Many countries have regulatory accounting, which is applicable in regulated sectors such as: Electrical Sector, Sanitation, Highways, Ports, Airports, Gas. Regulatory accounting is a specialized field that focuses on the application of accounting principles in compliance with specific regulations established by government bodies or regulatory entities. These regulations are developed to ensure the transparency, accountability, and comparability of financial information disclosed by organizations.
A clear example of regulatory accounting is the application of International Financial Reporting Standards (IFRS) or Financial Accounting Standards (GAAP) in the United States. These standards establish the accounting principles that companies must follow when preparing their financial statements for external reporting. Adherence to these standards is generally required by financial regulators and government agencies to ensure the consistency and quality of the financial information disclosed.
In addition, specific sectors of the economy may have their own accounting regulations. For example, financial institutions, insurance companies, and utility companies may be required to follow additional accounting rules due to the highly regulated nature of their operations.
Regulatory accounting plays a crucial role in investor protection, financial market stability, and corporate governance. By establishing clear and uniform accounting standards, it helps ensure that companies provide accurate and relevant financial information, thus promoting investor confidence and market integrity.
Regulatory accounting in Brazil In Brazil, regulatory accounting is currently governed primarily by the Federal Accounting Council (CFC) and the Securities and Exchange Commission (CVM), the capital market regulatory body. The CFC is responsible for issuing accounting standards in the country, while the CVM specifically regulates publicly traded companies and capital market participants.
One of the most important points when we talk about accounting is a company's financial balance sheet. The document that contains all the accounting movements of the business must be clear, transparent and meet all market standards. On the other hand, following all the required standards requires technique and knowledge, thus ensuring the correct completion of the information.
Among the accounting reporting standards, we have the IFRS, an acronym for International Financial Reporting Standards (known in Brazil as International Financial Reporting Standards). This standard makes it easier for companies to present their numbers on an intercontinental basis, making it easier for professionals from other countries to read the data.
Accounting standards in Brazil are aligned with International Financial Reporting Standards (IFRS), which have been adopted since 2008 for publicly traded companies and have since been progressively implemented by other entities.
In Brazil, regulatory accounting encompasses several areas and sectors of the economy, each subject to specific regulations. Some of the main areas that have regulatory accounting include: publicly traded companies, financial institutions, insurance and private pension companies, not-for-profit entities, and companies from regulated sectors.
These are just some of the areas in Brazil that have regulatory accounting. In each sector, accounting regulations are developed to meet specific needs and ensure the transparency, integrity, and efficiency of organizations' financial and accounting operations.
The IFRS concept In short, the IRFS is the model of accounting standards that companies must follow to comply with international standards, making the balance sheet clear and interpretable in different countries.
Adopted in more than 120 countries, IFRS is also used in Brazil. This bookkeeping standard is fundamental for companies that want to grow and maintain a good image before shareholders and investors.
Every entrepreneur or business administrator must always remember the importance of having well-organized financial numbers, transmitting to third parties a transparent and clear image of the soundness of the business. External auditing is also indispensable in this regard. .
The adoption of IFRS brought greater harmonization and comparability of Brazilian financial statements with international standards, which is essential to attract foreign investors and promote the integration of the Brazilian capital market with global markets.
In addition to IFRS, there are specific regulations for sectors such as financial institutions, insurance companies, and publicly traded companies, which are issued by the Central Bank of Brazil (BCB), the Superintendence of Private Insurance (SUSEP) and the CVM itself, respectively.
Regulatory accounting in Brazil also addresses specific issues related to taxation, such as compliance with the rules of the Public Digital Bookkeeping System (SPED) and the preparation of financial statements for tax purposes in accordance with the rules of the Brazilian Federal Revenue Service (RFB).
Particularities of some regulated sectors Business managers and regulators rely on the same basic financial indicators to measure the performance of a given activity, however, regulators have different and broader objectives, so they need accounting to be formatted to those objectives. Regulators need to define their specific cost objectives and their own allocation rules and methodologies, and they use the entity's information to guide the definition of prices (tariffs). Because of these specific situations, regulators must ensure that prices are fair and acceptable and that they are cost-effective. These specific information needs justify the existence of regulatory accounting, established by Accounting Manuals, issued by national, state, or even municipal regulatory agencies.
