Mandatory IFRS Adoption in Brazil (2010): Index of Compliance with Disclosure Requirements and Explanatory Factors of Firms Reporting
Santos, E. S.; Ponte, V. M. R.; Mapurunga, P. V. Mandatory IFRS Adoption in Brazil (2010): Index of Compliance with Disclosure Requirements and Explanatory Factors of Firms Reporting. Revista Contabilidade e Finanças, 2014. Forthcoming
38 Pages Posted: 17 Aug 2013 Last revised: 18 Aug 2014
Date Written: January 5, 2013
Abstract
We evaluated firms’ compliance with required International Financial Reporting Standards (IFRS) disclosure in the first mandatory adoption year of IFRS in Brazil (2010) by comprehensively examining 638 disclosure required items from 28 encompassing IFRSs in the Notes to Financial Statements of all (366) Brazilian non-financial corporations listed on the Brazilian stock exchange (BM&FBovespa). We measured disclosure compliance levels by calculating the respective index, both overall and for each standard, and investigated associations between disclosure levels and firm’s characteristics as potential explanatory disclosure compliance factors. Our findings showed overall low levels of disclosure compliance in the analyzed year: the average level of compliance with IFRS required disclosure was very sensitive to the approach employed, varying from 16.04% (strict criterion and dichotomous approach) to 33.72% (tolerant criterion and partial compliance unweighted approach). In line with other countries experience illustrated by the international literature, these results emphasize the importance of increasing institutional support conditions for enhanced enforcement mechanisms, enabling the Brazilian firms to better attain the full economic benefits of IFRS adoption. In all our analyses, company size and “Big 4” auditing were positively associated with the dependent variable, independent of the model employed to determine the compliance disclosure index, making it possible to conclude that these factors produce a significant positive impact on compliance with the IFRS disclosure requirement levels of Brazilian firms.
Keywords: compliance, mandatory disclosure, explanatory factors, IFRS, Brazil
JEL Classification: M40, M41
Suggested Citation: Suggested Citation
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