Portugal is located in Southern Europe and also includes the Azores and Maderia located in the Atlantic Ocean. The capital of Portugal is Lisbon which accounts for the highest population density; most people live in Portugal’s coastal regions rather than inland generally. Portugal gained its independence in the 12th century making it one of the oldest nations in Europe. People from many different origins: Phoenicians, Greeks, Carthaginians, Romans (who left us our language), northern Europeans and peoples from Mauritania.
Portuguese is the third most spoken European language in the world and native tongue of about 200 million people. Many people in Portugal can also communicate in English, French and Spanish; seeing as Spain shares a boarder with them. Portugal is known for it’s……
Portugal was once one of the poorest countries in Western Europe but due to the end of dictatorship and the introduction of Democracy in 1974 as well as its incorporation into the European Union (EU) in 1986 it has significantly increased prosperity. An instrumental part of the force currently propelling Portugal has been an accounting profession that has developed considerably in status and performance, particularly in recent decades.

History of Portugal’s Accounting System
Portugal created a Board of Trade in 1755 along with a School of Commerce in 1759 because foreigners were dominating the marketplace and the Portuguese did not have the skills they needed to excel in the marketplace. These educational programs were designed to train people to become good merchants and how to use the double entry bookkeeping system. This was when Portugal first saw the need for accounting standards.
In the 1800s Portugal became quite liberal which resulted in a de-regulation of accounting and industry. They were now allowing anyone to do their own bookkeeping regardless if they had the training to do so. This obviously would not have ended well, and in 1890 they found that their economy was weak and Portugal was on the verge of bankruptcy. Portugal passed new legislation that required joint-stock companies to have official audits and inspections completed. Directors could no longer also be bookkeepers, and in 1911 two Chambers of Accounting Experts were created; one in the south and one in the north.
In 1926, the military overthrew the democratically elected government. They studied how they could best regulate bookkeepers and accountants under their rule. National Union of Accountants and Bookkeepers from the Oporto District [NUABO] was created in 1934 which provided professional codes for accountants. You needed to have a license from them in order to perform any bookkeeping or accounting activity, and if you signed the balance sheets and knew of fraud you could be held liable. Although this was progress for the accounting profession, NUABO was dissolved in 1943 because they no longer felt there was a need for it.
The Portuguese Accounting Society (PAS) was founded in 1945. Members were graduates of an accounting course provided by the Commercial Institutes. The Industrial Tax Code was passed in 1963 which placed tax on profits that had to be calculated by accounting systems. This created the need for the accounting industry to become regulated.
In the 1970’s Portugal continued to regulate the accounting industry. Portugal was beginning to emerge as a liberal democracy and Portuguese Association of Accounts Technicians (APOTEC) was created which was free of state control. The name Account Technicians was to take place of the term bookkeepers and accountants because they were thought to be outdated. APOTEC’s goal was to teach skills, knowledge and efficiency of accounting to accounting technicians. They also spread awareness of the importance of the accounting industry. APOTEC started releasing an Accounting Journal in 1977 which is still in publication today. In 1974 the Portuguese Accounting Standards Board (CNC) was set up and in 1977 the Official Accounting Plan (POC) was put into place along with the Accounting Standards Board in 1983.
In 1986 Portugal entered the European Union which required them to be "bound by European accounting directives, common education and training requirements, compulsory mutual recognition of qualifications and more". New tax reforms were also implemented in 1989 by significant new codes covering personal income tax and profit-based taxes for businesses. Joining the EU also led to Portugal creating company and commercial law.
In 1981 Nobes stated the Portuguese accounting system had a strong legislative tradition because of the strong link between taxation and accounting along with the limited influence of the accounting professionals. Also because the state is the primary recipient of the financial statements.

