Impact of Brazilian Sanitation Companies Adopting IFRS: an Industry Outlook

Abstract

The enactment of Law n. º 11.638 on December 28, 2007 paves the way for the accounting convergence of Brazilian accounting standards with international ones, by making mandatory the use of International Financial Reporting Standards (IFRS) for consolidated financial standards from 2010 onwards. Other countries’ experiences have shown that the IFRS convergence process for the financial statement can be complex, last long, and result in major impacts on companies’ income and shareholders’equity, with considerable effect on the price of their shares in capital markets. Considering that those changes may entail significant economic impacts for Brazilian companies, the objective of this paper is to analyse, from accounting professionals’s perception, what difficults will be faced and what impacts will probably occur on equity and income of Brazilian sanitation companies with the adoption of IFRS . The research was conducted by applying a questionnaire to professionals in charge of accounting information in fifteen companies comprising the population sample of the sanitation sector. The sample represents 73.48% of the population’s total assets and 63.60%of its net income. By subjecting the results to descriptive and cluster analyses, it was observed, among other issues, that, in accounting professional’s perception, the adoption of IFRS will result in significant impacts on balance sheet and income for companies in the sanitation sector. The study also showed that there is still a difference between the perception of the professionals who work in public-held companies and that of those in closely-held companies.