Companies operating in Brazil still have difficulties in drafting financial statements, despite new guidelines put in place.
Companies operating in Brazil are required to prepare financial
statements, as per Law No. 11.638/07 and Provisional Measure No.
449/08, which aligns Brazilian accounting practices to
international standards.
Financial statements include the balance sheet, income statement,
comprehensive income statement, statement in changes in net worth
position, cash flow statements, and the added value statement.
Companies under the Securities and Exchange Commission of Brazil
(CVM) standards also require explanatory notes, which assist in
interpreting information. The benefits of properly prepared
financial statements include attracting investors, finding new
funding sources, presenting results to the board and shareholders,
and market credibility.
In recent years, the relevancy of information in financial
statements has been questioned. Aware that improvements were
needed, the Accounting Pronouncements Committee and the CVM created
new guidelines for drafting financial statements in 2015 –
implemented through OCPC-07: Disclosure in Publishing
Accounting and Financial General Purpose Reports, and Resolution
727. Certain terms that were being used incorrectly were adapted,
and the required information was reviewed and modified.
Despite improvements, drafting financial statements can be
complicated and companies need to be careful not to create reports
that are disproportionate to their business size and
complexity.
By law, financial statements cannot be drafted by a company's
auditors. Therefore, it is important to find the right strategic
partner.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
