BRAZILIAN GAAP

vs. IFRS
The Basics
September 2010
 Table of Contents
Introduction 04
Converged Standards
• Framework for the Preparation and
Presentation of Financial Statements 06
• Accounting Standard for Small and
Medium-sized Entities (CPCs for PMEs) 06
• CPC 01 (R1)- Impairment of Assets 07
• CPC 02 - Changes in Foreign Exchange Rates
and Financial Statements Conversion 07
• CPC 03 - Statement of Cash Flows 08
• CPC 04 - Intangible Assets 08
• CPC 05 - Related Party Disclosures 08
• CPC 06 - Leases 08
• CPC 07 - Government Grants 08
• CPC 08 - Transaction Costs and Premium
on the Issuance of Debt and Equity
Instruments, CPC 38 Financial Instruments:
Recognition and Measurement (supersedes
CPC 14), CPC 39 Financial Instruments:
Presentation, CPC 40 Financial Instruments:
Disclosure 09
• CPC 10 - Share Based Payment 09
• CPC 11 - Insurance Contracts 09
• CPC 13 - First Time Adoption of
Law 11,638, CPC 37 First Time
Adoption of IFRS, CPC 43 Initial
Adoption of Technical Pronouncements
CPC 15 and 40 10
• CPC 15 - Business Combinations 11
• CPC 16 (R1) - Inventory 11
• CPC 17 - Construction Contracts,
CPC 30 Revenue Recognition and
CPC 01 Concession Contracts 11
2 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco
• CPC 18 - Investments in Associates, CPC 19
Interests in Joint Ventures, CPC 35 Separate
Financial Statements, CPC 36 (R1)Consolidated
Financial Statements; ICPC 09 Individual
Financial Statements, Separate Financial
Statements and Consolidated Financial
Statements and Equity Method 12
• CPC 20 - Borrowing Costs 12
• CPC 21 - Interim Reporting, CPC 22
Operating Segments, CPC 23 Accounting
Policies, Changes in Accounting Estimates
and Errors, CPC 26 Presentation of Financial
Statements 13
• CPC 24 - Subsequent Events; ICPC 08
Accounting for the Payment of Proposed
Dividends 13
• CPC 25 - Provisions, Contingent Liabilities
and Contingent Assets 14
• CPC 27 - Property, Plant & Equipment,
CPC 28 Investment Property, CPC 31
Non-Current Assets Held for Sale and
Discontinued Operations, ICPC 01
Concession Contracts 14
• CPC 29 - Biological Assets 14
• CPC 32 - Income Taxes 15
• CPC 33 - Employee Benefits 15
• CPC 41 - Earnings per Share 16
Standards without a direct IFRS equivalent
• CPC 09 - Value Added Statement 17
• CPC 12 - Adjustments to Present Value 17
Areas for Future Consideration by the CPC
• CPC 34 - Exploration for and Evaluation
of Mineral Resources 18
• CPC 42 Financial Reporting in
Hyperinflationary Economies 18
• CPC 44 Combined Financial Statements 19
BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 3
 Introduction
It is of no surprise today that many people
who follow the development of worldwide
accounting standards may well be confused.
GAAP convergence is a high priority on
the agendas of several countries and
“convergence” is a term that suggests
the elimination or coming together of
differences.
In Brazil, a number of steps have been
taken towards the use of International
Financial Reporting Standards (IFRS),
with two distinct but related paths to
IFRS adoption being taken.
First, the Brazilian securities regulator,
the Comissão de Valores Mobiliários
(locally CVM) and the Brazilian Central
Bank (locally BACON) have determined
that IFRS should be used for consolidated
financial statements of public companies
4 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco
and companies regulated by BACON from
2010 onwards, with early adoption being
permitted. Similar decisions will most
likely be taken by the insurance regulator
(locally SUSEP), meaning that insurance
companies will also have IFRS reporting
requirements from this date.
Secondly, a new corporate Law 11,638,
which was enacted in 2007 and took effect
in 2008, requires all Brazilian companies
to prepare their financial statements
in accordance with a new set of local
standards which are currently being issued
and are based on IFRS. This means that all
Brazilian companies, both public and non-
public, are currently required to use local
standards which are identical to IFRS.
The local standards are being issued by
Comitê de Pronunciamentos Contábeis
(locally CPC), a newly established Brazilian
accounting standard setter. These new
standards replace the existing accounting
standards (Normas Profissionais de
Contabilidade or NPCs issued by Instituto
dos Auditores Independentes do Brasil –
IBRACON) and other guidance issued by
regulators. As of December 31, 2008,
a total of fourteen CPC standards and 1
technical orientation (OCPC) had been
issued and most of these were required to
be applied to calendar year 2008. Since
then, an additional 27 CPCs have been
issued along with 14 interpretations (ICPC)
and 2 technical orientations (OCPC). There
are also 2 additional standards relating to
the framework for preparing and presenting
financial information and specific to small
and medium sized entities. These new
standards are required to be applied to
calendar year 2010 and can be found
online at www.cpc.org.br.
BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco
In this guide, “Brazilian GAAP vs. IFRS:
The Basics”, we take a high level look into
existing GAAP differences and provide an
overview of where the standards are similar
and where they diverge.
No publication that compares two sets
of accounting standards can include all
differences that could arise in light of the
huge variety of business transactions that
could possibly occur. The existence of any
differences – and their materiality to an
entity’s financial statements – depends
on a variety of specific factors. This
guide focuses on those differences most
commonly found in present practices and,
where applicable, provides an overview
of how and when those differences are
expected to converge.
We hope you find this guide a useful tool
for that purpose.
Ernst & Young Terco
September 2010
5
 Converged Standards

