An Empirical Evaluation of The Costs of Harmonizing Romanian Accounting With International Regulations

Accounting in Europe
Vol. 4, 2007
An Empirical Evaluation of the

Costs of Harmonizing Romanian
Accounting with International
Regulations (EU Directives and
IAS/IFRS)
ION IONASCU, MIHAELA IONASCU, LAVINIA OLIMID &
DANIELA ARTEMISA CALU
Academia de Studii Economice, Bucuresti, Romonia
ABSTRACT After the fall of communism, Romanian accounting has undergone several
waves of reform. The first began with the 1991 Accounting Law and its 1993
Regulations implementing a French-inspired accounting chart and guidelines. The
second wave of reform produced Regulations (in 1999 and 2001) for the harmonization
of large entities accounting with EU accounting directives and International
Accounting Standards/International Financial Reporting Standards (IAS/IFRS). An
interesting feature was the inclusion of IASBs conceptual framework into the text of
these Regulations. Our study seeks to identify and evaluate the costs of harmonizing
Romanian accounting with international regulations (EU Directives and IAS/IFRS). We
hypothesize that three types of costs are prevalent: personnel training costs, consultants
fees and costs to adjust existing information systems. We also hypothesize that
harmonization benefits are noticeable for those entities that make frequent use of
foreign finance and for those entities with majority foreign shareholders. To collect
data, we sent out questionnaires to the finance directors of listed Romanian companies.
As full application of IAS/IFRS by non-financial companies has recently been
postponed until 2007, we also comment on the benefits and costs of gradual reforms as
opposite to a one-step adoption of IAS/IFRS.
Correspondence Address: Mihaela Ionascu, Academia de studii Economice, facultatea de contabilitate si informatica de gestiune, Piata Romana nr. 6, Sector 1, Bucuresti, 010374, Romania. E-mail:
mihaela.ionascu@cig.ase.ro
1744-9480 Print/1744-9499 Online/07/02016938 # 2007 European Accounting Association
DOI: 10.1080/17449480701727965
Published by Routledge Journals, Taylor & Francis Ltd on behalf of the EAA
170
I. Ionascu et al.
Introduction
This paper intends to study the harmonization of Romanian accounting
with international regulations (EU Directives and International Accounting
Standards/International Financial Reporting Standards (IAS/IFRS)) from the
vantage point of a wider cost benefit analysis. Tang (1994) hypothesized that
international regulations will be assimilated only if benefits will exceed
implementation costs. Romanias transition to an IAS/IFRS-based system followed the political decision of the accounting regulator (The Ministry of
Finance) and represented a radical change of course as the accounting reform
undertaken soon after the fall of communism had implemented a Continental
accounting model, the French model.
The new approach was questionable on several grounds. First, the regulator
tried to harmonize Romanian accounting with the Fourth Council Directive
and IAS at a time when the European Union had not stated its position
toward IAS in individual company accounts (European Commission, 1995).
Second, the harmonization regulations targeted a large number of enterprises,
without taking into account their capacity to implement these regulations.
Third, such regulations, being an approximation of IAS, were of no use to
those enterprises that needed financial statements conforming to IAS; these
enterprises had to perform restatements and therefore incurred additional costs.
Last, the very attitude of regulators was ambiguous, as 2005 witnessed the
reorientation towards the European Directives and the postponement of the
application of IAS/IFRS until 2007.
Under these circumstances, several issues arise: is the new direction imposed
by the accounting regulator fitting a trend in the Romanian business environment? How extensive was the effort that Romanian enterprises had to make?
And particularly, is this effort justified from a cost benefit point of view?
Our paper aims at offering answers to such questions via an ex post facto analysis of the process of internationalization of Romanian accounting during 1999
2005. Accordingly, we have surveyed the companies listed on the Bucharest
Stock Exchange because they were primarily targeted by the Ministry of
Finance to implement the new regulations. Our research focused on identifying
and evaluating the costs entailed by the assimilation and implementation of international regulations. At the same time, we intended to capture the opinions of
finance directors of listed companies regarding the appropriateness of the
decisions made by the accounting regulator from a cost benefit standpoint.
The Process of Internationalization of Romanian Accounting: From

Harmonization to Conformity with European Directives and IAS/IFRS
After the fall of the communist regime, company accounting was shaped by two
waves of reform (see Table 1). From its very beginning, the process of accounting
Table 1. Recent history of Romanian accounting regulations

Main regulations
Objectives
Comments
(Table continued )
Costs of Harmonizing Romanian Accounting with International

Regulations 171
Accounting Law no. 82 of 24 December To create an adequate accounting Ministry of Finance as the accounting
1991 98
regulator.
system for the market
1991, published in the Official
Regulations for
Internal and external users of accounting
economy allowing an efficient
Market Economy
Journal no. 265 of 27 December
information acknowledged.
fiscal control.
1991
Accounting is centred on the civil law
concept of patrimony, also present in
French accounting.
To implement Accounting Law Features significant imports from French
Government Decision no. 704 of 14
no. 82/1991.
company accounting.
December 1993 approving certain
Introduces new accounting principles,
measures of implementation of the
valuation rules, accounting chart, debiting
Accounting Law no. 82/1991,
and crediting rules for each account,
published in the Official Journal no.
standard formats for the financial
303 of 22 December 1993
statements.
The Order, applied only as a limited
To harmonize the individual
1999 Harmonization Regulation:
1999 2005
experiment, consists of four parts:
accounts of large enterprises
Order of the Minister of Finance no.
Harmonization
Volume I. The Harmonization Regulation;
with the Fourth Council
403 of 22 April 1999, published in the
Regulations
Volume II. IASC Conceptual Framework;
Directive and with
Official Journal no. 480 of 4 October
Volume III. IAS/IFRS;
International Accounting
1999
Volume IV. Professional Guides.
Standards.
The third and fourth volumes were
published separately later.a
Although the Harmonization Regulation
maintains the accounting chart, it provides
for more disclosure within the model format
for the financial statements.
172
Table 1. Continued
2006 present
Conformity
Regulations
Objectives
Comments
To enact Consolidation
Regulations consistent with the Seventh
Consolidation Regulation:
Regulations.
Council Directive. Applied only as a limited
Order of the Minister of Finance no.
experiment.
772 of 2 June 2000, published in the
Official Journal no. 374 of 11 August
2000
Same objective as 1999
Maintains the previous structure in four
2001 Harmonization Regulation:
Harmonization Regulation.
volumes.
Order of the Minister of Public
Slightly changes the 1999 Regulation and
Finance no. 94 of 29 January 2001,
allows carve outs for inflation accounting
and consolidation.b
85 of 20 February 2001
Consequence of the process of preparing for
To divide enterprises into two
Conformity Regulation:
accession to the European Union. Changes
categories: (1) those applying
the direction of company accounting,
accounting regulations
Finance no. 907 of 27 June 2005,
repealing the Harmonization Regulation.
conforming to European
All entities will apply the regulations
Directives and (2) those
579 of 11 July 2005
conforming to the European Directives
applying in addition
pending their issue (see European Directives
accounting regulations
Conformity Regulations below). For the
conforming to full IAS/IFRS.
year 2006 credit institutions also prepare
IFRS financial statements, while other
public interest entities prepare IFRS
financial statements only if they have
implementation capacity. Further
regulations governing IAS/IFRS
application as from 2007 were announced
(see IFRS Conformity Regulations below).
I. Ionascu et al.
Main regulations
International Accounting Standards Committee, Standardele Internationale de Contabilitate 2000 [IAS 2000], translated into Romanian by the IAS Working Party
headed by Aileen Beattie, Editura Economica, Bucuresti and respectively Ministerul Finantelor Publice (2001).
b
For a list of changes in the 2001 Harmonization Regulation, see Government of Romania (2001).

