Convergence of Accounting Standards towards IFRS in Brazil

Brazilian legislation introduced the convergence towards IFRS as from 2008; it was achieved in a gradual pace, with full adoption being required from the December 31, 2010 closings on. The process of convergence had started earlier on, with the setting up of a Brazilian Accounting Standards Board around 2005, which began preparing the field for the full convergence that ultimately was validated with the 2007 piece of legislation that initiated the whole process. Then, the objective of this chapter is to describe this process, discussing consequences stemming from that adoption. To achieve this, we describe how the Brazilian accounting model has developed since 1940 until 2010, as well as the main technical, conceptual and practical changes derived from this. We understand that, despite all the difficulties, Brazil achieved full success in this process and the ending balance was very positive for the development of accounting practices and of accountants themselves.

IFRS for SMEs

In this chapter examines the perception of accountants in the State of Mato Grosso, from Brazil, on continuing professional education on IFRS applied to small and medium enterprises - SMEs. After the introduction, where we present this chapter, we contextualize the theory of human resources, with theoretical assumptions. In the next item, we revise of Brazilian accounting standards for SMEs and their regulatory environment. The literature review is completed with the item that addresses content on continuing education. The next step we present the methodology and the date analysis. To collect the evidence, we used questionnaires to accountants responsible for active financial services companies in the State of Mato Grosso. With a sample of 302 responses from a population of 1597 organizations, a descriptive analysis using frequency distribution, measures of central tendency and variability was performed. It is concluded that the perception of accountants indicates that they recognize the possibility of improvement in job performance, as well as greater employability and income. They still set regular level of difficulty in the submission of financial statements in accordance with the new standard: IFRS for SMEs. The study indicates the need to offer continuing education, pointing the Regional Accounting Council and universities as important promoters in the process of qualification of accounting professionals.

Difficulties in the Adoption of IFRS on Small and Medium Enterprises (SMEs) in Brazil

In this chapter are showed how cultural factors influence accounting practices in different countries of the world, due to culture after the adoption of IFRS by SMEs in Brazil. It is based on a sample of 120 SMEs located in the state of Maranhão, Brazil. The SMEs were selected from a group that has been receiving accounting and financial advice since 2008. These companies are from a range of different sectors, but have in common the need to arrange bank financing in order to expand their activities. The results suggest that cultural impacts continue to prevail, such as the subordination to tax rules, but the disinterest of stakeholders in financial reporting provides a strong case to postpone the IFRS adoption process.

The Impact of the Mandatory Adoption of IFRS in the Fees of Auditing in Companies of BM&FBovespa

This study aims to investigate if the mandatory adoption of the IFRS by the Brazilian companies listed in BM&FBovespa has made an impact on the audit fees. The final sample was made by 151 companies, between 2009 and 2012. To restrict the relations, other control variables of the size of the companies, of the turnover of auditing companies and of the quality level of the published financial statements were listed. The results made evident that the mandatory adoption of the IFRS represented a significant increase of 20.71% in the auditing fees. It has also been noticed that a positive relation between the auditing fees charged by the services and the size of the companies. However, the rotation of the auditing companies has generated a negative impact, reducing the fees paid to the independent auditors. Related to the quality of the financial statements, it was not verified a statistically significant relation.

International Financial Reporting Standards for Latin American Small and Medium Enterprises

The purpose of this chapter is to describe the process followed by Latin America to adopt International Financial Reporting Standards for Small and Medium Enterprises (IFRS for SMEs), based on examples about the approaches used by seven South American countries – Argentina, Brazil, Chile, Colombia, Peru, Uruguay, and Venezuela. These countries have followed different models of harmonization to IFRS for SMEs. Harmonization models may be grouped into five categories: maintenance of local financial reporting standards, adaptation of International Financial Reporting Standards (IFRS) to local standards, full or partial adoption of IFRS, adoption of another country's standards, and convergence to diminish differences between local standards and IFRS. Regardless of the chosen mode of harmonization, SMEs face particular challenges as major players in the Latin America and Caribbean region with needs to greater access to finance sources and simplification of laws and reporting standards to be able to achieve global competitiveness.

