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.
Learn more about TMF Group’s Accounting services or get in touch with one of our experts.