Portugal’s standard setters today

Need to know if APOTEC is still in power???
The Commission for Accounting Standards (CNC) and “Plano Oficial De Contabilidade” POC, as mentioned above, are still used in Portugal’s present day accounting system. The CNC was implemented because Portugal started to realize how important accounting standards were and it is made up of 41 members who represent 36 institutions (professional associations, schools, representatives of the economic sector and public entities). The CNC has independence technically but still operates under the Ministry of Finance.
The CNC sets accounting procedures and standards in accordance with European standards and relevant international standards. Portugal follows the requirements the CNC sets in place along with their POC.
Accounting standards (DC) are also released by the CNC. The accounting standards are developed by CNC members and a few well-known individuals with very little information given to the public. The Portuguese Institute of Public Auditors (OROC) and Accounting Institute (CTOC) are allowed to make comments but other than that it is a very internal process.
Portugal started adopting IAS while preparing their DCs, and the influence of IAS can be observed in many of the DCs which are issued. Over two thirds of them were developed in line with IAS. When there is an absence of Portuguese accounting standards then IAS is to be used instead.
The users of their financial statements are much like Canada’s, being investors, financers, other creditors, etc. which explains why their POC says 'financial statements should provide information on the financial position, changes in this position and operating results, which may be useful to investors, creditors and other users in terms of making rational investments, providing credit and taking decisions. In this way they contribute to the efficient functioning of the financial markets'.
Companies that are in Portugal are required to prepare both a Balance Sheet and a Profit and Loss Statement at least once a year. They reports must be put together by a Chartered Accountant (TOC) who is registered with the Association of Chartered Accountants. Chartered Accountants are responsible for planning, calculating and preparing business accounts and also for technically coordinating all accounting operations. Accounts prepared by a Chartered Accountant are then reviewed by a Statutory Auditor (ROC) who is responsible for the checks and verifications needed to audit and certify the accounts. There are the only individuals authorized to carry out statutory audits of the accounts of companies. Starting on January 1, 2009 companies in Portugal had to start preparing their financial statements in compliance with Sistema de Normalização Contabilística (SNC). The CNC created the SNC to better harmonize their standards with IFRS. The CNC hoped that by changing from the previously used POC to SNC that higher quality financial reporting would be created and greater development would take place of capital markets that were both efficient and effective.
The POC was introduced mainly to fulfil tax purposes and legal requirements and did not change a lot since it was originally created.
It is a challenge for Portugal changing from POC to the SNC because of the many difference. The POC used historical costs and the level of disclosure and presentation wasn’t very high. Also, under the POC LIFO was permitted, research costs could be capitalised and goodwill was subject to amortization. Under SNC however none of these things are permitted.
The SNC has a higher level of disclosures, includes the fair value model for initial recognition and has rules on how to treat financial instruments and biological assets. The application of SNC requires increased use of fair value measurement of assets and liabilities. The goal of SNC is to reflect the economic substance in the Balance Sheet which brings significant volatility to the Profit and Loss Statement. It also stresses the need to disclose information correctly and that it’s important to understand the Financial Statements as a whole.

Differences between IFRS and Portugal’s standards

1990’s to Present Day

In 1991, Portuguese companies started to prepare their financial statements in accordance with the Portuguese standards. When Portugal could not receive any support from the EU they decided to issue accounting standards that mirrored the IAS standards. This allowed the accounting development in Portugal to be in harmonization with the EU accounting. Portugal created the Statutes of Official Accounts Technicians in 1995, which required all companies to have an official accounts technician. These businesses were to be taxed based on their profits, which were calculated in accordance with the Portuguese GAAP. The Portuguese GAAP included the Official Accounting Plan and the accounting directives and standards, which was issued by the Portuguese Accounting Standards Board. Due to the issuance of these statutes an Association of Official Accounts Technicians (ATOC) were established. The purpose of the ATOC was to “defend the dignity and prestige of the accounting function, to promote respect for ethical principles, to defend the interest and rights of members; and to promote and improve professional training” (reference). The ATOC changed its name to Camara dos Tecnicos Oficiais de Contas (CTOC) in 1999, which means the Chamber of Charted Accountants. By 2002, the CTOC was the largest Portuguese professional accounting body with 71,509 members. After 2005, accounting standards for listed companies and non-listed companies were created and the EU adopted IFRS. Because Portugal is part of the EU it has the following options:
• Require or permit IFRS for unlisted companies
• Require or permit IFRSs in parent company (unconsolidated) financial statements
• Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007.
• Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.

Converting to IFRS – what small companies follows, dates, etc.

Taxation Influence

The accounting system in Portugal has been influenced by tax regulations. In 1963, the first attempt to harmonize accounting practices occurred with a large tax reformation. Also, the 1977 Portuguese Official Accounting Plan was influenced by taxation. This influence to move towards tax continued with the Tax Law of 1988, which provided a set of rules for the recording and measurement of taxable items. Taxation affects the accounting standards when valuating inventory, revaluating fixed assets, and depreciating fixed assets.

Conclusion