|Extent of IFRS application||Status||Additional Information|
|IFRS Standards are required for domestic public companies||Required.|
|IFRS Standards are permitted but not required for domestic public companies|
|IFRS Standards are required or permitted for listings by foreign companies||Required.|
|The IFRS for SMEs Standard is required or permitted||Required.|
|The IFRS for SMEs Standard is under consideration|
Two organisations from Brazil responded to the survey:
CPC is the Brazilian standard-setting body engaged in the study, development and issuance of accounting standards, interpretations and guidance for Brazilian companies. Its rules are enforced by the CVM for public entities and by the Conselho Federal de Contabilidade (CFC) for non-public entities. Some other agencies enforce these accounting pronouncements in specific industries, such as electrical energy and health insurance.
CVM is the Brazilian government agency that regulates stock exchanges and over-the-counter markets.
CFC is the national professional accountancy organisation in Brazil.
Companies other than financial institutions:
IFRS Standards have been mandatory for the consolidated financial statements of companies whose debt or equity securities trade in a public market for financial years ending 31 December 2010. Early adoption was permitted beginning with financial years ending 31 December 2007. Unconsolidated (separate company) financial statements follow Brazilian Generally Accepted Accounting Principles (BR GAAP), which were partially converged with IFRS Standards from 2008 to 2009 (‘transition period’) and since 2010 have been fully converged with IFRS Standards.
This was laid out in Instruction CVM 457/07.
On 1 January 2008 changes were introduced in Corporate Law 11.638/07 setting the way to a process of accelerated convergence of BR GAAP to IFRS Standards. Full convergence with IFRS Standards was reached for financial reporting years ending at 31 December 2010 and onwards.
Non-Publicly Accountable Enterprises (NPAEs) are obliged to prepare their financial statements in accordance with BR GAAP, but are permitted to adopt IFRS Standards for the consolidated financial statements. Small and medium sized NPAEs are required to apply the Brazilian equivalent of the IFRS for SMEs Standard and may opt to apply full BR GAAP/IFRS Standards.
A large-sized entity is defined by Corporate Law 11.638/07 as a company or group of companies under common control whose total assets, in the previous year, amounted to over R$ 240 million (approximately US$ 70 million), or whose total gross annual revenues exceed R$ 300 million (approximately US$ 90 million). An entity that does not meet those thresholds is considered a small or medium sized entity.
Financial institutions regulated by the Brazilian Central Bank (BACEN) that are (a) listed or (b) unlisted but required to have an audit committee, have been required to present consolidated financial statements prepared in accordance with IFRS as supplemental information since 2010. An audit committee is required for all financial institutions that have regulatory capital or manage resources of third parties in an amount equal or above R$1 billion (approximately US$ 300 million) or hold deposits and manage resources of third parties in an amount equal or above R$5 billion (approximately US$ 1.5 billion). Statutory accounts are required to follow accounting practices adopted by the Brazilian Central Bank. Other financial institutions (ie those that are not listed and are not required to have an audit committee) are not required to prepare IFRS financial statements. However, if an unlisted entity is the leader of a conglomerate or group that includes an entity that is a listed entity, then IFRS financial statements are required (see Resolution CMN 3786-sole paragraph of Article 1)
Insurance companies have also been required to prepare consolidated financial statements using IFRS Standards since 2010. As with financial institutions, listed insurance companies have to follow CVM regulations for their consolidated financial statements. Unlisted insurance companies were obliged to use the IFRS-converged CPC standards (BR GAAP) to prepare their 2010 consolidated financial statements. However, in line with the BACEN, the Brazilian Private Insurance Regulator (SUSEP) gave those companies the option not to present comparative financial statements and to use 1 January 2010 as transition date.
For their individual (separate company) financial statements, insurance companies have adopted BR GAAP from 2011 onwards with a transition date of 1 January 2011.
However, from 2011 onwards, SUSEP has removed the deemed cost option at first time adoption and has included an option for companies to provide for credit losses based on expected losses (as opposed to incurred losses) for both the consolidated and separate company financial statements.
