Petrobras (PBR)

2.2 Effects of changes in exchange rates and translation of financial statements

The Company's functional currency, as established by management, is the Real.

The exchange variations on investments in subsidiaries and affiliated companies with a functional currency different from the parent company are recorded in shareholders' equity, as an accumulated translation adjustment and are transferred to the statement of income upon realization of the investments.

The income statements of invested companies in a stable economic environment with a functional currency different from the parent company are translated by the monthly average exchange rate, and the other items of shareholders' equity are translated at the historic rate.

2.2 Effects of changes in exchange rates and translation of financial statements

The Company’s functional currency, as established by Management, is the Real.

The exchange variations on investments in subsidiaries and affiliated companies with a functional currency different from the Parent Company are recorded in shareholders’ equity, as an accumulated translation adjustment and are transferred to the statement of income upon realization of the investments.

The income statements of invested companies in a stable economic environment with a functional currency different from the Parent Company are translated by the monthly average exchange rate, and the other items of shareholders’ equity are translated at the historic rate.

2.2 Effects of changes in exchange rates and translation of financial statements

The Company’s Management has defined that its functional currency is the Real in accordance with the rules established in CPC 02, approved by CVM Resolution 534/08.

The adoption of CPC 02 changed the following procedures:

a) The exchange variations on investments in subsidiaries and affiliated companies with a functional currency different from the parent company are now recorded in shareholders' equity as an accumulated translation adjustment and are transferred to the statement of income upon realization of the investments.

Until fiscal year 2007, this exchange variation affected the results for the year, as an equity adjustment.

b) The income statements of invested companies in a stable economic environment with a functional currency different from the parent company are now translated by the monthly average exchange rate, and the other items of shareholders' equity are now translated at the historic rate.

Until fiscal year 2007, the exchange rate at year-end was used for translation of these items.

3.3 Effects of the changes in the exchange rates and translation of the financial statements

CPC 02 establishes criteria for defining the functional currency and translating the financial statements of subsidiaries, affiliated companies and branches with a functional currency that is different from the functional currency of the parent company.

The adoption of CPC 02 changed the following procedures:

a) The exchange variations on investments in subsidiaries and affiliated companies with a functional currency different from the parent company are now recorded in shareholders’ equity, as an accumulated translation adjustment and are transferred to the statement of income upon realization of the investments.

Until fiscal year 2007, this exchange variation affected the results for the year, as an equity adjustment.

b) The income statements of invested companies in a stable economic environment with a functional currency different from the parent company are now translated by the monthly average exchange rate, and the other items of shareholders’ equity are now translated at the historic rate.

23

Table of Contents

Previously, the exchange rate at the end of year was used for translation of these items.