Tax effect of the adoption of ICPC 12 (IFRIC 23) on Brazilian companies issuing ADRs

Abstract

The application of the accounting standard ICPC 22 Uncertainty over Income Tax Treatment in Brazilian companies, equivalent to IFRIC 23 Uncertainty over Income Tax Treatments, became effective for the financial statements ending from January 1, 2019. ICPC 22 compares to US Accounting Standard FIN 48 Uncertain Tax Positions (currently ASC 740-10), adopted in 2007 for Brazilian companies listed on the New York Stock Exchange - NYSE. This article aimed to study the possible tax impacts resulting from the application of ICPC 22 to Brazilian companies issuing American Depositary Receipts (ADRs). As a methodology, a sample of Brazilian companies issuing ADRs was selected, and the t-test was performed for paired samples, considering the hypothesis that there was and had no effect of the adoption of ICPC 22. We also analyzed the disclosures of companies selected for the sample before and after the adoption of the interpretation, considering the quarterly information as of March 31, 2019 and March 31, 2018. As a result of the test, it was concluded that there was no impact arising from the adoption of the ICPC 22 for selected companies, thus confirming the initial hypothesis that there would be no impact. Despite some differences between the international standard or ICPC 22 and the US accounting standard FIN 48, this article contributed to a greater understanding of the tax effects of the application of ICPC 22/IFRIC 23 on Brazilian companies.