Comparison of Brazilian and international accounting standards for patrimonial equivalence

Abstract

Efforts for the convergence of Brazilian standards towards international accounting standards are well known. However one of the persisting difficulties is the measurement of permanent investments according to the Patrimonial Equivalence Method (PEM). This research analyzed the differences between the calculation of the patrimonial equivalence according to CVM and the IASB and Law 6.404/1976 as well as the impact on company net profit, dividend distribution and net equity in order to find the most coherent treatment. Evaluation methods and differences in the recognition and measurement of permanent investments according to both standards were presented followed by an example simulating these approaches. Exploratory, documentary and qualitative research was used for this purpose. The difference found in the PEM was related to the treatment of not-carried-through-profit that affected net profit, dividend distribution and net equity. The most coherent treatment of the not-carried-through-profit was according to the CVM.