Regulations 173
To enact Fourth and Seventh

All entities apply the regulations conforming
European Directives Conformity
Council Directives.
to the European Directives beginning on 1
Regulations:
January 2006.
Finance no. 1752 of 17 November
2005, published in the Official
Journal no. 1080 bis of 30 November
2005
Mandatory IFRS consolidated financial
To enact Regulation (EC) no.
IFRS Conformity Regulation:
statements for listed companies beginning
1606/2002 of the European
on 1 January 2007. All credit institutions
Parliament and of the Council.
Finance no. 1121 of 4 July 2006,
(listed and not listed) also apply IFRS in
their consolidated accounts.
602 of 12 July 2006
Optional IFRS individual financial
statements for listed companies (targeted at
other users than government institutions).
174
I. Ionascu et al.
regulation was a public one, deriving from a legislative process where the
Ministry of Finance is the main actor.
The first wave of reform came in the early 1990s with the Accounting Law
which aimed at introducing an accounting system adequate for a market
economy, a system that allowed an efficient control of the legality of commercial
transactions and of the fulfilling of the fiscal obligations (Ministerul Finantelor,
1991). Company law, also passed in 1991, required public companies and certain
private companies to have an odd number of censors elected by shareholders
from among themselves with the exception of the accountant censor.1
The regulations that implemented the Accounting Law, effectively applied on
1 January 1994, had their inspiration in the French accounting system and came
with the stated objective of creating an accounting system compatible with the
Fourth Council Directive2 and International Accounting Standards (Ministerul
Finantelor, 1994). The latter part of this objective was merely declarative:
there is no further mention in the text of these regulations of IAS or compatibility
with IAS.
The various reasons for choosing the French accounting system are discussed
elsewhere (Feleaga, 1992; Dutia, 1995; Richard, 1995; Roberts, 2000) and comprise cultural, political and economic factors.
A second wave of reform started in 1996, when the goals of the Romanian
Accountancy Development Programme3 sponsored by the UKs Department
for International Development (DFID, 2000; King et al., 2001) superposed
with the requirements of international financial institutions. The World Banks
PSAL I and PSAL II loan agreements had among their objectives improving
the business environment and required the Romanian government to modernize
the accounting standards and to implement internationally recognized accounting
standards (World Bank, 2001, 2003a). The rationale was that such an accounting
framework would create a favourable environment for direct investment and
privatization. Ionascu et al. (2006) consider that the Romanian government
based its decision to adopt IAS/IFRS on financial grounds, while pursuing in
parallel harmonization with the European Directives as part of the political
objective of joining the European Union. Consequently, in 1999, the Ministry
of Finance issued a Harmonization Regulation seeking to harmonize Romanian
large enterprise individual accounts with both the Fourth Council Directive
and International Accounting Standards.
We cannot but notice that the regulator tried to harmonize Romanian individual company accounting with the Fourth Council Directive and IAS at a time
when the European Union did not have any requirements concerning IAS/IFRS
for Member States. In addition, Romania went much further than the European
Unions strategy at that time, introducing IAS/IFRS for the individual accounts
of large companies, listed and not listed, when the EU had not stated its position
toward IAS in individual company accounts:

Regulations 175
For those companies which are not directly concerned with the pressure of
international capital markets and which prepare consolidated accounts, it is
intended to continue efforts to improve the comparability of accounts. The
Contact Committee should step up its efforts to facilitate a harmonised
approach by dealing with practical problems which arise in connection
with the application of the Directives.
(European Commission, 1995)
As explained above, the decision of the Romanian regulator was due to the
requirements of the international financial institutions that most large
state-owned enterprises and all banks be compliant with international accounting
standards for financial reporting (World Bank, 2001). Asked why Romania got
ahead of the EU in adopting IAS/IFRS, a representative of the Ministry of
Finance interviewed by Ionascu et al. (2006) stated:
we got [ahead] on this programme with the international bodies . . . on the
IMF, WB agreements . . . which conditioned granting the loans [with the
adoption of IAS/IFRS] for large entities, those subject to privatization . . .
We assumed a responsibility . . . by the conditions [imposed] . . . you
could not carry on a finance agreement with IMF or WB, if you did not
take these steps . . .
The national regulator sought harmonization with both the Fourth Council
Directive and International Accounting Standards. However, well before the
time of the 1999 Harmonization Regulation, Romanian accounting had attained
a significant degree of conformity with the Fourth Council Directive, as the
Accounting Law and the related regulations were inspired from French accounting. In fact, the regulations adopted in 1999 reflect the reorientation of the
Romanian regulator towards Anglo-Saxon accounting, via International
Accounting Standards Committee/International Accounting Standards Board
(IASC/IASB), because the conceptual framework and the International Accounting Standards were included as volumes two and three in the Order 403/1999
enacting the 1999 Harmonization Regulation. This unusual inclusion of the conceptual framework into the text of a national regulation might indicate the regulators desire to help accountants to understand and apply standards grounded in
an accounting philosophy little known in Romania. Newly introduced accounting
principles, such as substance over form and materiality were justified and
explained by referring to the conceptual framework. Moreover, the 1999 and
2001 Harmonization Regulations provided that, in the absence of a relevant
IAS, the directors should draft accounting policies in accordance with the
Framework for the preparation and presentation of financial statements
(article 3.5 in both Regulations). Ionascu et al. (2006) found out that it was the
World Bank who required the inclusion of the conceptual framework into the
body of the Harmonization Regulation.
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I. Ionascu et al.
This mixture of accounting philosophies, that is, the superposing of an AngloSaxon accounting system on a legalistic one, with a national chart of accounts and
a strong fiscal connection, was evaluated as a cultural intrusion (Roberts, 2000).
The Ministry of Finance conceived the application of IAS/IFRS as a gradual
process to allow the audit market growth to keep pace with the demand from the
companies and for accountants in companies to be trained in the new standards
(King et al., 2001, p. 165). For the year ended 31 December 1999, the Harmonization Regulation and the existing, French-inspired, regulations were applied
simultaneously by 13 enterprises, forming a representative sample of listed companies on the stock exchange and certain enterprises of national interest (Order
403/1999, art. 2, para. 1). In fact, 12 pilot enterprises volunteered to produce
accounts under both the new system and the existing one, each being audited
by one of the Big Five (King et al., 2001). Another volunteering enterprise
was later added as it had received loans from international financial institutions
which required audited IAS financial statements.
The regulator included in the 1999 Harmonization Regulation the possibility to
require the application of the National Inflation Accounting Standard and indeed
the accompanying accounting chart had been adapted accordingly. Hyperinflation (as defined in IAS 29) marked the Romanian economic environment in
the first decade after 1990 (see Table 2) resulting in decapitalization and taxation
of inflationary profits. In 1995 and 1996, the Ministry of Finance allowed the calculation of taxable profits on the basis of an inflation adjusted tax balance sheet,
but this facility was withdrawn in 1997. About the same time, the accounting regulator within the Ministry, advised by British consultants, drafted a national
inflation accounting standard by adjusting the balance sheet only. By the end
of 1998, the standard was in the process of field testing (Olimid, 1998), but
was neither issued as a standalone regulation, nor included in the professional
guides (Volume IV, 1999 Harmonization Regulation). Some of the 13 enterprises
in the field test adjusted their financial statements to inflation on the basis of IAS
29 (Ministerul Finantelor Publice, 2001).
The 13 enterprises mentioned above were the only ones to ever apply the 1999
Harmonization Regulation and while it is not certain that it was meant to be an
Table 2. Yearly inflation rate in Romania during 1990 2006

Year
Inflation rate
Year
Inflation rate
Year
Inflation rate
1990
1991
1992
1993
1994
1995
5.1
170.2
210.4
256.1
136.7
32.3
1996
1997
1998
1999
2000
2001
38.8
154.8
59.1
45.8
45.7
34.5
2002
2003
2004
2005
2006
22.5
15.3
11.9
9.0
6.56
Source: Romanian National Institute of Statistics.

