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This excerpt taken from the PBR 20-F filed May 22, 2009. Brazilian
GAAP Is in the Process of Adopting IFRS
Principles
Enacted in 2007, Law No. 11,638/07 amended the Brazilian
Corporate Law to permit Brazilian GAAP to converge with
International Financial Reporting Standards, or IFRS, as issued
by the International Accounting Standards Board, or IASB. The
transition from Brazilian GAAP to IFRS is being made gradually
as official accounting pronouncements are issued. Financial
statements prepared in accordance with Brazilian GAAP for the
fiscal year ended December 31, 2008 were impacted by the
new pronouncements. As a result, the basis for calculating
dividend and profit sharing distributions to our employees were
also affected. Our financial statements prepared in accordance
with U.S. GAAP were not affected by Law No. 11,638/07
other than dividends payable and profit sharing payable to our
employees, which are based on net income as calculated under
Brazilian GAAP.
In 2008, Provisional Measure No. 449/08 was enacted to
create a transitional tax regime that will allow the changes to
Brazilian GAAP brought by Law No. 11,638/07 to be tax
neutral until further legislation regulating the tax effects of
the new accounting principles becomes effective. The adoption of
the transitional tax regime is optional for the fiscal years
ended December 31, 2008 and 2009 and mandatory as from
fiscal year ended December 31, 2010. The temporary tax
effects caused by the adoption of this transitional tax regime
are reported in our financial statements as deferred income
taxes.
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