As of September 2010, the CPC has issued equivalent IFRS standard. However, there are
forty-three accounting standards of which some subtle differences, usually due to addi-
thirty-eight are essentially translations of the tional guidance or clarification being inserted

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

Prior to the framework,

BR GAAP did not have a
The Framework under BR GAAP
Basic Concepts Framework for specific framework relating
contains differences from the
Framework for the the Preparation to financial statements. The
IFRS Framework as it relates to
Preparation and and Presentation framework formalizes certain
items that are not allowed by
Presentation of of Financial items such as the definition
Brazilian Corporate Law such
Financial Statements Statements of assets, liabilities, revenues
as the revaluation of assets.
and expenses and the concept
of substance over form.

Both standards include criteria

that entities must meet in order
to utilize the pronouncement
such as no public debt or
equity and no fiduciary
responsibilities, but the BR
The International GAAP standard also includes
CPC PME Financial specific size requirements
Accounting Standard Reporting which are consistent with
for Small and Medium- Standard for Small Brazilian Corporate Law in
sized Entities (CPCs and Medium-sized order for an entity to qualify
for PMEs) Entities (IFRS for as an SME. In Brazil, an entity
SMEs) is qualified to use this standard
as long as the specific criteria
in the standard are met and its
revenues are not greater than
R$300 million and its total
assets are not greater than
R$240 million.
Prior to the accounting
standard for SMEs, BR
GAAP did not have a
specific standard for small
and medium-sized entities.
This standard simplifies the
requirements for entities that
qualify as SMEs by omitting
certain topics such as EPS
and operating segments,
removes and simplifies,
options contained in the
complete set of CPCs,
simplifies recognition and
measurement principles
and reduces disclosure
requirements.

6 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

into the CPC standards. The information in Entities should consult the standards in full
this document is summarized and does not to ensure proper application. A summary of
include a detailed analysis of the standards. these thirty-eight standards are as follows:

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

Prior to CPC 01 (R1),

the Comissão de Valores
Mobiliários (locally CVM)
required public companies
to write down fixed assets
to their recoverable
CPC 01 (R1) IAS 36 amounts when events and
circumstances indicated
Impairment Impairment No significant differences.
that permanent impairment
of Assets of Assets existed. However, in
practice there was little
guidance regarding the
calculations of these
write offs and recorded
impairment losses were
unusual.