Regulations 177
experiment, it remained as such. The issue of Consolidation Regulations in 2000
was also an experiment: five groups named in the respective Ministerial Order
participated in this experimental phase, but we could only infer that it was unsuccessful. The Ministry of Finance has neither published a report, nor the professional guides regarding consolidation and other complex standards, such as
those concerning accounting for pensions and financial instruments; the application of these standards (IAS 19, IAS 27, IAS 29, IAS 32, IAS 39) remained
optional.
In 2001, the Ministry of Public Finance4 replaced the 1999 Harmonization
Regulation with a slightly different one bearing the same name. The new regulation was almost a copy of the previous one, but explicitly carved out IAS 27
and IAS 29. Once the experiments completed, it is possible that the regulators
feared that Romanian accountants did not possess the skills to apply these
standards in the absence of a common methodology or professional guides.
A year before the issue of the 2001 Harmonization Regulation, the European
Commission proposed the adoption of IAS/IFRS in the consolidated accounts of
listed companies (European Commission, 2000). Acknowledging the practical
problems of using IAS/IFRS in individual company accounts, the Commission
only encouraged Member States to adopt IAS/IFRS for this purpose, as this
would facilitate the preparation of consolidated accounts in the future (European
Commission, 2000, p. 7). Therefore, the Commission would allow Member
States to extend the application of full IAS to unlisted companies and to individual accounts. Accordingly, we notice that, this time, the harmonization process
begun with the advice of British experts and at the requirements of the World
Bank was not so far away from the EUs strategy with respect to IAS/IFRS,
although there were still no legal requirements for the Member States.
According to the new regulation, financial statements of eligible enterprises
had to observe the provisions of the Accounting Law, the 2001 Harmonization
Regulation, IASCs conceptual framework and IAS/IFRS. The 2001 Harmonization Regulation provided for its retroactive application by restating the year 2000
financial statements of approximately 200 enterprises: listed companies on the
Bucharest Stock Exchange, certain national enterprises and companies listed
on the RASDAQ Electronic Exchange.5 Similarly to its predecessor, the 2001
Harmonization Regulation was to be applied gradually, over a five-year period,
according to decreasing size criteria, to include all large enterprises by 31
December 2005. The ultimate large enterprises were those fulfilling two out
of the three size criteria for the previous year indicated by the Ministry of
Public Finance: total turnover more than E5 million, total assets over E2.5
million and average personnel number more than 50.6 According to the lists published by the Ministry of Public Finance, over 1,700 non-financial enterprises had
to apply the Harmonization Regulation by 31 December 2003 (Table 3).
The financial statements of these enterprises had to be audited by independent
auditors according to the newly issued Government Ordinance regarding independent audit, no. 75 of 1 June 1999. King et al. (2001) highlight the shortage
178
I. Ionascu et al.
Table 3. Number of non-financial enterprises having to apply the Harmonization Regulation for the first time
Financial statements for the year(s) ended on
31 December
31 December
31 December
31 December
2000
2001
2002
2003
No. of enterprises
197
767
410
367
Source: Ministry of Public Finance Orders nos. 94/2001, 990/2002, 705/2003 and
1827/2003.
of auditors and report the provisional arrangements that were put in place to
qualify as independent auditor.7
For all the other non-financial enterprises, considered small, the Ministry of
Public Finance issued Simplified Regulations, harmonized with the European
Directives only. The Simplified Regulations, applicable from 1 January 2003,
represented a simplified version of the Harmonized Regulations for large
enterprises. Harmonization Regulations were also issued for banking (2001),
insurance (2001) and brokerage (2002) industries.
According to the initial strategy of the accounting regulator, from the financial year 2006 onwards, company accounting should have functioned at two
speeds: an echelon of large companies applying the Harmonization Regulations and another echelon of small companies applying a simplified
version of these regulations. In practice, the attempt to ensure harmonization
with two accounting frameworks was not a success. Even if IAS/IFRS were
considered a part of the 1999 and 2001 Harmonization Regulations, the latter
featured two notable carve outs: IAS 27 and IAS 298 (2001 Harmonization
Regulation, para. 3.4). For example, companies could choose if they wanted
to apply IAS 29 or not: those that did opt for the application of IAS 29 had
to perform the relevant restatements outside the statutory accounts not to interfere with the calculation of the taxable income. Stating that the 2001 Harmonization Regulation supplemented by the yearly closing rules, differ significantly
from IAS, the ROSC 2003 country report cites inflation accounting,
consolidation, the presentation of own shares and the format of accounts
where masses of additional information, . . . can only confuse foreign shareholders and potential investors (World Bank, 2003b).
In practice conformity with IAS/IFRS was partial with respect to: IAS 1, IAS 2,
IAS 7, IAS 12, IAS 16, IAS 17, IAS 18, IAS 21 and IAS 39 (World Bank, 2003b).
Deloitte Audit S.R.L. (2006) also cites IAS 36 with respect to the determination of
recoverable value. Owing to the strong link between accounting and taxation, a tax
application of IAS/IFRS was often made, for instance, the provisions of international standards were applied if they did not contravene the tax regulations
(Ionascu et al., 2006). Likewise, companies did not appear to understand that

Regulations 179
IAS required them to make judgments and often deferred to Romanian tax laws
(World Bank, 2003b, p. 11). One audit report described the financial statements
prepared in accordance with the Harmonization Regulation together with their
interpretation via the year-end secondary legislation as not being IAS/IFRS compliant, but fulfilling the Ministry of Public Finances taxation requirements
(Deloitte Audit S.R.L., 2006).
Due to the countrys imminent joining of the EU (expected on 1 January
2007), Romanian regulators had to abandon the regulations harmonized with
the Fourth Directive and IAS and adopt separate regulations conforming to
the EUs accounting requirements. The 2005 Conformity Regulation (see
Table 1) announced the issue of two separate types of regulations: the first conforming to the European Forth and Seventh Directives (European Directives
Conformity Regulations in Table 1), and the second to IAS/IFRS (IFRS Conformity Regulation in Table 1), the latter stemming from the IAS Regulation
(EC) no. 1606/2002.
The regulator decided that, for the financial year 2006, all entities should
prepare financial statements conforming to European Directives (introduced by
the European Directives Conformity Regulations); some public interest entities
will also publish IFRS financial statements. This was the end of the 2001 Harmonization Regulation, and also of the regulators attempt to harmonize, on its own,
the European Directives and IAS/IFRS.
Beginning in 2006, banking enterprises prepare two sets of financial statements: a statutory one, in accordance with the European Directives, and a
second one, conforming to IFRS and destined for other users. The rest of the
public interest entities (insurance companies, entities regulated and supervised
by the Securities Commission, listed companies, national companies,
companies consolidated by a parent applying IFRS, etc.) may prepare an
IFRS set of financial statements only if appropriate implementation capacity
is available. As this phrase was included in the Conformity Regulation
without any explanation, we may take it as not precluding the voluntary application of IAS/IFRS.
We therefore consider that, contrary to the original intention of the regulator,
IFRS are now to be applied on a smaller scale. The scope of the IFRS is reduced,
because the eligibility criterion has changed: for the year 2006, only banks are to
apply them on a mandatory basis, other public interest entities are to do so only if
they are able to, while enterprises which do not qualify as public interest entities
are excluded.
The Conformity Regulation stated that EU requirements and the evaluations
of various supervising and regulating authorities would determine the conditions for the application of IFRS beginning with the financial statements of
the year 2007. Owing to Romanias scheduled accession to the EU on 1
January 2007, new regulations concerning the application of IFRS by listed
groups were adopted in 2006 (IFRS Conformity Regulation in Table 1) enacting
Regulation (EC) no. 1606/2002 of the European Parliament and of the Council.
180
I. Ionascu et al.
According to these regulations, starting with the financial year 2007, listed
groups and banking institutions (listed and not listed) will mandatorily apply
IFRS in their consolidated financial statements only, while the European Directives Conformity Regulations remain valid for all reporting to governmental
institutions. Out of all the options included in Regulation (EC) no. 1606/
2002, the Romanian regulator chose to enforce IAS/IFRS for the consolidated
financial statements of banking institutions only. Recent history must have
shown that the majority of Romanian enterprises did not have the capacity to
apply full IAS/IFRS.
The Bucharest Stock Exchange

Forty-eight years after it was closed down by the Communist authorities,
the Bucharest Stock Exchange (hereafter BSE) reopened in November 1995.
Ten years later the total market capitalization amounted to E15.31 billion at
the end of December 2005 (19.30% of GDP) and E21.41 billion in December
2006 (22% of GDP9) (Table 4). In 1996 RASDAQ securities market was established, as an institutional framework for the exchange of shares distributed
through the mass privatization programme. There were around 3,700 companies
(out of which over 1,900 suspended) listed on RASDAQ Electronic Exchange in
December 2005, with a total market capitalization of E2.24 billion. A year later,
the number of RASDAQ companies fell to around 2,400, but the market capitalization increased to E3.13 billion. To create a more attractive capital market, in
November 2005, the shareholders of the two entities approved the merger of BSE
Table 4. Market capitalization of BSE and neighbouring stock exchanges
Stock exchanges
Athens
Exchange
Bucharest Stock
Exchange
Budapest Stock
Exchange
Prague Stock
Exchange
Bulgarian Stock
Exchange
Sofia
Warsaw Stock
Exchange
Market
capitalization
December 2005
(euro millions)
GDP 2005 (euro

millions)
Market
capitalization as
percentage of
GDP
123,033
181,087.5
67.94
15,310
79,313.5
19.30
27,586
87,894.6
31.39
31,059
98,417.5
31,56
4,279
21,448.1
19.95
79,353
243,398.2
32.60
Sources: www.feas.org, www.fese.be, www.bvb.ro, www.eu.int/comm/eurostat/

