As characterized by the quote “Brazil is the country of the future—and always will be,” the Brazilian nation has been viewed for decades as a country possessing immense economic potential, yet has been hitherto unsuccessful in harnessing this potential. Having an estimated population of 190 million, a purchasing power parity of 1.5 trillion US Dollars (ranking 9th in the world), a leading economy of the South American continent, and an abundance of natural resources, it is obvious why such things have been said about the potential of the country. While it showed promising booms throughout the 1960s and 70s, the Brazilian economy has been relatively sluggish since the early 80s. In order to overcome this stagnancy, the Brazilian corporate environment must make some changes. While this is certainly not the only area needing improvement in the Brazilian business world, its accounting practices may be lacking in comparison to those of other developing nations, and thus the nation as a whole would benefit from careful examination and perhaps revision of these practices.
First, a brief overview of Brazilian accounting standards should help familiarize oneself with the matter at hand. In compliance with Brazilian corporate law, a corporation publishing an annual financial report is required to include comparative figures for the previous year (in addition to the current), as well as the following components: a balance sheet, an income statement, a statement of stockholders’ equity, a statement of changes in financial position, and sufficient footnotes to explain the technicalities of the financial statements. While the bare minimum annual report comprises the aforementioned components, there is naturally a growing tendency among Brazilian corporations (as well as wo ...