The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Romania

Abstract

Romanian accounting rules (RAR) had followed a convergence process with International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) since 1999, and the level of convergence has increased over time. The Romanian accounting regulator continues to follow IAS/IFRS in internalizing the Accounting Directive 2013/34/EU. Only a few major differences still exist (some of them due the restrictions in the Accounting Directive 2013/34/EU) between RAR and IFRS. However, RAR lack the level of detail existing in IFRS, and IFRS cannot be used in practice as a source of guidance and interpretation. While major stakeholders have a positive attitude towards the convergence with IAS/IFRS, the Romanian accounting regulator intends to keep the control over RAR and avoid differences in interpretations that might have tax consequences. Despite the good level of convergence of RAR with IFRS, practitioners tend to continue to utilize the tax approach as a source of guidance and interpretation.

Keywords:

• IFRS
• EU accounting directive 2013/34/EU
• SMEs
• Romania

Acknowledgements

We sincerely express our thanks to the interviewees who have taken the time to share with us their knowledge and experience. We also thank Paul André (the editor) for his insightful guidance and feedback on an early draft of the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 We refer to financial accounting standards issued by the International Accounting Standard Committee (IASC), before 2001, as International Accounting Standards (IAS). International standards applicable after 2001 (including the standards issued by the International Accounting Standard Board (IASB), the successor to the IASC, and the IAS still applicable) are referred to as IFRS.

2 Governing through OUGs is a well-established practice of successive Romanian governments, and was subject to heavy critiques in the media for its lack of transparency and public consultation (http://www.gandul.info/politica/guvernarea-de-urgenta-ponta-l-a-depasit-la-ordonate-de-urgenta-pana-si-pe-emil-boc-vezi-frecventa-oug-urilor-din-2009-pana-azi-11193622).

3 However, the Directive 2013/34/EU also brought some changes to the Accounting Law (such as the definitions of financial statements elements, entity size criteria for simpler formats of the financial statements), and to the regulations issued by other regulators (the National Bank for banks and the Financial Supervisory Authority for the entities regulated by this entity) (changes implemented through OUG no. 79/2014).

4 The very short timeframe for the implementation of various accounting rules is also a characteristic of the Romanian environment. Anecdotal evidence exists where entity accountants complained about the lack of time to prepare the implementation of the various changes occurred over time.

5 Microentities are required to prepare an abridged balance sheet and an abridged income statement and are not required to prepare notes to the financial statements (chapter 12, art. 576, 577). Small entities are required to prepare an abridged balance sheet, an income statement and notes to the financial statements (art. 20). Medium and large entities are required to prepare a balance sheet, an income statement, a cash flow statement, a statement of changes in equity and notes to the financial statements (art. 21).

6 Prior to 2012, IFRS as adopted by the EU were required (and accepted) only for the consolidated financial statements of entities listed on the regulated market. However, the recommendations from the World Bank led to the decision to require IFRS for separate financial statements as well. The decision was motivated mainly by the lack of comparability of the information provided by listed companies (there is a significant number of separate listed entities, besides groups) and by the difficulties, even the impossibility, encountered by some groups in preparing IFRS-compliant consolidated financial statements based on the separate financial statements complying with national rules.

7 The accounting professional bodies and enforcers are still mentioned as consulted parties, and interviewees (cited in Albu et al., 2016) indicated that MFP invites various stakeholders for specific consultations when convenient.