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In 2010, Portugal’s newly implemented Accounting Standardization System (SNC - Sistema de Normalização Contabilística) aligned Portuguese accounting standards for unlisted companies with International Financial Reporting Standards (IFRS). The purpose of this paper is to explore the influence of the local context and the role of auditors in the institutionalization of this IFRS-based model in Portugal.

Drawing from an institutional theory framework, the authors interviewed 16 Portuguese auditors in 2017 (seven years after formal implementation of the SNC) to determine their perceptions on whether barriers to the IFRS-based model persisted.

The authors reveal that the code-law institutional logic embedded in the Portuguese context is hindering full institutionalization of the new accounting model. Some persisting barriers to implementation reflected a decoupling between formal requirements and actual practices. Despite these barriers, there has been an encouraging institutionalization of SNC. The authors reveal a high level of commitment of auditors. They draw attention to the engagement of auditors in the institutional work that is intended to assist in SNC implementation, and their role as promoters of a power-knowledge discourse in propagating IFRS institutional logics at the national level, namely, through the justification and rationalization of the reported institutional contradictions.

The highlighting the authors provide of problems related to accounting change should assist international regulators, the Portuguese standard-setter and professional accounting associations to devise appropriate strategies to promote IFRS-based accounting systems implementation.

The authors contribute to the skimpy literature on micro institutional analysis and encourage further exploration of the dynamics between the micro and macro levels of analysis in institutional research.

This study aims to identify a taxonomy of financial ratios derived from financial statements prepared using International Financial Reporting Standards (IFRS). The work first empirically establishes and then statistically validates the taxonomy of financial attributes captured in financial ratios. In 2005, the European Commission required that publicly traded companies in the European Union use IFRS as the basis for financial reporting. In the same year, Australia adopted IFRS as a basis for financial reporting. Since then, 120 countries and reporting jurisdictions have adopted IFRS as the basis for financial reporting. Given that IFRS predominate in the financial reporting world, it seems essential to establish and validate IFRS-based ratio attributes. Only then can reliance upon and comparability of these ratios be warranted (Altman and Eisenbeis, 1978). Using principle component analysis, the authors empirically identify nine stable attributes (factors) for ratios drawn from IFRS-based financial statements from 84 counties. The findings provides an empirical basis to formulate testable hypotheses regarding the predictive and descriptive utility of financial ratios draw from IFRS-based financial statements.

The paper begins with a broad category of IFRS-based financial ratios, 50, found in practice and research, including income statement, balance sheet, cash flow, profitability and liquidity measures. Then, a sample of companies from the manufacturing sector is segmented using IFRS as a basis of financial statement reporting. Next, principal component analysis, a method of factor analysis, is applied to empirically identify factors and financial attributes captured in financial ratios used in research inquiry and financial analysis.

The authors find that the financial attributes captured by IFRS-based ratios go well beyond the traditional measures of profitability, liquidity and solvency. The authors identify nine factors that are interpretable and stable over the period, 2011-2015: asset relationship, asset turnover, capital structure, expense insight, fixed asset usage, inventory turnover, liquidity, profitability margin and performance return. Interestingly, the authors did not find a separate cash flow factor. Most importantly, the results corroborate that IFRS-based ratios are consistent and comparable, despite innate country differences that have been shown to influence the application, interpretation and use of IFRS.

The efforts are limited to the manufacturing sector. The financial attributes may be different in service, distribution and retail sectors. Also, limiting the effort are the ratios selected in this study. A broader range of ratios may widen the identification of unique stable factors over time.

The findings provide a basis for research and analysis efforts regarding the validity, comparability and stability of IFRS-based financial ratios. Most importantly, the results corroborate that IFRS-based ratios are consistent and comparable, despite innate country differences that have been shown to influence the application, interpretation and use of IFRS. The findings should be of interest to international and national financial reporting standard setters, investors and analysts.

An empirically evidenced classification system for IFRS-based financial ratios has yet to be determined based on a financial statements across a wide breadth of countries and reporting jurisdictions. Identification of stable interpretable factors, financial attributes, has been limited. The first is that inquiry has been limited to domestic-based, such as US Generally Accepted Accounting Principles, financial ratios. The second is inquiry has been limited to IFRS-based financial ratios within a specific country.