Prior to CPC 02, BR GAAP

CPC 02 has additional
paragraphs which cover the
separate IFRS interpretation
IFRIC 16 (Hedges of a Net
Investment in a Foreign
CPC 02 IAS 21 Operation).
Changes in Foreign
The Effects of In addition, CPC 02 includes
Exchange Rates and
Changes in Foreign an explicit requirement
Financial Statements
Conversion Exchange Rates for subsidiaries that are
considered an “extension” of
the parent company. These
subsidiaries must use the same
functional currency as the
parent.
had no specific standards
relating to currency
conversion of financial
statements with a functional
currency different from the
parent’s functional currency
and the currency in which
the financial statements
were presented.
Exchange differences
related to the
remeasurement of foreign
subsidiaries were usually
recorded in the income
statement, rather than
directly in shareholders’
equity as required by
CPC 02 and IAS 21.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 7

 Converged Standards

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

Prior to CPC 03, BR GAAP required

a Statement of Changes of Financial
CPC 03 IAS 7 Position (locally DOAR). Although
No significant
Statement of Statement of not mandatory, the Statement of Cash
differences.
Cash Flows Cash Flows Flows was considered supplemental
information and was usually disclosed by
public companies.

Prior to CPC 04, there were no specific

standards relating to intangible assets in
Brazil. However, the concept of deferred
CPC 04 IAS 38
No significant assets under BR GAAP allowed entities
Intangible Intangible
differences. to capitalize pre-operating expenses and
Assets Assets
research and development costs. Under
CPC 04, many of these amounts can no
longer be capitalized.

CPC 05 IAS 24 Prior to CPC 05, certain related parties

No significant
Related Party Related Party disclosures were required for public
differences.
Disclosures Disclosures companies.

Prior to CPC 06, all leases were normally

treated for accounting purposes as
CPC 06 IAS 17 No significant operating leases and the expense was
Leases Leases differences. recognized at the time that each lease
installment fell due. Disclosure regarding
leases was limited.

IAS 20
CPC 07 includes
Accounting Prior to CPC 07, government grants
examples specific to the
CPC 07 for Government were usually recorded as a credit in
Brazilian environment,
Government Grants and shareholders’ equity rather than being
as government grants
Grants Disclosure of recorded in the income statement
are common in Brazil
Government immediately or over time, as appropriate.
and take many forms.
Assistance

8 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

CPC 08
Transaction Costs
and Premium on
IAS 32
the Issuance of
Financial
Debt and Equity
Instruments: Prior to CPC 38, 39 and 40, certain
Instruments;
Presentation; financial instruments were classified
CPC 38 Financial IAS 39 as trading without considering whether
Instruments: Financial or not they should be classified for
Recognition and No significant available-for-sale or held-to-maturity.
Instruments:
Measurement differences.
Recognition and There were no specific rules in
(replaces CPC 14); Measurement; regard to preference shares with
CPC 39 Financial IFRS 7 debt characteristics, convertible
Instruments: Financial debt, or puts and calls.
Presentation; Instruments:
Disclosures
CPC 40 Financial
Instruments:
Disclosure

Prior to CPC 10, no amounts relating to

CPC 10 IFRS 2
No significant share options were recognized. Certain
Share Based Share Based
differences. disclosures were, however, required for
Payment Payment
public companies.

Prior to CPC 11, there was no specific

guidance for embedded derivatives
CPC 11 IFRS 4 in insurance contracts. CPC 11 is
No significant
Insurance Insurance effective for periods beginning on
differences.
Contracts Contracts or after January 1, 2010, for
consolidated financial statements
rather than for calendar 2008.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 9

 Converged Standards

Description BR GAAP prior to CPC

These CPCs were issued in order to help companies apply

the changes brought by Law 11.638 and the CPCs. They Under BR GAAP, NPC
are broadly equivalent to IFRS 1 but there are differences 12 – Accounting Policies,
CPC 13 eliminating alternatives and requiring items primarily due Changes in Accounting
First Time Adoption to CPC or Corporate Law constraints or requirements Estimates and Errors
of Law 11,638; such as the revaluation of assets (not allowed under was used, with the CPC
Corporate Law), presentation of the income statement providing an additional
CPC 37 (under the CPC, entities must present an income option on the adoption
First Time Adoption statement separate from comprehensive income but of Law 11,638. NPC
of IFRS; the IFRS allows a choice between one statement and 2 12 is similar to IAS 8
CPC 43 statements), and the effective date of when businesses Accounting Policies,
Initial Adoption combinations must be revalued (under the CPC, business Changes in Accounting
of Technical combinations can only be revalued back to January 1, Estimates and Errors. CPC
Pronouncements 2009 but the IFRS allows companies to go back further 23 – Accounting policies,
CPC 15 and 40 than this so companies in Brazil should be following the changes in estimates
CPC requirements). and errors, is effective in
We expect CPC 37 and 43 to be revised to be aligned 2010.
with IFRS 1.

