Portugal has been recognised as a code law country, with weak legal enforcement mechanisms and conservative accounting practices. However, since 2005, Portuguese companies have been changing their financial reporting practices to those based on common law institutional logic. In 2010, unlisted Portuguese companies began to apply a new set of accounting standards called the Accounting Standardisation System (Sistema de Normalização Contabilística -SNC) based on International Accounting Standards/International Financial Reporting Standards (IFRS). This paper seeks to analyse the impact of the first-time adoption of the SNC with regard to the accounting treatment of impairment losses. It is found that, to mitigate political costs associated with their public visibility, larger companies present more credible financial statements that reflect their overall true financial and economic condition. This study is a valuable contribution to both users of financial information and domestic standard setters to help them understand and improve the impact of accounting standards. Consistent with Khalil and Simon (2014), it also contributes to the debate on the optimal flexibility permitted by IFRS to improve reporting quality and reduce earnings management.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.