Accounting Policy in Portugal
The (SNC) accounting standards are mandatory for the following entities:
a) Companies comprised by the Companies Code (CSC); b) Individual companies regulated by the Commercial Code; c) Individual establishments of Limited Liability; d) Public Companies; e) Co-ops; f) Joint Ventures and European Economic Interest Grouping. Portugal has three levels of accounting policy within the country Level 1 - Companies listed on the Stock Exchange Level 2 - All companies not covered by levels 1 and 3 Level 3 - Small Companies which do not exceed two of the following three limits: €1.000.000 of total net sales and other income; €500.000 total balance; 20 employees (average number during reporting period) |
Level 1
IFRS as adopted by the European Union
Aims:
The need for a universal accounting language implies that assets and liabilities are measured according to the same criteria;
Financial reporting rules should be uniform so that an investor can evaluate a company independently of its economic, financial or social context.
Aims:
The need for a universal accounting language implies that assets and liabilities are measured according to the same criteria;
Financial reporting rules should be uniform so that an investor can evaluate a company independently of its economic, financial or social context.
Level 2
Employing accounting standards and financial reporting – national standards applicable to companies with a mitigated degree of disclosure, considering that their records are not targeted to investors in regulated markets. For all other companies, in other words, companies not listed. In Portugal these are designated by the acronym NCRF: Normas Contabilísticas e de Relato Financeiro (accounting standards Financial Reporting)
Equivalences between the NCRF and IAS/IFRS
ACCOUNTING AND FINANCIAL REPORTING STANDARDS
NCRF 1 - Structure and Content of Financial Statements NCRF 2 - Statement of Cash Flows NCRF 3 - Adopting NCRF for the first time NCRF 4 - Accounting Policies, Changes in Accounting Estimates and Errors NCRF 5 – Related Party Disclosures NCRF 6 - Intangible Assets NCRF 7 - Fixed Tangible Assets NCRF 8 - Non-current Assets Held for Sale and Discontinued Operations NCRF 9 - Leases NCRF 10 - Borrowing Costs NCRF 11 - Investment Property NCRF 12 - Impairment of Assets NCRF 13 – Interests in Joint Ventures and Investment in Associates NCRF 14 - Business Combination NCRF 15 - Investments in subsidiaries and Consolidation NCRF 16 - Exploration for and Evaluation of. Mineral Resources NCRF 17 - Agriculture NCRF 18 -Inventory NCRF 19 - Construction Contracts NCRF 20 - Revenue NCRF 21 - Provisions, Contingent Liabilities and Contingent Assets NCRF 22 - Accounting for Government Grants and Disclosure of Government Assistance NCRF 23 - Changes in Foreign Exchange Rate NCRF 24 - Events After the Reporting Period NCRF 25 - Income Taxes NCRF 26 - Environmental Issues NCRF 27 - Financial Instruments NCRF 28 - Employee Benefits |
N. IASB
IAS 1 IAS 7 IFRS 1 IAS 8 IAS 24 IAS 38 IAS 16 IFRS 5 IAS 17 IAS 23 IAS 40 IAS 36 IAS 28 e 31 IFRS 3 IAS 27 IFRS 6 IAS 41 IAS 2 IAS 11 IAS 18 IAS 37 IAS 20 IAS 21 IAS 10 IAS 12 IAS 32+39+7 IAS 19 |
Level 3
The standards for Accounting and financial reporting for small entities (NCRF-PE) encompass the main aspects of recognition, measuring and disclosure of the corresponding accounting standards and financial reporting (NCRF), with the exception of the following:
NCRF 2 – Statement of Cash Flows
NCRF 5 – Related Party Disclosures
NCRF 8 – Non-current Assets Held for Sale and Discontinued Operations
NCRF 11 – Investment Properties
NCRF 12 – Impairment of Assets
NCRF 13 – Interests in Joint Ventures and Investment in Associates
NCRF 14 – Business Combination
NCRF 15 – Investments in subsidiaries and Consolidation
NCRF 16 – Exploration for and Evaluation of Mineral Resources
NCRF 24 – Events After the Reporting Period
NCRF 2 – Statement of Cash Flows
NCRF 5 – Related Party Disclosures
NCRF 8 – Non-current Assets Held for Sale and Discontinued Operations
NCRF 11 – Investment Properties
NCRF 12 – Impairment of Assets
NCRF 13 – Interests in Joint Ventures and Investment in Associates
NCRF 14 – Business Combination
NCRF 15 – Investments in subsidiaries and Consolidation
NCRF 16 – Exploration for and Evaluation of Mineral Resources
NCRF 24 – Events After the Reporting Period
Tax Policy in Portugal
In January 2010, the decree-law that enacts the Accounting Standardization System and repeals the Official Chart of Accounts (POC) will enter into force. The reform takes shape in four different legislative instruments: the legislation that enacts the Accounting Standardization System, the one that amends the IRC (Corporate Tax) Code, the one that sets up the new Accounting Standardisation Committee and the one that sets up the Accountants’ Association.
