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Brazil - Accounting & Auditing

1. Sources of Brazilian legal and accounting requirements:

Brazilian accounting practices are currently in a convergence process towards International Financial Reporting Standards (IFRS). This process should be completed by 2010. This section gives an overall presentation of the Brazilian legal accounting requirements and accounting practices adopted in Brazil.

Source of legal accounting requirements in Brazil:

Brazilian legal accounting requirements are based on an old Corporate Law of 1976 that has been recently and significantly modified in December 2007 by the Law 11.638/2007 that has introduced new accounting rules in compliance with IFRS. Listed companies must also follow the regulations of the Brazilian Securities Commission (CVM). Most of accounting regulations and adopted practices in Brazil can be downloaded in several official websites. That’s why I have included several links in this section that will allow you to download most of Brazilian GAAP standards and legal requirements.

The Brazilian legal accounting requirements are detailed in the Corporate Law N° 6.404/1976 of 1976 that has been amended by the Law 9.457 in 1997 and the Law 11.638 in December 2007. The consolidated version of these legal requirements can be downloaded HERE. The Law 11.638 introduced significant accounting changes to Brazilian accouting practices (effective on January 1, 2008).

Source of accounting practices in Brazil:

Up to date, Brazilian GAAP (Brazilian Accounting practices adopted in Brazil) are based on legal requirements defined in the Law and a set of several technical standards that are published by several official entities.

Technical standards published the Comitê de Pronunciamentos Contábeis (CPC) are the most updated and latest technical accounting standards. The CPC is a non lucrative entity that was created in 2005 by the following official entities: ABRASCA, APIMEC NACIONAL, BOVESPA, CFC, FIPECAFI and IBRACON. The CPC is responsible for revising existing accounting standards with the objective to create new accounting standards that should be compliant with IFRS. This process should be completed by 2010, according to the following CPC's convergence plan. Most of the remaining accounting practices (not yet revised by the CPC) can be downloaded in the websites of the Brazilian Institute of Independent Auditors (IBRACON) and the Federal Council of Accountants (CFC).

Listed companies must also follow the rules dictated by the Brazilian Securities and Exchange Commission (CVM) which has the authority to specify accounting and reporting practices for publicly held companies as well as to promulgate disclosure requirements for the quarterly and annual financial reports of such companies. Note that the CVM generally relies on CPC, IBRACON and CFC standards.

In addition to these set of accounting rules, regulatory agencies for specialised business sectors also published specific accounting standards such as banking and financial institutions (Brazilian Central Bank, BACEN), Insurance (SUSEP), Electrical Energy (ANEEL) and Telecommunications (ANATEL).

2. Convergence of Brazilian GAAP with IFRS:

Accounting practices adopted in Brazil are currently converging with IFRS standards.

3. Brazilian Auditing Rules:

In Brazil, publicly held companies and large closed companies (Gross Sales above BRL 300 millions or Total Assets above 240 millions) must have their financial statements audited by an independent audit firm. Corporations ("Sociedades Anonimas") must publish their financial statements in a local newspaper. Limited liability companies ("Limitadas") are not subject to these legal requirements, except if they are large companies.

Source of Brazilian auditing standards:

Brazilian auditing standards can be downloaded HERE in the website of the IBRACON.

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