IMPARITIES: MATERIALITY AND FISCAL IMPACT ON LARGE CONTRIBUTORS OF CAPE VERDE – 2011 to 2018

Abstract

This study aims to understand the materiality of impairment losses recorded by Cape Verdean companies and to analyze their fiscal impact. To this end, Cape Verde’s accounting standards on the subject were analyzed. In addition, tax procedures on the  recording of impairments in Cape Verde were also studied. In the empirical study, through the analysis of the reports and accounts from 2011 to 2018 of the major taxpayers in Cape Verde, it was shown that the vast majority of companies recorded impairment losses, namely from customer debts and inventories. It was also found, empirically, that the value of the impairments was materially relevant and had an impact at the tax level, with significant relationships between taxes paid (negative), operating costs without impairments (negative), turnover (positive) and costs (positive) with impairments recorded. However, it was found that these relationships were more relevant in the first years analyzed (from 2011 to 2014), which may be associated with two factors: the decrease in the activity of the major taxpayers of Cape Verde in the following years, reducing the need to record impairments to reduce profits to be taxed; the publication of the corporate income tax Code, which introduced more restrictive limits for the registration of these accounting items.