Welcome Decree No. 108/022

Context

On April 4, 2022, Decree 108/22 was published, which regulates some aspects of the preparation and presentation of financial statements. After several years of coexistence of two “libraries”, generated from the regulatory vacuum caused by IAS 21 and section 30 of IFRS for SMEs, we finally have clear local regulations to apply.

Purpose

The purpose of this decree is to establish accounting criteria for presentation that allow comparability between financial statements presented by various issuers, as well as to define the preparation currency in which the financial statements must be considered for all purposes of the application of Law No. 16,060 (Commercial Companies Law).

Main provisions

The main provisions of this decree can be summarized as follows:

a. The financial statements must be presented in the functional currency and in the presentation currency, when these are different.

b. The financial statements presented in both currencies are those that must be submitted for the approval of the partners or shareholders as appropriate.

c. The presentation of both financial statements may be made in the same body (financial statements with four columns) or in separate bodies.

d. For the purposes of the provisions of Law 16,060, the financial statements prepared and presented in the functional currency must be considered. Finally, it is now clear that the distributable results are those determined in the functional currency.

and. The entities included in the provisions of Decree 291/014 and other complementary and concordant regulations, must present the components of equity grouped in the following chapters:

• Integrated capital
• Contributions to capitalize
• Issue premiums
• Own shares in portfolio
• Other reserves
• profit reserves
• Accumulated results

F. What is detailed in the previous literal can be voluntarily adapted by the entities included in Decree 124/011.

g. The effect of the conversion of the balances from the functional currency to the national currency must be presented in separate lines, within the respective chapters, except for the effect of the conversion of the results of the reporting year or period, which must be recognized as Other results. comprehensive and presented in Other reserves and transferred to Retained earnings in the following fiscal year.

Decree 108/22 is mandatory for fiscal years beginning on January 1, 2022 and early adoption is permitted.

Patrimony Structure

The main novelties regarding the presentation of equity components are as follows:

Other reserves: Corresponds to all those reserves that do not constitute profit reserves. Corresponds to all those items from other comprehensive income and those derived from transactions carried out between the entity and its partners or shareholders, typical of its condition as such. Each of these reserves, according to their nature, must be presented on separate lines.

Profit reserves: Corresponds to those profits retained in the entity by the express will of the company or by legal or contractual provisions. Each of these reserves must be presented on separate lines, according to their nature.

Accumulated results: Corresponds to accumulated earnings without specific allocation or accumulated losses, as the case may be. They must be presented on separate lines, depending on whether they come from previous years or from the year or period itself. In cases in which profits or profits have been distributed in advance, in accordance with the provisions of article 100 of Law No. 16,060 of 09/04/989, they must be presented deducted from the profits or profits of the year.

conclusion

In summary, this decree resolves some points that were not clear from the point of view of exhaustive regulations.

The financial statements that are submitted for the approval of the shareholders or partners are those that are presented in the functional currency and in the presentation currency.