In transfer pricing (TP) methods, especially when based on margins, accounting indicators are of paramount relevance to assess the profitability of firms, and to compare such indicators to samples of similar companies. The purpose of this paper, drawing on the legal research method, is to discuss the following questions: when using the transactional net margin, quite common in TP tax reporting, does the new (IFRS-based) Portuguese financial accounting system produce profit level indicators that are closer to the underlying reality that TP aims to capture, or are these profit level indicators of a lower quality than before?

The methodology used in the paper draws on legal research. The hermeneutical and evaluative approaches are used to answer the research question. The legal research method is often criticized by not making the empirical sciences’ type of generalizations, since many problems are, by nature, related to national legal systems and, therefore, proposed solutions are not valid outside a specific territory. However, given the nature of the accounting and tax issues identified and discussed in the paper the topic is relevant outside Portugal, given the widespread adoption of IFRS-based accounting systems and the multinational impact of TP principles’ and legislation.

The main conclusion is that the new accounting regime has a significant potential for increasing uncertainty and compliance costs in the area of TP, given the nature of operating income adopted in the new IFRS-based system. As such, taxpayers and tax authorities (TA) and tax courts will have to allocate more resources to an already complex and uncertain fiscal area. A careful analysis of non-recurrent items is now mandatory, given the increased flexibility and the amalgamation of recurring and non-recurring accounting items that can have a pernicious influence in TP tax compliance. The answer to the research question is that the new accounting system produces operating margins that, when used as profit level indicators in TP, are of lower quality.

Taking into account the aim of this study, the discussion of a Portuguese particular feature of corporate financial information and tax system can highlight useful policy points to a broader audience. Many OECD countries face a dire situation in budgetary terms. Therefore, given the pressure to increase tax receipts, TP issues can shed some light on solutions being applied in other countries, and enhance awareness of corporate tax policy points. Directive 2013/34/EU gives Member States some accounting flexibility (e.g. in the design of the income statement). Therefore, the authors would argue for a new design of the SNC’s income statement by the Portuguese legislators. The analysis also argues for a broader level of coordination and consultation between accounting standard setters and TA, in areas where a strong link exists between book and tax income.

The link between IFRS-based account systems and TP tax issues is not, to the best of the authors knowledge, a widely researched topic Thus, the paper adds value to the discussion related to book-tax relation in the specific area of transfer price profit level indicators. It finds a divergent path between the economic reality that TP tries to capture and a concept of operating margin that is affected by non-recurring and peripheral transactions.

This paper aims at understanding the action of pilot entities, in order to ultimately infer about their role to the overall reform process of public sector accounting (PSA).

Taking the Portuguese case as a reference, the new institutional theory (isomorphism perspective) and institutional logics are used to explain the action and stance of pilot entities in the implementation process of reforms.

Pilot experiments are expected to provide feedback on the main difficulties felt in the implementation of a new PSA system, helping to define a global strategy to overcome those problems and to improve the system to be generally and finally put into practice. Nevertheless, entities seem to find it important to be pilots, more for individual advantages than for the common benefit of the reform as a whole. Therefore, in order for them to actually be important actors in the reform process, pilots need to be included in the decision process, better realizing the benefits of the new IPSAS-based system and be provided with the proper technical, human and financial support.

This research suffers from some limitations, namely concerning the use of questionnaires. The findings may, in some points, reflect the perceptions of the respondents and not the actual reality. Additionally, the respondents were not asked about any personal background factors, which may influence their answers. Also, they did not allow relating the new PSA system features with the way pilot entities (re)acted. In regard to the implications for practice, the study points to a need for decision-makers and external support bodies to work more closely with pilot entities in the overall design and implementation of PSA reforms. Pilot entities need to understand the importance and usefulness of changes, and reform authorities need to better recognize their institutional reality and the support they require. Only in this way, the use of pilots can make a difference in the implementation of PSA innovations.

This paper contributes to theory by adding to a better understanding of the role of the ones acting in the development and implementation of PSA innovations, enlightening on how pilot entities can act/react. Despite several studies on PSA reforms, very few so far have addressed pilot entities in particular, their attitude and actual contribution toward PSA reforms, and why. The case of Portugal as a frontrunner in adopting an IPSAS-based system within the EU helps contribute to that understanding in the setting of European countries.