Regulations 181
and RASDAQ Electronic Exchange. Already a single legal entity, with most
RASDAQ companies traded on BSEs platform, the combined capitalization as
a percentage of GDP did not change significantly in 2006, compared to 2005
(22% of GDP).
In December 2005, there were 64 domestic companies listed on BSE, out of
which 20 in tier I and 44 in tier II. To qualify for tier I listing, a company had
to fulfil a number of general, financial and managerial requirements such as:
(i) a share capital of at least E8 million, (ii) at least three years of business operations, (iii) positive earnings for two of the previous three years (excluding financial income), (iv) certain managerial aspects, regarding the expertise and moral
integrity of management, cash flows for the previous year, business plan for
the next two years and (v) at least 15% of the issued outstanding shares (representing a minimum of 75,000 shares) must be held by at least 1,800 public shareholders. Tier II companies were required a minimum share capital of E2 million
and the filing of an annual, externally audited report.10
In 2001, BSE initiated the plus (transparency) tier; any listed company can apply
for plus tier listing, while maintaining its listing in the original tier. The main condition was to adhere to BSEs corporate governance code, a code based on OECDs
principles. Annual and interim financial statements of plus tier companies must be
prepared according to both Romanian accounting regulations and IFRS and ought
to be available on the issuers website in Romanian and English.
According to BSE regulations, listed companies should disclose information to
the investing public enabling it to make investment decisions. The financial information available on BSEs website is limited and includes certain headings and the
corresponding amounts from issuers balance sheets and profit and loss accounts,
overdue payments and average numbers of employees. In February 2006, we surveyed the websites of listed companies to assess the financial information available. There was only one company listed on the plus tier because it included
BSEs corporate governance code in its Articles of Association but its website
did not feature any financial reports. Of the 20 companies listed in tier I, only
five had links to their annual reports including financial statements (e.g. 2004
annual report). Two companies used IFRS to prepare their financial statements,
while the other three applied the Harmonization Regulation. Five other tier I companies featured annual or interim management reports; one of these included
interim financial reports for the year 2005. Just five tier II companies (out of 44)
included links to their full 2004 annual reports or financial statements, all of
them prepared according to the Harmonization Regulation. The level of financial
information disclosure through company websites has decreased compared to previous years, as some companies ceased to include links to their annual reports.
Previous IAS/IFRS Transition Costs Research
Research in IAS/IFRS harmonization costs is only in its incipient phase, and we
are not aware of related studies published in academic journals. Several surveys
182
I. Ionascu et al.
were carried out by audit and financial services firms, but their results should be
cautiously evaluated as detailed references are not always available and their
results are not validated according to rigorous scientific criteria.
These surveys revealed that the effort to implement IAS/IFRS is significant.
JMH Financial Services11 survey of 1,000 British companies estimated an
average compliance cost of around 360,000. This figure is even higher for a
top 500 company (446,000), or for companies with a market capitalization
between 1 billion and 2 billion (625,000), and in excess of 1 million for
companies worth more than 2 billion.
A survey of listed companies in 12 European countries undertaken by the
French accounting firm Mazars SA (Mazars, 2005) in April 2005 revealed that
60% of the Polish companies surveyed consider that moving to IFRS is a
major cost, with only 30% of the respondents judging that benefits will outweigh
costs. The same opinion regarding the size of IFRS transition costs is shared by
companies in Belgium and Luxembourg, but with a more optimistic cost benefit
outlook (55%). Surprisingly, only 20% of Czech companies believe that IFRS
costs are sizeable (one of the lowest percentages in Europe), while 92% of
these companies have subcontracted the relevant accounting services (a percentage much larger than the average of 59%). Moreover, 64% of Czech companies
expect the benefits linked to the move to IFRS to exceed related costs.
A survey conducted in January February 2004 for Atos Consulting (Atos
Consulting, 2004) asked 200 top listed companies from the UK, France,
Germany and the Netherlands if their expected IAS/IFRS implementation
costs would exceed E1 million. It seems that this estimate is too pessimistic,
as 71% of the surveyed companies in the final implementation phase consider
that the final amount will be less than that and only 19% think that this value
will be exceeded. Only 4% of companies that have started the implementation
phase consider that their costs will rise beyond the E1 million threshold. The
authors nevertheless conclude that IAS/IFRS implementation costs are underestimated and the related projects are underfinanced. Only 40% of the surveyed
companies expect IFRS to increase shareholder value through greater transparency of reporting and ease of access to capital markets. However, 47% of the
surveyed companies anticipate share price fluctuations and 20% a decrease in
shareholder value. The results single out UK companies as failing to recognize
a potential positive impact, possibly because of more similarity between UK
accounting standards and IAS/IFRS.
The biggest issue reported by the companies on the Continent surveyed is
retraining staff to be conversant in IFRS (ranked second in the UK) followed
by technical accounting expertise (ranked top in the UK). All companies
mention modifying systems and re-engineering processes as the third and
fourth challenges, respectively.
A survey conducted in May 2005 for PricewaterhouseCoopers (Romir
Monitoring, 2004) on a sample of approximately 3,000 people,12 covering
Russian general businesses, audit firms, academics and students ended with

Regulations 183
excessively optimistic results. An overwhelming majority believes that IAS/
IFRS should be implemented partially (44%) or completely (39%) from 2010
onwards. IFRS were used by a small percentage (11%) of Russian companies,
but over 80% of the respondents are confident that partial or full transition
from Russian accounting to IFRS will be feasible. Although the average level
of international standards knowledge was assessed as basic, the respondents
opinions did not depend on this variable.
The issue of costs related to Romanian accounting harmonization with IAS/
IFRS has not been discussed elsewhere. Although the Ministry of Finance
stated that the 1999 Harmonization Regulation was based on a pilot study of a
sample of 13 companies, the results of this study were never made available to
the public. Accordingly, we cannot know if the regulator was aware of the
effort required to assimilate and apply IAS/IFRS.
In the context of implementing the European Accounting Directives, Day and
Taylor (2005) underline the importance of sufficient administrative and regulatory capacity at the standard setters in the applicant countries. This prevails over
the exercise of drafting legislation, and the European Commission assessed the
administrative capacity of the responsible ministries as a part of its more
general benchmarking process. In the specific case of the Harmonization Regulation, the issue of the implementation capacity can be raised both at the regulators level and at enterprise level. The important matter of effectively translating
regulations into local languages has been highlighted elsewhere (Larson and
Street, 2004; Day and Taylor, 2005) and current and updated IFRS translations
widely available are essential for the effective implementation of IFRS (Larson
and Street, 2004). In this context, we note that the first official Romanian translation of the IAS was published in 2000, even though the Harmonization Regulation was meant to be applied for the first time to the financial statements of the
same year.
As to the Professional Guides anticipated as Volume IV of the Order 403, just
Part I was ever published (in September 2001), while the accounting body
CECCAR edited its own professional guides for individual IAS/IFRS in 2004.
A four-week intensive IAS course taught by British accountants from the Institute of Chartered Accountants of Scotland was held at the Ministry of Finance in
the first half of 1997 as part of the Romanian Accountancy Development
Programme. The audience was limited and included: employees of the Ministry,
from both Accounting and Taxation Divisions, a few academics and representatives from the local professional accounting body CECCAR. A similar
course, also given by British accountants at the beginning of 2001 and held at
the main business school in the country, was aimed at academics (with around
100 people attending).
Meanwhile international accounting firms started their own IAS/IFRS courses
as part of their consulting activities: at least one Big Five firm was already operating such a project in 1999. CECCAR, the Romanian association of accountants,
has organized IAS/IFRS courses since 2001.
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I. Ionascu et al.
One cannot underestimate the implementation difficulties that eligible enterprises faced, making the recourse to professional accounting firms almost a
necessity.
Our contacts in the business milieu suggest that there is a perception that the
decision to introduce the 1999 Harmonization Regulation did not take into
account the enterprises capability of implementation, nor its effects on eligible
enterprises. Hereby is the remark of one finance director of a listed company:
[. . .] it would have been better to fill in this questionnaire 5 6 years ago.
[. . .] Our company was put at a disadvantage by the application of the
Order 94/2001 owing to [certain accounting treatments] that had led to
the taxation of inflationary gains during the first years (2001 2003), financial losses in 2004 and probably in 2005. The non-application of IAS 29
decided by the Ministry of Finance led to an increase in accounting
profit and therefore in income tax. The review of the financial statements
by the County Directorate for Fiscal Control gave us many troubles and
there were unending discussions because they were not sufficiently
trained to check the application of these regulations.
Given these circumstances, our study intends to identify and evaluate the costs of
harmonizing Romanian accounting with international regulations and capture the
perception of finance directors regarding the regulators decisions, all from a
cost benefit vantage point. We recognize that even before the issue of the Harmonization Regulations, Romanian accounting was already in line with the
Fourth Council Directive in most respects. Accordingly, the implementation
costs of these Regulations were mainly due to the IAS/IFRS component. We
shall keep in mind that Romanian Harmonization Regulations are only a rough
application of IAS/IFRS, and that restatement costs may be also incurred to
ensure full IAS/IFRS compliance.
Research Hypotheses
The three main objectives pursued by our study are: (i) to identify the extent to
which Romanian companies feel the need for IAS/IFRS; (ii) to identify and
evaluate the costs involved in the harmonization of Romanian accounting with
international regulations; and (iii) to capture the perception of finance directors
regarding the costs and benefits linked to the harmonization process. We have
built the research hypotheses upon these objectives.
A. Voluntary Adoption of IAS/IFRS
In order to evaluate the direction imposed by the accounting regulator, we tried to
identify if there existed an independent trend to use IAS/IFRS. As late as 2003,
the demand for transparent financial statements was described as low, owing to