Challenges in Applying IFRS in a Civil Law Tradition

As part of the Common Law, IFRS represents a significant cultural change in Brazil, a Civil Law country, for both accounting and law. In 2010 (the first adoption of IFRS), Brazilian accounting legislation fully adopted the International Financial Reporting Standards (IFRS) as its standard for accounting practices. Accordingly, its adoption by Brazil represents a challenge, since it is a significant cultural change, because of its insertion into a Civil Law system country. First of all, in accounting terms, this chapter comments how the specific rules were changed by principles with a big importance for the administration judgments, in this way, the managers' subjectivity. Additionally, considering that in a Civil Law system, especially in Brazil, this chapter presents that there are many shareholders' rights in the stricto sensu law, the legal impacts of the financial statements must be analyzed, including the manager's responsibility.

Has IFRS Improved Comparability Regarding Earnings Management in Latin America?

The adoption of IFRS as a unique set of accounting standards is claimed to have the potential to enhance cross-border financial statements comparability, due to a reduction of information costs and information asymmetry. IFRS is a recent issue in Latin America and there is a lack of knowledge about its application in the region, with countries beginning to completely converge to international accounting standards around 2010. This chapter compares the level of earnings management in the first three Latin American IFRS adopters, Brazil, Chile and Peru, considering the periods before and after IFRS adoption. The results show that firms from each country evidence different levels of earnings management before IFRS adoption, and that those differences no longer remain after the adoption of IFRS. The results indicate that IFRS has made financial information more homogeneous and, therefore, enhanced information comparability in Latin America.

Accounting Systems' Classification in Latin America

This chapter aims to propose a classification based on accounting systems of five Latin American countries that have adopted IFRS. More specifically, we seek to identify which is the position of each country within this group of countries as a whole, providing empirical evidences of whether the accounting practices in Latin America countries are harmonized in the IFRS era, or not. Despite of international efforts around the convergence to IFRS, where companies would use the same accounting standard, reducing the differences in terms of accounting practices, there is empirical evidence of significant differences in the way that IFRS has been applied worldwide, resulting in “national versions of IFRS”. The results of this chapter provide empirical evidence that accounting practices in Latin America countries are harmonized, considering that the five countries analyzed have similar characteristics in terms of accounting systems.

The Role of Latin American Bodies to the International Standard Setting

This chapter presents an overview, on a twofold perspective, of the role of Latin American (LATAM) countries in the process of setting international standards. Firstly, at the international level, it checks who are the LATAM bodies and persons who have a seat in the structure of IFRS Foundation and the IASB's advisory bodies, highlighting their role and the required individual skills. Secondly, at the regional and local levels, it looks at the accountancy bodies in each LATAM country, to identify what they are doing regarding the process of convergence and adoption of international accounting standards. The topics discussed conclude that (1) overall Brazil seems to assume the leading position and the most prominent role, (2) Brazil, Mexico, Argentina, and Venezuela are the most engaged with IASB's work, and (3) Brazil and Mexico have the most diverse and available information on the activities developed by local accountancy's bodies and respective consequences for financial reporting.

Influence of International Accounting Convergence on the Level of Earnings Management in both Brazilian and Chilean Companies

This study aimed to analyze the influence of international accounting convergence in the level of earnings management in both Brazilian and Chilean companies. The sample was composed by the Brazilian and Chilean firms listed in Thomson ONE Banker database and presenting the data needed for the research. The study period was that between 2004 and 2012. Descriptive, document and quantitative research was conducted, with the application of the KS Model, t Test for independent samples and panel analysis. In Chilean companies, it was found that the greater the variation of revenue, the greater the tendency to use discretionary accruals. In Brazilian companies, it became clear that the larger the firm, the higher the earnings management. It was concluded that the adoption of IFRS by Brazilian and Chilean firms contributed to the reduction of discretionary accruals and, therefore, earnings management, although this effect was significant only in Chilean companies.