Accounting practices for financial instruments. How far are Portuguese companies from IAS?
The purpose of this study is to analyse the current accounting practices for financial instruments by Portuguese companies and compare them to the measurement, recognition and disclosure requirements stipulated in IAS 32 and 39. In order to attain our objective, we drew up a list of 120 categories of inquiry and 370 possible responses that we were interested in analysing. We applied content analysis technique to 2001 listed companies’ annual reports. Our results suggest that the accounting practices for financial instruments by companies listed on the Portuguese stock exchange are very far from what IAS 32 and 39 require. This is especially observed in the measurement and recognition criteria applied to the categories of financial instruments for which the adoption of fair value is required (that is, held-for-trading and available-for-sale financial assets). In what derivative instruments are concerned, we found that the fair value measurement criterion is being adopted by a large number of derivative users. However, with respect to hedging transactions, the gap between accounting practices and the relevant accounting Standards is quite wide. A big improvement in reporting practices regarding this type of instruments will be needed. These findings throw light on the challenges of adopting IAS, particularly with respect to fair value measurement, now that 2005 is near.
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