Regulations 185
underdeveloped capital markets, collateral-based lending, and a general lack of
understanding of free market principles (World Bank, 2003b, p. 14). Consequently, we believe that a certain need for a transparent accounting framework,
such as IAS/IFRS or US Generally Accepted Accounting Principles (GAAP),
could be felt by enterprises interested in receiving foreign finance.13 It is probable
that these enterprises began the voluntary application of IAS/IFRS even before
the regulators attempt to harmonize Romanian accounting.
Since the Harmonization Regulations were an approximate application of
IAS/IFRS, we conjecture that enterprises needing full IFRS financial statements
will therefore practice double reporting at present. As large enterprises have the
highest potential for obtaining foreign finance, we believe that it is they who need
IAS/IFRS financial statements and therefore will prepare two sets of financial
statements. Accordingly, we formulate the following hypotheses:
HA1: Enterprises making recourse to foreign financial markets have applied IAS/
IFRS before they became mandatory through the Harmonization
Regulations.
HA2: Enterprises making recourse to foreign financial markets prepare two sets of
financial statements.
HA3: Large enterprises prepare two sets of financial statements.
B. Harmonization Costs
Based on certain preliminary discussions and signals from the business milieu,
we believe that harmonization costs consist primarily of personnel training
costs, consultants fees and costs of adjusting information systems. Large
enterprises incur significant costs to prepare and report accounting information
as explained by the increased volume and complexity of their transactions, but
also because of possible geographical dispersion. We do not believe that, at
least in the implementation phase, large companies were able to draw on the
benefits of reporting standardization, such as shared service centres, and
thus lower their harmonization costs. Moreover, some of these companies
might have applied IAS/IFRS to fulfil their own information needs, thus
exceeding the legal requirements of the Harmonization Regulation. If so, it
is possible that such companies would have incurred additional costs entailed
by the application of the optional inflation accounting and consolidation
standards.
For that reason, we believe that the implementation costs of large companies
were the highest. As Romanian harmonization regulations are only a rough application of IAS/IFRS, enterprises needing IFRS financial statements have performed restatements that may entail additional costs. As a result, some
enterprises have organized, within the Accounting Department, a special unit
charged with IAS/IFRS restatement.
For these reasons we posit that:
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I. Ionascu et al.
HB1: Harmonization costs consist mainly of personnel training costs, consultants

fees and costs of adjusting information systems.
HB2: Large enterprises incurred bigger IAS/IFRS implementation costs than the
rest of the enterprises.
HB3: Enterprises with double reporting incur higher implementation costs.
C. Costs and Benefits
Based on certain preliminary discussions and signals from the business milieu,
we anticipate that, on the whole, finance directors of listed companies consider
that the benefits of the implementation of IAS/IFRS do not cover related
costs. Nevertheless, we expect that the cost benefit relationship be evaluated differently by different types of enterprise. For example, we believe that companies
wholly or majority-owned by foreign capital and companies making recourse to
foreign finance will deem benefits to exceed IAS/IFRS implementation costs.
HC1: Finance directors judge that IAS/IFRS implementation benefits do not
cover related costs.
HC2: Finance directors of enterprises that request foreign finance regularly
consider IAS/IFRS implementation benefits higher than related costs.
HC3: Finance directors of companies wholly or majority-owned by foreign
capital consider IAS/IFRS implementation benefits higher than related
costs.
Methodology
In October 2005 we e-mailed a questionnaire accompanied by a cover letter to the
finance directors of companies listed on the BSE, that is, to 18 tier I companies
and 44 tier II companies. The design of the questionnaire was based on preliminary discussions that we had with finance directors from three listed companies.
The initial response was very low, so we phoned each finance director and
reminded him or her of the questionnaire. Thirty-eight questionnaires were
returned, achieving a response rate of 61%. The first questionnaire was returned
in the second half of October 2005 and the last by the end of February 2006. The
respondents asked for complete confidentiality with respect to the identification
of their company.
Data were analysed with the functions of SPSS. The associations between
nominal and ordinal variables were tested using the Fisher exact test, as there
were too few observations for a valid application of the chi-square test. To test
for correlations between numerical and nominal variables we chose the
Mann Whitney test and for the investigation of correlations between numerical
variables, we performed a linear regression analysis. Ordinal and logistic
regression models were also used to explore possible correlations between
other types of variables and ordinal or dichotomic variables. The type, nature
and values of variables employed are described in Table 5.

Regulations 187
Table 5. Definition of variables
No.
Label
Measure
Values
Harmonization regulations only;
restatement; full IAS/IFRS
Before Harmonization Regulations became
mandatory; after Harmonization
Regulations became mandatory
Multiple response: training of personnel;
adjustment of information systems;
consultants fees; double reporting
Open-ended question
Continuous
1.
Type of reporting
Nominal
2.
Date of
implementationa
Nominal
3.
Type of cost
Nominal
4.
5.
Nominal
Scale
6.
7.
Most important cost

Implementation
costs
Budgets
Advantages
8.
Costs and benefits
Ordinal
9.
Participation in
IAS/IFRS
training
Use of consultants
Nominal
10.
11.
12.
13.
Recourse to foreign
financial markets
Type of capital
Company size
(market
capitalization)
Nominal
Nominal
Nominal
Ordinal
Nominal
Scale
Has budgeted; has not budgeted

Multiple response: adequacy for capital
markets; access to foreign financial
markets; solutions for transactions not
yet regulated; relevant information for
managers; simpler accounting
Benefits lower than costs; presently,
benefits lower than costs; benefits exceed
costs
Has participated in IAS/IFRS training; has
not participated in IAS/IFRS training
Has used consultants; has not used
consultants
Inexistent; envisaged; occasional; frequent
Wholly or majority-owned by Romanian
investors; wholly or majority-owned by
foreign investors
Continuous
a
We requested the year of application of IAS/IFRS and checked it against the appendices to the Harmonization Regulation to determine if these enterprises have applied IAS/IFRS before the Regulation
became mandatory for them.
The first 12 variables result from the questionnaire, while the last one,
Company Size, was operationalized as the market capitalization on 23 December
2005, the last transaction day on the BSE, translated in euros at the National
Banks exchange rate on the same day.
Results and Findings

We analyse the research results according to the three objectives stated above.
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I. Ionascu et al.
A. Voluntary Adoption of IAS/IFRS