Prior to the adoption of an IFRS based reporting framework in Malaysia, no binding standard governing goodwill had ever been implemented. After several decades in which a laissez faire approach to the problem represented the dominant paradigm, the highly prescriptive and technical provisions of FRS 136 – Impairment of Assets represent a very substantial variation from past practice. This in turn gives rise to questions about the extent to which Malaysian companies and their auditors have fared during the process of transition to a complex new reporting regime and in consequence to the quality and consistency of reports produced pursuant to that new regime. Thus, FRS 136 presents an opportunity to interrogate the level of compliance and disclosure quality exhibited by first‐time reporting entities – and by extension, yield insights into the implications of and challenges associated with transition to new and complex reporting regimes. Focussing specifically on compliance and disclosure quality relating to the highly detailed requirements set out in FRS 136, this paper finds evidence that the quality of the responses by large listed Malaysian firms has indeed been mixed, with many firms producing financial reports that have failed to meet the mark of the new standard. While the move by MASB to adopt IFRSs is a reflection of Malaysia’s commitment to align with global accounting standards in order to achieve harmonization with international practice, these findings suggest that continued improvement will be required by Malaysian companies and their auditors before Malaysian practice is truly aligned to the international standard.

The purpose of this paper is to discuss how a decision of restructuring and firing people in a Portuguese company was based on financial data, and how the interpretation of such data made the process quite complex. This complexity was particularly relevant in the litigation that followed. At the core of the restructuring decision was the evolution of the firm's operating income; and a central point in litigation was precisely what should be considered the operating income of the company under analysis, and how it could influence the case's court outcome.

In 2008 a Portuguese company fired people in its finance department. The main reason presented by the management to the laid off persons was the evolution of the firm's operating income, which was negative for several consecutive years. The paper, after a background analysis of restructuring decisions and financial performance, will focus on this case and the correspondent issues, that are mainly related to the concept of operating income, the style of communication between managers and affected employees, and court procedures. It will also compare the Portuguese accounting regime in 2008, with the present one, introduced in 2010 and based on IFRS, as far as the nature of operating income is concerned.

The main conclusion is that standards of accounting and financial reporting can have an important role in justifying restructurings and lay off decisions, and are quite complex to discuss in court cases related to labor laws. Also, changes in accounting systems can have a significant impact in measures of economic performance, opening a wide field of interpretation and legal uncertainty about case outcomes. Judges must have the capacity to navigate through such intricate questions, and see financial information numbers in the light of a company's true economic function.

The paper highlights the problems that can arise when financial data are the basis for layoffs. Given the nature of accounting conventions, if litigation follows, a significant degree of complexity can be brought to the legal process. Also, managers must state, in very clear terms, reasons for restructuring, and, when they stress financial performance, related indicators must have an objective nature.

The paper has value for managers engaged in restructuring processes and also for the legal professions, as far as the relation between layoffs and financial performance based on accounting data is concerned.

The purpose of this paper is to examine the joint effects of state ownership and tax rate cuts on accounting conservatism, considering the different levels of foreign ownership in the context of Vietnam.

The paper uses ordinary least squares regressions and a data set of 405 firms covering the period 2007 to 2019. The manuscript uses three measures of accounting conservatism: Basu’s 1997 timeliness of earnings, Basu’s 1997 earnings persistence and the book-to-market ratio.

State-owned enterprises (SOEs) adopt less accounting conservatism than non-SOEs; however, the result is only robust in firms with foreign ownership being lower than the foreign ownership median. Firms increase accounting conservatism in the year immediately prior to the year that the tax rate cuts become effective. An SOE possesses an unusual conflict both as a taxpayer and in having its controlling interest held by the government, which is both a tax creator and a tax collector. Interestingly, the increase in accounting conservatism prior to the year of the tax rate cuts is more pronounced for non-SOEs than SOEs.

This research is beneficial to investors and policymakers where the government is both the taxpayer and tax collector and in emerging markets where foreign investment is local firms’ important financing.

To the best knowledge, this study is the first in examining the joint effects of state control and tax rate cuts on accounting conservatism.

This study aims to examine the effects of audit quality on earnings management and cost of equity capital (COE) considering the impact of two owner types: government ownership and foreign ownership.

