Portugal

During the last 20 years, Portugal has seen the creation of thePortuguese Accounting Plan, the approval of new codified legislationon taxation and business, the incorporation of the Fourth andSeventh European Company Law Directives into Portuguese lawand, amongst other things, legislation on securities markets and theaccounting and auditing professions. Not surprisingly, in a countrywhere the public sector has occupied a position of considerableimportance in the economy, the state has been the main authoritativesource on many aspects of corporate governance. The trendin recent years, however, has been towards a sustained reduction inthe public sector with a programme of privatisation beginning in1988. Moreover, with the opening of the banking sector to privateinitiative and Portugal’s entry into the European Community, thefinancial system underwent a major liberalisation and the deregulationof capital followed. In matters of accounting, however,regulation continues to be dependent primarily on legislative instruments.Indeed, accounting principles usually require legal backingin Portugal if they are to be treated as valid because there is notradition of general acceptance of the accounting principles issuedby professional bodies.The Portuguese legal system is a structured hierarchy of laws, themost important of which is the Constitution Law which acts as afoundation for other legislation. In descending order of priority,other sources of legislation are leis (laws) passed by Parliament,decretos-lei (laws by decree) issued by the Government, decretosregulamentaresand portarias (orders) issued by Ministries anddespachos normativos (official communications) signed by Secretariesof State. In the area of financial accounting, the principallegal statutes in force in Portugal comprise the Plano Oficial de