To investigate if there is a trend for the voluntary adoption of IAS/IFRS by
Romanian companies we have defined two nominal variables: Type of Reporting
and Date of Implementation of IAS/IFRS (see Tables 6 and 7).
We noticed that a small percentage of listed companies (10.5%) applied IAS/
IFRS before the Harmonization Regulations became mandatory for them. Even
after the issue of the Harmonization Regulations, a significant percentage of
listed companies (65.8%) was still not interested in IAS/IFRS financial statements, neither restating, nor applying full IAS/IFRS.
Since we believe that obtaining foreign financing is the main reason for which
companies used IAS/IFRS before the Harmonization Regulations became mandatory, we defined an ordinal variable that captures the interest of finance directors in foreign financial markets Recourse to Foreign Financing (see Table 8).
The association between Recourse to Foreign Financing and Date of
Implementation is statistically significant and we therefore accept hypothesis
HA1 (Fishers exact test, two-sided, p 0.048, see Appendix B, Table B1). Companies requesting foreign capital frequently or occasionally have applied IAS/
IFRS before the Harmonization Regulations became mandatory. On the other
hand, companies not requesting foreign financing have done so after the issue
of the Harmonization Regulations.
The association between Type of Reporting and Recourse to Foreign Financing
is also statistically significant and we therefore accept hypothesis HA2 (Fishers
exact test, two-sided, p 0.012, see Appendix B, Table B2). Companies
making frequent recourse to foreign financial markets have double reporting,
while companies not requesting foreign finance or doing so only occasionally,
prepare financial statements conforming to the Harmonization Regulations.
Table 6. Type of reporting

Type of reporting
Frequencies
Harmonization Regulations only

Restatement
Full IAS/IFRS
Total
25
10
3
38
Percentages
65.8%
26.3%
7.9%
100%
Table 7. Date of implementation of IAS/IFRS

Date of implementation
After the Harmonization Regulations
Before the Harmonization Regulations
Total
Frequencies
34
4
38
Percentages
89.5%
10.5%
100%

Regulations 189
Table 8. Recourse to foreign financial markets
Recourse to foreign financing
Inexistent
Envisaged
Occasional
Frequent
Total
Frequencies
11
17
4
6
38
Percentages
28.9%
44.7%
10.5%
15.9%
100%
It is noteworthy that, even now, enterprises having applied IAS/IFRS before

they became mandatory according to the timetable included in the Harmonization
Regulations, prepare two sets of financial statements. The correlation between
Type of Reporting and Date of Implementation is revealed by Fisher exact test
(two-sided, p 0.009, see Appendix B, Table B3). In other words, the regulations introduced by the Ministry of Finance did not help those enterprises
needing financial statements complying with IAS/IFRS: such enterprises practice double reporting at present, too.
We investigated the relationship between Company Size, as operationalized by
market capitalization (see Table 9) and Type of Reporting. As there is a significant association between Company Size and Type of Reporting (Mann Whitney
U 95,000, exact sig., p 0.038), it follows that large enterprises prepare two
sets of financial statements. We therefore accept hypothesis HA3. This is
explained by the higher potential of large enterprises to obtain foreign financing,
which led to an application of IAS/IFRS on their own initiative rather than as an
imposed legal provision. This explanation is backed statistically, as large enterprises tend to request foreign finance frequently or occasionally (Mann Whitney
U 60,000, exact sig., p 0.007).
We can safely conclude that there is no manifest demand for IAS/IFRS in the
Romanian business milieu, only a small number of listed companies preparing
such financial statements out of the need to obtain foreign financing. Accordingly, the decision of the regulator does not appear to be based on an existing
Table 9. Market capitalization

Descriptive statistics
Values (euros)
Mean
Median
Standard deviation
Minimum
Maximum
Sum
Observations
197,345,013
27,330,039
452,175,996
1,382,319
2,626,441,529
7,499,110,501
38
190
I. Ionascu et al.
trend; Harmonization Regulations do not help companies needing IAS/IFRS

financial statements as restatements are still necessary.
B. Harmonization Costs
According to Table 10, we identified four main types of harmonization costs:
personnel training costs, adjustment of information systems, consultants fees
and double reporting. For that reason we accept hypothesis HB1.
We notice that almost all listed companies surveyed (94.7%) incurred personnel training costs. Personnel were trained via training courses (86.8% of companies variable 9 from Table 5, Participation in IAS/IFRS Training).
Consequently, we might believe that these companies intended to assimilate
and apply international regulations with their own staff, rather than externalize
the accounting function. Even though companies intended to implement IAS/
IFRS with their own staff, the actual procedures were supervised by a professional accounting firm, as 65.8% of companies indicated significant consultants fees.
The companies surveyed mentioned other IAS/IFRS implementation costs,
such as: audit costs (seven companies), documentation costs (one company)
and remuneration costs (one company). Since the financial statements prepared
in accordance to the Harmonization Regulation had to be audited, all companies
actually incurred audit costs.
Taking into account the lack of qualified personnel and the delays in the publishing of IAS/IFRS translations and implementation guides, we are inclined to
believe that, at least in the incipient phase, the international accounting firms
which were auditing the financial statements were also involved in their restatement in accordance with the Harmonization Regulation.14
It is widely recognized that auditors prepare financial statements on behalf
of their clients because clients lack financial reporting expertise and therefore expect the auditors to prepare them. However, clients emphasize that
audit firms gradually transfer knowledge to company staff, who then can
take over the drafting of financial statements.
(World Bank, 2003b, p. 6)
Table 10. Occurrence of IAS/IFRS adoption costs
Type of cost
Training of personnel
Adjustment of information systems
Consultants fees
Double reporting
Total
Frequencies
Percentages
36
27
25
9
n/a
94.7%
71.1%
65.8%
23.7%
n/a

Regulations 191
Table 11. Most important cost
Most important cost
Training of personnel
Consultants fees
Audit
Adjustment of information systems
Total
Frequencies
Percentages
14
11
7
4
n/a
36.8%
28.9%
18.4%
10.5%
n/a
Apparently, a number of companies in our sample received, from the same professional accounting firm, auditing and consulting services that could have
included training courses or adjusting of information systems. It seems that wherever accounting firms gave their assistance in areas related to the implementation
of the Harmonization Regulation, companies had difficulties in distinguishing
between audit costs and other implementation costs. We therefore express reservations on the components of IAS/IFRS implementation costs as they were supplied by the respondents, because it is possible that some of them overlapped and
were reported in a less precise way.
A percentage of 36.8% of the finance directors indicated personnel training
costs as the most onerous type of cost (see Table 11).
Based on the answers received (only 23 of the 38 enterprises that returned the
questionnaires disclosed the amount of the costs), we have calculated an average
implementation cost of approximately 30,000 euros (see Table 12), 78.26% of
respondents indicating costs lower than 50,000 euros (see Table 13).
These costs are insignificant when weighed against the annual operating
expenses reported by listed companies: the average IAS/IFRS implementation
cost represents only 0.035% of the average operating expenses in 2004.15 Compared to the results of other similar studies done in the European Union (e.g. JMH
Financial Services16), the costs of Romanian enterprises that have implemented
IAS/IFRS are much lower. This is explained by the features of the local labour
Table 12. Implementation costs of IAS/IFRS
Descriptive statistics
Mean
Median
Mode
Standard deviation
Minimum
Maximum
Sum
Observations
a
Values (eurosa)
30,348.12
15,000
30,000
35,506.80
2,762.69
151,947.88
698,010.40
23
Translated into euros at an average exchange rate for the period November
2005February 2006.
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I. Ionascu et al.
Table 13. Size of costs
Cost intervals (euros)

Below 50,000
Between 50,000 and 100,000
Over 100,000
Total
Frequencies
Percentages
18
4
1
23
78.26%
17.39%
4.35%
100%
market, still characterized by low costs: for the year 2004 the National Institute
for Statistics calculated an average gross salary of approximately 200 euros
(around 270 euros in 2005).17 The majority of harmonization costs (personnel
training costs, consultants fees, audit, adjustment of software applications) are
composed of highly qualified professional services delivered at much lower
costs than in Western Europe. It has also been suggested that these comparatively
low costs might be due to a possible minimal application of the Harmonization
Regulation. As explained earlier, the regulator permitted the carve outs of IAS
27 and IAS 29; at their turn, the preparers, not accustomed to making judgments,
often went for a partial or tax application of a number of standards.
The amounts reported as IAS/IFRS costs must be regarded with caution, as
the respondents were asked to make a global evaluation which was not always
consistent in terms of its components (e.g. audit costs).
The second hypothesis, HB2: Large enterprises incurred bigger IAS/IFRS
implementation costs than the rest of the enterprises, was tested using the following regression model (Table 14):
Ci a0 a1 MCi 1i
where Ci implementation costs of company i and MCi market capitalization
of company i.
Table 14. Regression results
Statistics
R
R-square
a0
(t)
a1
(t)
F
Durbin Watson
Observations
Significant at 0.001.
Values
0.696
0.484
17,479.552
(4,206)
0.372
(4.331)
18.759
1.986
22