10 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

Prior to CPC 15, goodwill was commonly

calculated as the net difference between
the amount paid for the investment and
the book value of net assets acquired at
CPC 15 IFRS 3 (R) the date of acquisition rather than the
No significant
Business Business fair value of net assets acquired.
differences.
Combinations Combinations
Goodwill amortization was permitted
until December 31, 2008 and for certain
regulated companies until 2009 while it
is not permitted under the new guidance.

Prior to CPC 16 (R1), disclosures were

not required for inventory write offs or
losses.
CPC 16 (R1) IAS 2 No significant
Inventory Inventory differences. Inventory was recorded at the lower of
cost or market value, which included
replacement costs compared to lower of
cost or net realizable value under the CPC.

Prior to CPC 17 and 30, construction

IAS 11 contracts including those of real estate,
Construction were generally accounted for using the
Contracts; percentage-of-completion method.
CPC 17
Construction IAS 18 BR GAAP was silent on customer
Contracts; Revenue; loyalty programs although the general
O CPC 17 requires practice was to record a provision for the
CPC 30 IFRIC 12 Service estimated future costs.
additional disclosure
Revenue Concession relating to gross and Also, receivables were normally recorded
Recognition; Arrangements; net revenues. at nominal value rather than at present
ICPC 01 SIC 29 value as required by CPC 12.
Concession Service BR GAAP had no specific accounting
Contracts Concession guidance on concession arrangements.
Arrangements: Generally infrastructure assets were
Disclosures included in the operator’s property, plant
and equipment.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 11

 Converged Standards

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

CPC 18
CPC’s 35 and 36 (R1)have a third type
Investments in
of financial statements called individual
Associates; financial statements. These are parent
CPC 19 company financial statements in which
Interests in Joint subsidiaries and joint ventures are
Ventures; presented using the equity method.
IAS 28 Joint ventures must use proportionate
CPC 35
Investments in consolidation under CPC 19 while they
Separate Financial Prior to CPC 36 (R1),
Associates; have the option of proportionate or
Statements; equity method consolidation under non-controlling minority
IAS 31 IFRS. interests were presented
CPC 36 (R1)
Interests in outside of equity as a
Consolidated Under IFRS, an entity can include results
Joint Ventures; separate line item in the
Financial of an investment in associate with a balance sheet rather
Statements; IAS 27 different reporting period as long as it is than as a separate
Consolidated and within 3 months of the entity’s reporting component in equity.
ICPC 09
Separate Financial date. CPC18 only allows a difference of
Individual Financial 2 months.
Statements
Statements,
Separate Financial CPC 18 has an additional paragraph
Statements and (22A) which says that profit cannot
Consolidated be recorded on individual financial
Financial statements on intercompany
transactions that remain within the
Statements and
group of related parties.
Equity Method

IFRS is silent as to whether or not

exchange differences should actually Prior to CPC 20, only
CPC 20 IAS 23 create a credit to the asset due to interest related to debt
Borrowing Costs Borrowing Costs favorable exchange rates while the CPC was capitalized by public
indicates that exchange rate differences companies.
should be captured in the capitalization.

12 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

IAS 34
CPC 21
Interim Financial
Interim Reporting;
Reporting; Prior to CPC 22, public companies had an
CPC 22
IFRS 8 option to disclose segments based on IAS
Operating IAS 1 does not require
Operating 14. IAS 14 was superseded by IFRS 8 and
Segments; the Value Added (locally
Segments; the criteria for defining segments are now
CPC 23 DVA) statement that different.
IAS 8 is required by CPC
Accounting
Accounting 26, it would only be Prior to CPC 26, assets and liabilities
Policies, Changes
Policies, Changes required if there was were presented in the descending
in Accounting
in Accounting a legal requirement order of liquidity rather than by using
Estimates and current and non-current classifications.
Estimates and or a requirement by a
Errors; Minority interests were included in a
Errors; regulator.
CPC 26 separate line from equity. A statement of
IAS 1
Presentation comprehensive income was not required.
Presentation
of Financial
of Financial
Statements
Statements