For example, the Electricity Sector, which is regulated by the National Electric Energy Agency (ANEEL), since the convergence of Brazilian Accounting Standards with the standards of the International Accounting Standards Board (IASB), prepared the Electric Sector Accounting Manual and established regulatory accounting.
Regulatory accounting in sanitation, on the other hand, has expanded in Brazil, but it does not have a national agency that regulates the sector throughout Brazil and regulatory accounting standards. Regional agencies are structuring themselves to issue regulatory accounting manuals concatenated with the regulation of tariff procedures and mechanisms. In some states and the Federal District, they already have accounting and asset control manuals.
Regulation can generate benefits in terms of economic performance if it contributes to the correction of externalities, informational asymmetries, or coordination failures - for example, preventing the issue of “free-riding” that impairs the provision of productive public services or promoting improvements in the dissemination of information, thus reducing credit rationing in financial markets.
One of the main premises of any regulatory accounting system is that it does not differentiate with corporate accounting practices that do not have technical justification aimed at seeking specific information aligned with tariff concepts. Any differences in accounting practices must be explained in explanatory notes to the regulatory financial statements.
By implementing regulatory accounting, regulatory bodies contribute to preserving the availability and stability of the services provided, promoting fair prices to consumers and satisfactory rates of return for companies and investors.
For clarity and transparency, international best practice recommends that the regulator publish regulatory accounting guidelines that summarize the regulator's requirements, as well as the motivation, legal basis, principles, and processes.
AIRPORT REGULATORY ACCOUNTING AND REPORT TEMPLATES FOR THE PUBLIC HEARING HELD BY ANAC TATICCA was the consultancy contracted by the NATIONAL CIVIL AVIATION AGENCY - ANAC to develop regulatory accounting for airports. The ANAC is about to issue guidelines to regulate the accounting information to be submitted by airport and airport administrators with a Federal Public Concession or the operating administrator of airports that, individually or collectively, have an annual movement of scheduled aircraft exceeding 50,000 (fifty thousand). They must provide ANAC with:
• Standardized Financial Statements
• Accounting and Financial Statements
• Auxiliary Reports
• Internal Control Deficiencies Report
• Recoverable Value Reduction Analysis Report (Impairment )
The obligations common to all relevant airport administrators:
Quarterly, up to 45 days after the reference quarter:
a) Standardized Monthly Analytical Balance Sheets;
b) Monthly Analytical Accounting-Financial Statements.
By the date of submission of the first Standardized Monthly Analytical Balance Sheets in accordance with the new ANAC Resolution, the following must be submitted:
a) Commented Corporate Chart of Accounts;
b) Document of Association between the Accounting-Financial Chart of Accounts and the Standardized Chart of Accounts.
Annually, up to May 15 of the subsequent financial year:
a) Accounting-Financial Statements;
b) Independent Auditor's Opinion on the Financial Statements
Financial;
c) Standardized Financial Statements;
d) Revenue Report;
e) Cost Allocation Report.
The specific obligations of airport administrators subject to the Federal Public Concession regime
Annually, up to May 15 of the subsequent financial year:
a) Variable Contribution Opinion;
b) Monthly Contribution Opinion;
c) Related Party Report;
d) Indebtedness Report;
e) Internal Control Deficiencies Report;
f) Recoverable Value Reduction Analysis Report (Impairment );
g) Fixed Asset and Intangible Asset Composition Report.
Quarterly, up to 45 days after the reference quarter:
a) Monthly Contribution Assessment Report, if applicable.
The specific obligations of airport administrators subject to the rate—ceiling per passenger fare regulation
They must submit annually, by May 15 of the following financial year:
a) Opinion from the Regulated Revenue Service;
It may include only airports subject to the Revenue-Ceiling per Passenger fare regulation.
Airport administrators subject, cumulatively, to the Federal Public Concession regime and to the fare regulation of the Revenue-Ceiling type per Passenger may submit only the Opinion in place of the auditor's Opinion regarding the amount of the Variable Contribution.
Importance of IFRS Training The IFRS (International Financial Reporting Standards) is the model of accounting standards followed by companies to comply with international standards, seeking greater clarity and interpretation of the balance sheet for different countries. Its intention is to promote understanding by people from all over the world and that is one of the reasons why the advantages of having knowledge of the standards through IFRS training can provide.
