This excerpt taken from the PBR 6-K filed Mar 31, 2009.
4.5 Accounting of derivatives and hedge operations
All the derivative instruments were recognized in the Companys balance sheet, both in assets and in liabilities, and were stated at fair value.
In the operations with derivative financial instruments, for hedge against the variations in the prices of oil and oil products, the gains and losses arising from the changes in fair value are recorded in the statement of income as financial income or expenses.
For cash flow hedges, the gains and losses arising from the changes in their fair value are recorded in equity valuation adjustments, in shareholders equity, until their settlement.