Abstract
Purpose – The present study evaluated whether there were reductions in the relevance of the accounting information of Brazilian energy distributors in the post-IFRS period. Design/methodology/approach – The rationale for such a conjecture stems from the fact that after the adoption of international accounting standards, energy distributors were unable to register regulatory assets and liabilities concerning their activities. Besides, the same hypothesis was also evaluated for Canadian electricity incumbents. The inclusion of the Canadian companies in this study was the result of the permission given by the IASB, through IFRS 14, so that adopters of international standards from 2015, could continue to register the regulatory items. Findings – Using a value relevance model it was possible to conclude that there was a reduction in the relevance of the accounting information in the Brazilian case and that this decrease is very potentially related to the write-off of regulatory assets after IFRS. It was also observed that the same effect did not occur in the Canadian companies after the adoption of this normative set. It was also verified that before the IFRS, both the regulatory assets of Brazilian companies and of Canadian firms, were from the statistical perspective also incorporated into the market value of the companies analyzed, denoting similar behavior on the part of investors. Originality/value – That is, although the economies of these jurisdictions are distinct, investors incorporated such accounting assets into stock prices because they could potentially verify realization rates on such items. Thus, it is concluded that the adoption of international standards did not benefit Brazilian energy distributors by distancing the book value from their market value.
Highlights
The primary objective of financial statements is to provide information on the financial position, performance, and changes in this position of an entity, which are relevant to a wide variety of users in their economic decisionmaking (IASB, 2010)
Our results indicated no significant reduction in the relevance of the accounting information of electricity distributors and that this did not occur in Canada, confirming that the effect of non-recognition of regulatory assets negatively affected those companies in Brazil
It is important to emphasize that what we evaluated was not the ability or not of Brazilian capital market agents to incorporate regulatory items into stock prices, because this information became available through the regulatory accounting statements required by ANEEL
Summary
The primary objective of financial statements is to provide information on the financial position, performance, and changes in this position of an entity, which are relevant to a wide variety of users in their economic decisionmaking (IASB, 2010). In this sense, the preparation of financial statements occurs in large part through the exercising of subjective choices by management, choices which are supposed to reflect the best measurements and knowledge about economic and financial events that impact organizations. The preparation of financial statements occurs in large part through the exercising of subjective choices by management, choices which are supposed to reflect the best measurements and knowledge about economic and financial events that impact organizations In this context, it is possible to restrict the scope to the capital market agents’ perspective, where such information plays a prior role in investor predictions of the future returns of organizations, where such expectations are expressed in stock prices and returns. Regulatory assets represent a right to receive when the costs incurred are higher than the estimated costs; otherwise there is a regulatory liability
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