This reform of the Portuguese accounting system brings the Portugal accounting standards - the Financial Reporting and Accounting Standards (FRAS) - closer to international accounting rules, in particular to the International Accounting Standards (IAS). These standards stipulate at length the various procedures to be used for recognizing, measuring, preparing and disclosing company accounts. The aim is to ensure greater ease of comparison, more transparency and “legibility” between the financial statements of Portuguese and foreign companies all over the world as they will be based on similar standards, which will lead to more investment and financing by foreign banks and investors. It will also foster enhanced integration of Portuguese companies in international consolidation perimeters.
Yet this approximation may be somewhat undermined by the fact that the FRAS are based on earlier versions of the IAS, versions which have since undergone many (and in some cases, significant) changes. It will certainly not be possible to continue amending the FRAS in accordance with or as a result of successive alterations to the IAS, since this is incompatible with the taxpayers’ legitimate expectations and certainty, and would also entail constant amendments to the tax rules that will now be adapted to the new Portuguese accounting provisions. Against this backdrop, as part of the reform and in the exercise of the legislative powers conferred upon it by the 2009 State Budget Law, the government has also enacted the decree-law that will amend the IRC Code and complementary legislation, adapting the rules for determining taxable profit to the new accounting standards as well as to the new terminology that will be used. With the amendment of the IRC Code to adapt the rules for determining taxable profit to the new accounting standards comes a minimization of the costs involved, particularly those arising from any future requirement to keep double accounting books – one in line with the new accounting model and the other for tax purposes –, which would be borne by the economic operators.
It will still however be necessary, as is the case today, to establish tax rules that veer away from the accounting rules and cause tax adjustments to be made to the taxable profit computed according to the accounting standards, as approximation between one and the other will not always be either possible or advisable.
Types of taxes:
Stamp Duty
Corporate Income Tax (IRC)
Value Added Tax - VAT (IVA)
Personal Income Tax (IRS)
Property Tax (IMI)
Municipal Tax on Real Estate Transfer (IMT)
This reform of the Portuguese accounting system brings the Portugal accounting standards - the Financial Reporting and Accounting Standards (FRAS) - closer to international accounting rules, in particular to the International Accounting Standards (IAS). These standards stipulate at length the various procedures to be used for recognizing, measuring, preparing and disclosing company accounts. The aim is to ensure greater ease of comparison, more transparency and “legibility” between the financial statements of Portuguese and foreign companies all over the world as they will be based on similar standards, which will lead to more investment and financing by foreign banks and investors. It will also foster enhanced integration of Portuguese companies in international consolidation perimeters.
Yet this approximation may be somewhat undermined by the fact that the FRAS are based on earlier versions of the IAS, versions which have since undergone many (and in some cases, significant) changes. It will certainly not be possible to continue amending the FRAS in accordance with or as a result of successive alterations to the IAS, since this is incompatible with the taxpayers’ legitimate expectations and certainty, and would also entail constant amendments to the tax rules that will now be adapted to the new Portuguese accounting provisions. Against this backdrop, as part of the reform and in the exercise of the legislative powers conferred upon it by the 2009 State Budget Law, the government has also enacted the decree-law that will amend the IRC Code and complementary legislation, adapting the rules for determining taxable profit to the new accounting standards as well as to the new terminology that will be used. With the amendment of the IRC Code to adapt the rules for determining taxable profit to the new accounting standards comes a minimization of the costs involved, particularly those arising from any future requirement to keep double accounting books – one in line with the new accounting model and the other for tax purposes –, which would be borne by the economic operators.
It will still however be necessary, as is the case today, to establish tax rules that veer away from the accounting rules and cause tax adjustments to be made to the taxable profit computed according to the accounting standards, as approximation between one and the other will not always be either possible or advisable.
Types of taxes:
Stamp Duty
Corporate Income Tax (IRC)
Value Added Tax - VAT (IVA)
Personal Income Tax (IRS)
Property Tax (IMI)
Municipal Tax on Real Estate Transfer (IMT)