This can be seen in Circular SUSEP 430/12.
Law 6.404/76 (Brazilian Corporate Act) was amended in December 2007 by Law 11.638/07 in order to require Brazilian Accounting Standards to comply with IFRS Standards.
In adopting IFRS Standards, Brazil has made several modifications to IFRS Standards that are described in the section on IFRS Endorsement later in this Profile.
Memorandum of Understanding
On 28 January 2010 the Brazilian Federal Council of Accounting and the Brazilian Accounting Pronouncements Committee signed a Memorandum of Understanding with the IASB that set the end-of 2010 as the target date for full convergence with IFRS Standards and established a framework for future co-operation between the organisations.
IFRS Standards are required for some financial institutions whose securities do not trade in a public market.
IFRS Standards are permitted for other companies whose securities do not trade in a public market.
Starting in 2012, all foreign companies whose securities are publicly traded in Brazil must submit to CVM interim and annual financial statements in Portuguese that are prepared under IFRS Standards. (Mercosul Decision 31/10 and Deliberação CVM n. 659/2011).
Prior to 2012, foreign companies were permitted to choose to comply with CPC standards (Brazilian Corporate Law), with IFRS Standards, or with a GAAP from a MERCOSUL country, if the company was located in a MERCOSUL country (CVM Instruction n. 480/09, Subseção III – Demonstrações Financeiras X § 6º Art. 27). Moreover, if a MERCOSUL company chose to file with CVM its financial statements complying with its domestic GAAP, a reconciliation of the differences between IFRS Standards and domestic GAAP was required to be presented in an explanatory footnote. (CVM Instruction n. 480/09, art. 27, §1º, inciso II). That choice was prohibited for annual periods after 31 December 2011.
Yes, in the case of separate company financial statements.
For separate company financial statements the auditor´s opinion refers to the accounting practices adopted in Brazil. Some publicly-traded companies are required by law to present both separate company financial statements (adopting the equity method for its subsidiaries) and consolidated financial statements (using IFRS Standards as issued by the IASB Board). The auditor’s report usually includes an explanatory paragraph describing the differences between Brazilian GAAP applied to the separate company financial statements (usually limited to use of the equity method for investments in subsidiaries, associates, and joint ventures).
For some consolidated financial statements, the auditor´s opinions refer to compliance with both IFRS Standards and accounting practices adopted in Brazil.
Some accounting policy options have been eliminated, for example, the revaluation of property, plant and equipment under IAS 16 and revaluation of intangible assets under IAS 38.
Also, Brazil modified IFRS Standards to prohibit early adoption.
Also, the CPC in Brazil has published guidance (known as OCPC 04) to IFRIC 15 Agreements for the Construction of Real Estate to allow real estate entities to apply the percentage-of-completion-method to recognise sale of units under construction. Companies that apply this guidance say that their financial statements are prepared ‘in accordance with the IFRS Standards applicable to real estate development entities in Brazil as approved by Accounting Pronouncements Committee (CPC), by the Brazilian Securities Commission (CVM) and by the Brazilian Accounting Council (CFC)’.
When Brazil initially adopted IFRS Standards, Brazil required that the equity method must be used in separate company financial statements to account for investments in subsidiaries, associates, and joint ventures. At the time, this created a difference with IFRS Standards. However, in August 2014 the IASB issued Equity Method in Separate Financial Statements (Amendments to IAS 27). That amendment now permits the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. Therefore, Brazil’s modification now has no effect on compliance with IFRS Standards.
All small and medium sized entities are required to use the IFRS for SMEs Standard unless they choose to use full IFRS Standards– with one exception: Some micro and small entities (gross revenue less than R$ 3,6 million, which is approximately US$ 1.1 million) are authorised to use a simplified set of accounting standards established under Resolution CFC 1418/2012. Entities were required to apply the IFRS for SMEs Standard for years beginning on or after 1 January 2010.
See above for discussion on which entities qualify as small and medium sized.