Regulations 193
To improve results, we have eliminated an outlier, that is, a single value 4
times higher than the standard deviation. In addition to this, as the two variables
were disproportionate, we have multiplied the values of MC by 0.0001 to avoid
obtaining a too low a1.
We therefore accept hypothesis HB2, market capitalization explaining 48.4%
of costs variation. The fact that large companies incur proportionately higher
implementation costs could be explained by the increased volume and complexity of their transactions, but also by possible geographical dispersion. The results
imply that the potential economies of scale of large companies were insufficient
to proportionately lower their implementation costs.
Owing to the specific mandatory application of IAS/IFRS, most listed companies (68.7%) have anticipated implementation costs and included them in their
budgets. We have noticed that large companies have budgeted IAS/IFRS costs
to a higher extent than the other companies (Mann Whitney U 82,000,
exact sig., p 0.019). This is justified if we take into account the fact that
large companies expected higher cost amounts and have thus included them in
their budgets.
We also accept the last hypothesis, HB3: Enterprises with double reporting
incur higher implementation costs (Mann Whitney U 30,500, exact sig.,
p 0.039). This is due to the fact that Romanian Harmonization Regulations
were rough approximations of IAS/IFRS and companies needing IAS/IFRS
financial statements had to perform restatements leading to additional costs.
C. Costs and Benefits

The vast majority of companies surveyed (89.5%) consider that IAS/IFRS allow
a better communication on the capital market, by offering more relevant information to investors; half of them welcome the opportunity to access international
financial markets.
A total of 60.5% of respondents consider that IAS/IFRS are a good source of
information for managers, revealing that the IAS/IFRS are not only relevant to
external parties, but also for internal use of the management. These results are
consistent with the findings of Colwyn Jones and Luther (2005) who investigate
the possible effects of IFRS on German controlling.
The analysis of data also showed that finance directors who did not have formal
IAS/IFRS training did not consider that IAS/IFRS are adequate for listed companies (Fishers exact test, two-sided, p 0.005), as they lacked the necessary
expertise.
We have defined Costs and Benefits, an ordinal variable, to assess finance
directors opinions with respect to the relationship between the costs and benefits
implied by the adoption of IAS/IFRS (see Table 15).
Given that 60% of the finance directors surveyed deem IAS/IFRS implementation benefits insufficient to cover related costs, we accept hypothesis HC1.
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I. Ionascu et al.
Table 15. Assessment of costs and benefits
Costs and benefits

Benefits lower than costs
Presently, benefits lower than costs
Benefits exceed costs
Total
Frequencies
9
12
14
35
Percentages
25.7%
34.3%
40%
100%
We have used ordinal regression models to test hypotheses HC2 and HC3 concerning associations between the ordinal variable Cost and Benefits and the variables Type of Capital or Recourse to Foreign Financial Markets, but also to test
potential associations between Cost and Benefits and Company Size. We have
also grouped the data in order to run logistic regression models. No correlation
resulted between the variable Cost and Benefits and the other variables considered. Consequently, we reject these two hypotheses (HC2 and HC3) out of
insufficient evidence to support the relationship between Cost and Benefits, on
the one hand, and Type of Capital and Recourse to Foreign Financing, on the
other hand.
A possible explanation why the cost benefit relationship was not evaluated
differently by companies wholly or majority-owned by foreign capital and companies making recourse to foreign finance could be that these businesses could
not equate the financial statements prepared under the Harmonization Regulation
with IAS/IFRS financial statements. Companies could not fully benefit from
IAS/IFRS financial statements (such as an easier access to foreign finance),
since additional restatements were necessary.
Summary and Conclusions

This paper is aimed at studying the harmonization of Romanian accounting with
international regulations (European Directives and IAS/IFRS) from the vantage
point of a wider cost benefit analysis. To achieve this, we focused on the identification and evaluation of costs entailed by the assimilation and application of
international regulations. From the same cost benefit perspective, we attempted
to capture the perception of finance directors of listed companies with respect to
the adequacy of the decisions made by the Romanian accounting regulator.
The results show that the harmonization decision of the Romanian accounting
regulator did not fit an existing trend in the business milieu; only a few companies
prepare IAS/IFRS conforming financial statements out of the need to obtain
foreign financing. Moreover, the benefits of the implementation of the Harmonization Regulations were perceived as not being significant by the majority of
finance directors of listed companies, even though implementation costs were
rather low.

Regulations 195
Based on the research results we can question the decision of the Ministry of
Finance to implement Harmonization Regulations, and the particular manner
chosen to carry it out. The fact that only a few companies were interested in
IAS/IFRS may suggest that the Harmonization Regulations submitted Romanian
companies to an unjustified effort. The comment made by a finance director asked
to point out an advantage of the adoption of IAS/IFRS is illustrative in this
respect: there is no advantage, it is an obligation.
The decision for gradual reforms that led to an approximate application of
IAS/IFRS (a tax application in certain audit reports) was of no assistance to
those companies that needed or would need financial statements conforming to
IAS/IFRS. These companies had to perform restatements and incur additional
costs. The actual application of the Harmonization Regulation proved true the
European Commissions warning that as far as the national statutory individual
accounts are concerned, regulatory and tax requirements could make the use of
IAS inappropriate or even invalid (European Commission, 2000, p. 6).
The 2005 decision of the regulator to withdraw the Harmonization Regulations
and limit the application of full IAS/IFRS to the consolidated accounts of public
interest entities is equivalent, in our view, to the tacit recognition that their issue
was made in haste, before the European Union stated its position towards IAS/
IFRS in individual company accounts. Even within the World Banks constraints,
the regulator could have limited the scope of the Harmonization Regulations to
public interest entities only, without going beyond the EUs applicable policy.
We are of the opinion that giving up the size criterion in the application of
IAS/IFRS is a decision that fits the characteristics of the Romanian economic
milieu, as, with the notable exception of public interest entities, the main users
of accounting information are the state and the creditors from the banking sector.
However, we are aware that adapting to the economic background is not
necessarily a prerequisite for imposing an accounting system. Authors such as
Munteanu (2003) believe that large-scale application of IAS/IFRS may be
advantageous even if it is done in a truncated form and without an immediate
goal. IAS/IFRS is an advanced accounting system and its assimilation by
Romanian companies could improve the overall quality of financial reporting.
The accounting profession will certainly benefit by relating to a conceptual framework even if imposed within a Ministerial Order, as accountants will
improve their professional judgement and gain independence from the public
authority. On the other hand, such benefits are difficult to quantify and use to
balance implementation costs.
For that reason we agree with the regulators taking note of the enterprises
capacity of implementation, since, as revealed by our study, for most listed companies the application of IAS/IFRS is not linked to an immediate direct benefit,
but advantages may become more visible with time. This could be the reason for
which more than a third (34.3%) of the finance directors surveyed were of the
opinion that the benefits of adopting IAS/IFRS do not cover related costs at
present. The rationale behind the Harmonization Regulation might have been
196
I. Ionascu et al.
reasonable at the time, and with careful preparations, could have smoothed the
transition to full IFRS, at least for listed companies.
Limitations and Further Research
Out of the 62 companies to whom we have sent questionnaires, 38 returned them
completed, that is, a response rate of 61%. In our opinion, the low rate of response
is due to the lack of transparency of Romanian companies, a relic from communist times when accounting information was secret. At least two finance directors
replied to our request writing that they cannot provide information since they
have not received managements permission.
Nevertheless, we may generalize the results of our research to all listed companies on the BSE, since respondents do not differ from non-respondents on at
least one important characteristic: company size, as operationalized by market
capitalization. The application of the t-test shows that respondents and nonrespondents do not differ on market capitalization (t-test: t 0.491, df 60,
sig. two-tailed, p 0.625). However, the variable Market Capitalization is
not distributed normally (skewness: statistic 6.536, standard error 0.304).
Accordingly, we have treated the data as non-parametric and applied the
Mann Whitney test. The results of the Mann Whitney test converge with
those of the t-test: the non-respondents do not differ from respondents on
market capitalization (Mann Whitney U 338,000, asymp. sig., two-tailed,
p 0.088).
Our study revealed a strong causal link between the size of costs and the
company size, that is, its market capitalization. As only 23 companies (out of
the 38) disclosed the amount of the IAS/IFRS implementation costs, the
average IAS/IFRS implementation costs can only be generalized to the rest of
the population if, again, there were no significant differences between the two
groups: companies that disclosed their costs and companies that did not (including those that have not returned the questionnaires). The results of the t-test
demonstrate that, in relationship with market capitalization, companies that disclosed cost information are not significantly different than those who did not
provide this information (t-test: t 0.932, df 60, sig. two-tailed, p 0.355).
For the same reasons given above, we have also applied the Mann Whitney
test to check the existence of differences between disclosing companies and
the rest of the companies. The test results show that the two groups do not
differ on market capitalization (Mann Whitney U 424,000, asymp. sig.,
two-tailed, p 0.721) and thus the average IAS/IFRS implementation cost
may be generalized to all listed companies.
Our study did not evaluate the benefits of adopting IAS/IFRS, but only the
opinions of finance directors concerning related costs and benefits. As finance
managers had to bear the effort of implementing the actual assimilation of the
Harmonization Regulations, we are aware of the fact that their perception may
be biased. The view of finance directors of listed companies is just one

