Impairment losses on assets: impacts of transition

Abstract

This dissertation examines the impact of the first time adoption of Portuguese Accounting Standardization System (SNC – Sistema de Normalização Contabilística) in terms of the accounting treatments for impairment losses. It tries to understand if SNC reflects less conservative accounting practices than those required by the previous accounting frame of reference, Portuguese Accounting Plan (POC - Plano Oficial de Contabilidade), and examines the potential effects of the determinants that explain the accounting differences found in the recognition of impairment losses during the transition to SNC.The main results indicate that there are significant differences in the total assets and equity amounts presented in POC and SNC during the transition date, but there are no significant differences in the income before tax and impairment losses amounts. Regarding the degree of conservatism underlying accountancy practices under both standards, findings indicate that the adoption of SNC has leads to less conservative practices. Companies with greater profitability have shown fewer divergences in the treatment of impairment losses during the transition period to SNC.