Accounting professionals, involved with IFRS statements, seek IFRS Training to exercise the applicability of the rules of the CPCS (Accounting Pronouncements Committee) and comparisons with the IFRS and their interpretations related to the standards. Due to the constant updates involving the IFRS, it is always recommended and advisable to rely on the guidance of a team with extensive experience in the segment.
IFRS Training is one of the most highly valued qualifications in International Financial Reporting Standards. Its purpose is to offer a broad introduction to the field of finance and to help professionals understand how it is used globally.
Understanding international accounting, identifying and applying disclosure requirements for financial reporting, applying relevant reporting standards, and preparing appropriate financial statements, are some of the objectives of the IFRS Training. It is sought after by accredited accountants, financial professionals, financial managers, professionals with MBAs in Finance and practice in the accounting area, external and internal auditors, financial and credit analysts who review financial statements, among others.
The content of the IFRS Training is relevant not only to those who use, prepare, or interpret financial statements, but also assists in understanding how to apply the principles, concepts, and knowledge of IFRSs, identify common pitfalls of applying standards, assess the business impact of standards on business, make business decisions, and provide practical business advice to clients.
For many companies, the disruption caused by the COVID-19 pandemic brought significant challenges in the application of IFRSs. An IFRS Training highlights the areas most likely to be affected and develops practical approaches for specific cases.
The recognition, measurement, and disclosure of accounting information became more complex with CPCS and the convergence with the international standard - IFRS, leading professionals to seek the best way to report information to the market. With the IFRS Training, professionals improve their understanding of international and Brazilian accounting standards, making it possible to implement improvements in their work routine.
By learning and being up to date with the standards, through IFRS training, professionals expand their accounting knowledge and achieve a great competitive advantage. After this apprenticeship, you will be able to work in multinational companies and to absorb more responsible roles. In the case of professionals who are already acting as auditors, they can offer this adjustment to the companies they serve.
In addition to consolidated professional experience, in our team there are masters in different areas of our practice, who also serve as professors at universities, internal courses at TATICCA and IFRS Training, as well as actively participate in working groups and committees in accounting and auditing bodies and are speakers at seminars and forums.
The advantage of regulatory accounting training Many countries have regulatory accounting, which is applicable in regulated sectors such as: Electrical Sector, Sanitation, Highways, Ports, Airports, Gas. In Brazil, these sectors also already have regulatory accounting and play an essential role in the process of seeking balance between the interests of investors, consumers and other interested and affected parties, as regulators use economic-financial indicators to support their decision-making, seeking security, continuity, timeliness and efficiency in the provision of services.
Regulatory accounting is a set of rules and principles that present the information of regulated companies. Company managers and regulators rely on these rules to allocate income and expenses, assets and liabilities, more easily monitoring the regulatory objectives to be achieved. Regulators need to define their specific cost objectives and their own allocation rules and methodologies, and they use the entity's information to guide the definition of prices (tariffs). Because of these specific situations, regulators must ensure that prices are fair and acceptable and that they are cost-effective. These specific information needs justify the existence of regulatory accounting, established by Accounting Manuals, issued by national, state, or even municipal regulatory agencies. And it is based on these Manuals that regulatory accounting training will present its content.
In addition to consolidated professional experience, our team includes masters in different areas of our practice, who also serve as professors at universities, internal courses at TATICCA and regulatory accounting training, as well as actively participate in working groups and committees in accounting and auditing bodies and are speakers at seminars and forums.
Regulatory accounting in Brazil is constantly evolving to keep up with changes in international standards, market needs, and the demands of regulatory bodies, with the objective of ensuring the transparency, reliability, and relevance of the financial information disclosed by Brazilian companies. In summary, regulatory accounting is essential for the effective and transparent functioning of financial markets, promoting investor confidence, economic growth, and the sustainable development of a country.
Get in touch with TATICCA Allinial Global Brazil , which provides integrated auditing, accounting, tax, corporate finance, financial advisory, risk advisory, technology, business consulting and training services. For more information, visit www.taticca.com.br or email taticca@taticca.com.br. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.
