Perceptions regarding the implementation of International Financial Reporting Standards in Portugal and Brazil

Abstract

This study responds to calls for further research on how the institutional context of code law rooted countries impeded or supported the adoption of International Financial Reporting Standards (IFRS). We contribute to the debate on whether the pre-IFRS Anglo-Saxon versus Continental European model persists under IFRS. The experiences of Brazil and Portugal with respect to IFRS are underexamined and allow a comparison of an advanced economy and an emerging market, thereby offering further research on this topic. This study also helps overcome the lack of research on IFRS implementation by unlisted firms. Findings reveal that as many as seven or eight years after formally adopting IFRS, full de facto international accounting convergence in Portugal and Brazil is not yet achieved. Evidence from both countries show a coercive isomorphism being exerted mainly by informal market forces rather than by formal supervisory mechanisms. This observation together with enduring professional resistance and a low level of professional development, most noticeably in Brazil, is consistent with the possibility of decoupling or loose coupling. The cultural traits that influenced the continental model adopted prior to IFRS are perpetuated in both countries, thereby suggesting that culture poses a major obstacle to the complete adoption of IFRS.