Impact of the Brazilian Accounting Pronouncements Committee’s New Guideline (OCPC 07) on the downsizing of companies’ Notes

Abstract

This article aims to assess the impact of the New Guideline of the Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - OCPC 07) on improving formal features (size, readability, and specificity) of Brazilian companies’ Notes. OCPC 07 is one of the world’s first guidelines issued in response to the current demand for the downsizing of companies’ Notes, which according to standard setters and market agents have become too extensive, thus characterizing a disclosure overload. This is a unique study on the subject. The results suggest the effectiveness, although limited, of the new standard in promoting a departure from the habits of secrecy and formalism rooted in centuries of legal-accounting civil law tradition, and indicate that there is still room for complementary improvement initiatives in the form of incentives for firms and increased enforcement. Three complementary methodological approaches are used: (1) an analysis of both the evolution of note size after OCPC 07 and the factors explaining that size and its variation; (2) an examination of indicators of readability, conciseness, and specificity of the note on accounting policies; and (3) a size comparison of the Notes of Brazilian and British companies, a benchmark of the common law tradition. An average reduction of 10% in Note size was found two years after the introduction of Guideline (Orientação) 07 by the (OCPC 07). This downsizing was not generalized, but instead identified only among firms in the Novo Mercado and among those audited by two of the Big Four. Even in firms that reduced their notes by at least 20%, no significant improvements in readability levels could be perceived, nor in habits of copy-pasting the auditors’ templates, which could signal a focus on firms’ real practices in the note on accounting policies. Brazilian Notes remain far from the benchmark and are still 40% longer than British ones, despite an equivalent number of pages being expected.

Nível De Disclosure E Forma De Apresentação Das Notas Explicativas: Um Estudo À Luz Da Ocpc 07

“…No que se refere à emissão de ADRs, um indicador de internacionalização comumente aplicado em pesquisas das áreas de contabilidade, controladoria e finanças, percebeu-se que, apesar de estudos anteriores sinalizarem que as empresas com papéis negociados em mercados estrangeiros seguem uma trajetória de mais ampla divulgação (Santos, Calixto e Bispo, 2019;Silva et al, 2018), especificamente para as empresas do setor de alimentos listadas na B3 não é possível confirmar tal achado sob bases estatisticamente confiáveis (resultado não significante para DRI e DTO). A Tabela 5 demonstra que, em sentido geral, todas as variáveis levantadas para a forma de apresentação das notas explicativas estão, de alguma maneira, correlacionadas com a divulgação das empresas.…”

“…Diante dessa problemática, constata-se o surgimento de discussões sobre o fato de as demonstrações contábeis tornarem-se cada dia mais extensas e onerosas, já que com o passar dos anos acaba por ocorrer um excessivo acúmulo de exigências de divulgação, sem, no entanto, haver uma revisão ou remoção da exigência de algumas informações que não são tão úteis, relevantes e materiais para os usuários (Santos, Calixto, & Bispo, 2019;Santos, Ponte, & Mapurunga, 2014;Torres, 2012).…”

The Dilemma of Information Overload: A Review of Literature from Accounting and Finance Related Studies

“…Thus, this study found that several authors addressed the issues related to lengthy annual reports (Abad et al, 2020;Du Toit, 2017;Du Toit et al, 2017;Hegazy & Kamareldawla, 2021;Herold et al, 2020;Velte, 2020). While there are also a few studies associated with the issue from different perspectives, such as from the preparers' side and statistically measuring the level of disclosure and the readability of annual reports (Dority et al, 2021;Lee et al, 2017;Santos et al, 2019;Stone & Lodhia, 2019;Velte, 2020). The observations on selected studies portray an increasing trend in research-related readability of financial reports using different types of readability indices such as Gunning Fog Index (Bai et al, 2019;Velte, 2020), Flesch-Kincaid Grade (Stone & Lodhia, 2019;Velte, 2020) and Smog Index (Dority et al, 2021).…”

Qualidade das informações contábeis, governança corporativa e desempenho financeiro

“…A utilização de medidas de forma mais adequada está diretamente ligada ao contexto da pesquisa (Dechow et al, 2010). A Qualidade das Informações Contábeis contempla em sua definição um caráter multidimensional vinculado tanto ao contexto da pesquisa quanto ao de adoção de práticas de gestão da informação contábil das empresas mediante o mercado de capitais em que estão inseridas (Dechow et al, 2010;Daske et al, 2013;Christensen et al, 2015;Leuz & Wysocki, 2016;Baioco & Almeida, 2017;Santos et al, 2019).…”