Prior to CPC 24 and ICPC 08, entities

were required to record dividends
ICPC 08 explains how proposed by management which
dividends are recorded were normally subject to approval by
CPC 24 and explicitly states that shareholders in the subsequent year.
Subsequent mandatory dividends Debt for which there was a covenant
Events; IAS 10 under Law 6.404/76 violation was presented as non-current
Events after must be recorded as if a lender agreement existed prior to
ICPC 08 the Reporting a liability. The same the issuance of the financial statements.
Accounting for Period conclusion would Also, short-term loans were reclassified
the Payment of be reached under as long-term if the entity intended to
Proposed Dividends IFRS but there is no refinance the loan on a long-term basis
interpretation in IFRS and, if prior to issuing the financial
similar to ICPC 08. statements, the entity presented
formal documents that supported the
reclassification of the loan.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 13

 Converged Standards

BR GAAP Standard IFRS Standard Significant Differences BR GAAP prior to CPC

IAS 37 Prior to CPC 25, provisions for legal

CPC 25
Provisions, obligations were sometimes recorded
Provisions,
Contingent No significant regardless of the probability of the
Contingent
Liabilities differences. eventual settlement. Provisions for
Liabilities and
and Contingent onerous contracts and constructive
Contingent Assets
Assets obligations were uncommon.

IAS 16
Property, Plant Prior to CPC 27, costs of major overhauls
CPC 27 Revaluation of assets is
& Equipment; were normally expensed. It was common
Property, Plant & not permitted under Law for entities to apply useful lives which
Equipment; IAS 40 11,638 while revaluation were determined by tax legislation.
CPC 28 Investment may be applied (as a Component depreciation was permitted
Investment Property; policy choice) to an but not commonly applied.
Property; entire class of assets
IFRS 5 which are then required Prior to CPC 28, investment property
CPC 31 Non-current to be revalued to fair was not separately defined and was,
Non-current Assets Assets Held value on a regular basis therefore, accounted for as held for use
Held for Sale and for Sale and under IFRS. or held for sale.
Discontinued Discontinued Under CPC 31, the Prior to ICPC 01, BR GAAP had no
Operations; Operations; CPC has an additional specific accounting guidance on
category of assets concession arrangements. Generally,
ICPC 01 IFRIC 12
called assets held to be infrastructure assets were included
Concession Service
distributed to owners. in the operator’s property, plant and
Contracts Concession equipment.
Arrangements

Prior to CPC 29, entities normally used

CPC 29
IAS 41 No significant cost to measure these assets although
Biological
Agriculture differences. they could be measured at fair value
Assets
subject to certain conditions.

14 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

BR GAAP IFRS Significant BR GAAP
Standard Standard Differences prior to CPC

Prior to CPC 32, BR GAAP defined the tax basis

of an asset or liability to be the value assigned for
tax purposes rather than the amount deductible or
taxable.
For deferred tax asset recognition, CVM Instruction
CPC 32 requires more 371 considered not only probability of future
CPC 32 IAS 12 disclosure as it relates recovery but also required a profit history while IFRS
to gross versus net only allows recognition when it is probable that they
Income Income
revenue and various will be realized (similar to the “more likely than not”
Taxes Taxes taxes specific to standard under US GAAP).
Brazil.
The tax effects of transactions recorded directly to
equity were not clearly defined under BR GAAP.
Deferred taxes were classified in current or non-
current based on their nature instead of all deferred
taxes being classified in non-current.

Prior to CPC 33, BR GAAP was not as detailed as

IAS 19 which could lead to different interpretations
regarding the definition of a defined contribution
IAS 19 plan and different considerations around the inputs
Employee for actuarial assumptions.
Benefits; Plan assets were only recorded if there was clear
evidence that the asset could reduce future
CPC 33 IAS 26 contributions, or would be reimbursed to the
No significant
Employee Accounting employer but under the new guidance a plan
differences.
Benefits and Reporting asset is recorded subject to a ceiling test.
by Retirement
Benefit Plans Normally, Brazilian entities did not record plan
surpluses.
Actuarial gains and losses were recorded in the
income statements unless not required to be
recognized under the “corridor approach” while in
IFRS these gains and losses are recognized in equity.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 15

 Converged Standards

BR GAAP IFRS Significant BR GAAP

Standard Standard Differences prior to CPC

The appendix of
CPC 41 has Prior to CPC 41, BR GAAP did not require diluted EPS.
introduced Basis EPS was required but the denominator was
implementation usually the number of shares outstanding at year
CPC 41 IAS 33 guidance that
end versus the weighted average number of shares
Earnings Earnings is more specific
outstanding during the period.
per Share per Share to the Brazilian
environment due There was no distinction between ordinary versus
to the specific preferred shares while CPC 41 requires the calculation
intricacies of equity for ordinary shares.
capital in Brazil.

