Listed companies in Brazil will use IFRSs starting 2010
On 13 July 2007, the Securities and Exchange Commission of Brazil – Comissão de Valores Mobiliários, or CVM (www.cvm.gov.br) – issued Rule No. 457 requiring listed companies to publish their consolidated financial statements according to IFRSs, starting with reporting periods ending in 2010. Use of IFRSs will be optional for listed companies from 2007 through 2009. Previously (in 2006), the Central Bank of Brazil decided that any bank required by law or regulation to publish financial statements in Brazil (including domestic owned and foreign owned, listed and unlisted) will have to prepare and publish consolidated financial statements in full compliance with IFRSs starting with years ending 31 December 2010.
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The Brazilian Securities and Exchange Commission has published an Exposure Draft of a proposal to require all companies listed on the BOVESPA (Sao Paulo Stock Exchange) to publish consolidated financial statements fully compliant with IFRSs starting with years ending 31 December 2010. Earlier adoption would be encouraged.
An accounting standards board was formed in Brazil in August 2006, called Comite de Pronunciamentos Contabeis (CPC) – the Committee for Accounting Pronouncements. Its mandate clearly states that its mission is to converge Brazilian accounting requirements towards IFRSs. CPC was formed by agreement of six founding members:
- ABRASCA (the association of the Brazilian listed companies),
- APIMEC (the association for the analysts),
- BOVESPA (the Stock Exchange),
- CFC (the Federal Council of Accounting),
- IBRACON (the Institute of Independent Auditors), and
- FIPECAFI (the accounting research foundation, representing the academics.
In 2006, the Central Bank of Brazil formally decided that any bank required by law or regulation to publish financial statements in Brazil (be they domestic owned or foreign owned) will have to prepare and publish consolidated financial statements in full compliance with IFRSs starting with years ending 31 December 2010. For that purpose, the Central Bank disclosed in March 2006 that its technical departments had until 31 December 2006 to fully list all banking regulations still in force relating to financial reporting, consolidate them in a single document, and come up with recommendations of changes to converge to IFRSs and the legal procedures necessary. Such legal procedures might involve revoking the ruling by the Central Bank, revising it at the level of the National Monetary Council (that sits above Central Bank in certain issues), or eventual changes in law that would then be proposed by the President of the Republic to Congress.
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Brazil will require IFRSs for financial institutions
On 9 March 2006, the Board of Directors of The Central Bank of Brazil decided to require that all Brazilian banks, and all financial institutions licensed by Central Bank to do business in Brazil (including leasing companies and savings and loan institutions), fully comply with IFRSs beginning with the financial statements for the year ending 31 December 2010. That decision was announced in an Official Communication (PDF 93k Portuguese). [Click here for the Unofficial English Translation (PDF 65k).]
The Board has asked each of its departments responsible for bank regulation to identify the changes that will be required to existing Bank regulations to achieve the 2010 target and to report back by 31 December 2006. Thereafter, working groups will be formed to propose solutions so that there will be no impediments to using IFRSs in 2010. The Central Bank also announced that it intends to require auditors of financial statements of banks and all other licensed financial institutions to follow the International Standards of Auditing (ISAs) issued by International Auditing and Assurance Standards Board.
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