The study uses a panel data set of 236 Vietnamese firms covering the period 2007 to 2017. Because the two main dependent variables of the COE capital and the absolute value of discretionary accruals receive fractional values between zero and one, the paper uses the generalised linear model (GLM) with a logit link and the binomial family in regression analyses. The paper uses numerous audit quality measures, including hiring Big 4 auditors or the industry-leading Big 4 auditor, changing from non-Big 4 auditors to Big 4 auditors or the industry-leading Big 4 auditor, and the length of Big 4 auditor tenure. Big 4 companies include KPMG, Deloitte, EY and PwC, whereas the non-big 4 are the other audit companies.

The study finds a negative relationship between audit quality and both the COE capital and income-increasing discretionary accruals. The effects of audit quality on discretionary accruals and the COE capital depend on the ownership levels of two important shareholders: the government and foreign investors. Foreign ownership is negatively associated with discretionary accruals; however, the effect is more pronounced in the sub-sample of state-owned enterprises (SOEs), the firms where the government owns 50% or more equity, than in the sub-sample of Non-SOEs.

To the best of the knowledge, no prior similar study exists that used the GLM with a logit link and the binomial family regression. Global investors may be interested in understanding how unique institutional settings and capital markets of each country impact the financial reporting quality and cost of capital. Further, policymakers of developing markets may have incentives to improve the quality of financial reporting and reduce the cost of capital which should result in attracting more foreign investments.

The purpose of this paper is to explore whether there are differences in either the level of support for the mandatory adoption of International Financial Reporting Standards or the arguments made by various stakeholder groups within Japan’s Business Accounting Council (BAC) during different time periods from 2009 to 2013.

Using a content analysis of related BAC meetings and referring to Gernon and Wallace’s (1995) accounting ecology framework, this study provides rigorous and holistic insights into the debates concerning the adoption of IFRS in Japan. Time-series analyses are specifically applied to unravel continuous or discontinuous patterns of BAC members’ statements.

The results indicated significantly higher levels of disapproval of mandatory adoption of IFRS by representatives from accounting academics, manufacturing industry, and the Financial Services Agency than by those from the Japanese Institute of Certified Public Accountants. Also, a lower level of disapproval of mandatory adoption of IFRS was found in 2009 than in 2012 and 2013. The results further demonstrated that diversity of opinions and arguments existed in different stakeholder groups as well as in different time periods.

The findings of this study suggest that accounting research will be enhanced by an objective and critical examination of the sociological context of the globalization (convergence) process.

The results of this study will provide answers related to the possible, probable, and desirable aspects of the globalization (convergence) process by unraveling the causes and consequences of certain patterns presented in BAC members’ statements.

This paper aims to research the reforms toward International Public Sector Accounting Standards (IPSAS) implementation and the perceptions about the use and usefulness of accounting information in the context of local government in the Iberian Peninsula. The paper focuses on the perspective of chief financial officers (CFOs).

The paper uses a mix of qualitative and quantitative methods. Beyond the study of the context of the reform in both countries through the consultation of legislation and official documents, the authors collected primary data through a survey addressed to the local CFO to catch both countries' perceptions and beliefs toward the topic under research.

The authors' findings evidence that both countries have made strong efforts to adapt IPSAS to both countries' national standards. The coercive and mimetic isomorphism and the private accounting normative were important determinants in the reform. Looking at perceptions, budget information continues to be perceived as the king information for public management and decision-making. In a comparative way, the Portuguese CFO seems to be more optimistic concerning the use and usefulness of the new accounting system. The strong orientation of CFO to cash-basis and budgeting information is an important explanation of the lower use and usefulness, essentially in the Spanish context. The regression results show that individual perceptions and beliefs on the accounting reform influence the opinion about the usefulness and use of financial information.

The use of the survey method has some limitations very discussed in the literature that are also applied in this study.

The paper has the potential to contribute to the academic, political and practitioner discussion of the core purposes of financial accounting information in the public sector and financial accounting information's impacts on the European Public Sector Accounting Standards (EPSAS) framework.

The recent adoption of the new accounting system in local governments of both contexts contributes to knowledge on the public sector accounting reforms toward the transition to accrual accounting and the IPSAS. The innovative character of the paper contributes to better clarify how the perceptions of the accounting reform influence the usage level of public financial information.