16 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco

Standards without a direct
IRFS equivalent

Description BR GAAP prior to CPC

CPC 09 regulates the presentation of

the Value Added Statement, which is
CPC 09 Although not mandatory, the Value Added
required in the financial statements of
Value Added Statement was supplemental information
public companies. This statement gives
Statement usually supplied by public companies.
further analysis into the nature of the
company’s costs and expenses.

CPC 12 is a conceptual standard focusing

on present value and its applicability.
It requires that assets and liabilities be
discounted to present value if material to
the financial statements. Prior to CPC 12, BR GAAP had no specific
CPC 12
standard on present value adjustment.
Adjustments to There is no equivalent standard in IFRS. Normally receivables and payables were
Present Value However, as IAS 39 requires financial recorded at nominal value.
assets and liabilities to be initially
recorded at fair value, no differences
would result if present value and fair
value are the same.

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 17

 Areas for Future Consideration
by the CPC
Exploration for and
Evaluation of Mineral
Resources
Convergence
The Brazilian CPC has not yet issued a
standard relating to mineral resources.
A standard on mineral resources
(CPC 34)is expected to be issued
and based on the IFRS 6.
IFRS 6
The Brazilian CPC has not issued a draft
of this pronouncement yet because it
doesn’t cover all types of exploration and
evaluation (i.e. petroleum exploration).
The IFRS 6 states that expenditures related
to exploration for and evaluation of mineral
resources, incurred after an entity has
the legal right to explore the location and
before an entity has technical feasibility and
commercial viability relating to extracting
the mineral resource, should be accounted
for as either tangible or intangible assets
depending on their nature. It further states
that expenditures related to development of
mineral resources should not be recognized
as exploration and evaluation assets and
should instead be considered under the
Framework and IAS 38 - Intangible Assets.
18 BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco
Impairment analysis of these assets are
required when facts and circumstances
suggest the carrying amount is greater
than the recoverable amount and just
before the asset is reclassified because
the technical feasibility and commercial
viability of extracting a mineral resource
are demonstrable.
Current Practice
There is not a specific pronouncement
related to mineral resources in current
BR GAAP, so companies have historically
used the guidance under the accounting
framework and tangible and intangible
assets to determine which costs are
capitalizable relating to these activities.
Financial Reporting
in Hyperinflationary
Economies
Convergence
The Brazilian CPC has not yet issued a
standard relating to hyperinflationary
economies because they are waiting for
improvements to be made to IAS 29 by
the IASB. A standard on hyperinflationary
economies (CPC 42) is expected to be issued
and based on the IAS 29 after improvements.
Similarities
Both BR GAAP and IFRS indicate that Brazil
was a hyperinflationary economy during
certain periods of the 1990’s.
Significant Differences
statements. Combined financial statements
differ from consolidated financial statements
because consolidated financial statements
have a parent-subsidiary relationship while
combined financial statements do not.
Instead, they are under common control
or management. There is no equivalent
IFRS standard related to combined financial
statements.

Timing differences
Current Practice
BR GAAP IFRS There was no specific accounting
pronouncement related to combined financial
Hyperinflation in Brazil Hyperinflation in Brazil statements under the previous Brazilian
is generally considered is generally considered GAAP although some groups prepared
to have ended as of to have ended as of
December 31, 1995. December 31, 1997. combined financial statements.

Combined Financial
Statements
The Brazilian CPC intends to issue a standard
on combined financial statements (CPC 44).
There is no direct IFRS equivalent for this
standard.
CPC 44 will be issued to provide guidance
around the aggregation of individual financial
statements all under common control or
management to form combined financial

BRAZILIAN GAAP vs. IFRS | Ernst & Young Terco 19

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