Regulations 197
perspective on the relationship between the costs and benefits of adopting IAS/
IFRS, and investors or financial analysts may have a different opinion.
For these reasons, we believe that further research is needed to evaluate the
benefits of adopting the international regulations, possibly in an international
context. As European Union Member States also face the issue of the capacity
of implementation of IAS/IFRS by listed groups, such studies could reveal the
effect of compliance costs on companies performance. Moreover, since the Harmonization Regulation was an approximation of IAS/IFRS, this cost benefit
evaluation could also be relevant for the proposed IFRS for SMEs.
Acknowledgements
The authors thank the participants to the INA Research Forum of the 29th Annual
Congress of the European Accounting Association (Dublin, 2006) and to the
IFSAMs Track 7, Internationalization of Accounting (Berlin, 2006), in particular Dr Ladislav Mejzlik, Dr Susan Hughes, Dr Andrei Filip, and Prof David
Alexander for their helpful comments and suggestions. We acknowledge the
kind assistance of Mrs Maria Manolescu, former Secretary of State at the Minister of Public Finance of Romania. The authors also thank two anonymous
reviewers of IFSAMs Track 7 for their useful comments. The financial and logistic support of CNCSIS - Romanian National Academic Research Council
(Project: Harmonising Romanian Accounting with EU Directives and International Financial Reporting Standards (IFRS), grant 1129/2004), the Faculty
of Accounting and Information Systems, Academy of Economic Studies Bucharest and Bucharest School of Management is gratefully acknowledged. We are
also grateful to the editor of Accounting in Europe and to two anonymous
reviewers for their very constructive comments on the manuscript. Special
thanks to Prof Tudorel Andrei and Prof Dirk Jacobs for their suggestions regarding data analysis.
Notes
1
The censor is not an auditor in the international acceptance of the word. He is empowered to
supervise the administration of the company, check the legality of the financial statements
and make sure that these are drawn up in agreement with supporting documents. He should
also verify if the company regularly records transactions in the journal and ledger and if the
inventory and valuation of the companys patrimony were done according to the relevant regulations. The rule was to choose an accountant member of CECCAR, the Institute of Public and
Licensed Accountants of Romania.
2
Two years after the adoption of the Accounting Law, the Romanian government signed the
Association Agreement with the European Community on 1 February 1993.
3
The Institute of Chartered Accountants of Scotland provided the technical assistance (ICAS,
1999; King et al., 2001).
4
On 10 January 2001 the Ministry of Finance was reorganized and its name was changed into the
Ministry of Public Finance.
5
Romanian Association of Securities Dealers Automated Quotation (system).
198
I. Ionascu et al.
6
Fourth Directive criteria after their third five-yearly revision in 1994. The Ministry of Public
Finance changed these criteria in 2003. At 31 December 2004, the final criteria were: total turnover more than E7.3 million, total assets over E3.65 million and average personnel number
more than 50.
7
The normal procedure comprised three-year training in an auditors practice, followed by a
series of examinations. The provisional procedure allowed to some 1,420 individuals who fulfilled the criteria relating to experience and reputation to become provisional members of the
Chamber of Auditors (World Bank, 2003b). The setting of the Chamber of Auditors generated
tensions between it and the professional body CECCAR whose members were previously
censors of companies eligible to apply the Harmonization Regulation.
8
SIC 19 was also carved out by secondary legislation regulating the financial statements of the
year 2002.
9
Estimated in March 2007 at RON 342,418 million by the National Statistical Institute
[www.insse.ro/cms/rw/pages/comunicate/pib.ro.do] and translated into euros at the
average exchange rate of 3.5258 RON/euro.
10
These listing rules were valid until September 2006 when the new Rulebook of the Bucharest
Stock Exchange was approved by the National Securities Commission.
11
http://www.accountancyage.com/News/1135861
12
Accountants in accounting firms 16.66%, accountants in general business companies 50.02%,
students 16.66% and teachers 16.66%.
13
We have already cited the case of the thirteenth enterprise in the 1999 pilot test.
14
It is also relevant that the few companies which restated their financial statements to account for
hyperinflation appeared to comply with IAS 29 and these companies clearly enjoyed the
support of local member firms of international audit firm networks (World Bank, 2003b, p. 12).
15
This average was calculated based on the operating expenses reported by the same companies
that have provided us with information regarding their implementation costs. For translation
into euros, we have used the average exchange rate published by the National Bank of
Romania for the year 2004.
16
http://www.accountancyage.com/News/1135861
17
http://www.insse.ro, translated into euros at the average exchange rate published by the
National Bank of Romania for the years 2004 and 2005, respectively.
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Ordinul MF nr. 403/1999 privind aprobarea reglementarilor contabile armonizate cu Directiva a

IV-a a Comunitatilor Economice Europene (CEE) si cu Standardele de Contabilitate Internationale, Monitorul Oficial, nr. 480/4.10.1999 [Order of the Minister of Finance no. 403/1999 for
the approval of the accounting regulations harmonized with European Directives and
International Accounting Standards, Official Journal, no. 480/4.10.1999].

Ordinul MFP nr. 94/2001 pentru aprobarea Reglementarilor contabile armonizate cu Directiva a
IV-a a Comunitatilor Economice Europene si cu Standardele Internationale de Contabilitate.
Monitorul Oficial, nr. 85/20.02.2001 [Order of the Minister of Public Finance no. 94/2001
for the approval of the accounting regulations harmonized with European Directives and
International Accounting Standards, Official Journal, no. 85/20.02.2001].

Ordinul MFP nr. 306/2002 pentru aprobarea Reglementarilor contabile simplificate, armonizate
cu Directivele Europene, Monitorul Oficial, nr. 279/25.04.2002 [Order of the Minister of Public
Finance no. 306/2002 for the approval of the simplified accounting regulations harmonized with
European Directives, Official Journal, no. 279/25.04.2002].

Ordinul MFP si al presedintelui CSA nr. 2328/2390/2001 privind aprobarea Reglementarilor contabile specifice domeniului asigurarilor, armonizate cu Directivele Europene si cu Standardele
Internationale de Contabilitate, Monitorul Oficial, nr. 34 bis/18.01.2002 [Order of the Minister
of Public Finance and of the President of National Insurance Commission no. 2328/2390/2001
for the approval of the accounting regulations for insurance industry harmonized with European
Directives and International Accounting Standards, Official Journal, no. 34 bis/18.01.2002].

Ordinul MFP si al guvernatorului BNR nr. 1982/5/2001 pentru aprobarea reglementarilor contabile, armonizate cu Directiva Comunitatilor Economice Europene nr. 86/635/CEE si cu Standardele Internationale de Contabilitate aplicabile institutiilor de credit, Monitorul Oficial, nr.
694/01.11.2001 [Order of the Minister of Public Finance and of the Governor of the National
Bank of Romania no. 1982/5/2001 for the approval of the accounting regulations harmonized
with European Directive no. 86/635/CEE and International Accounting Standards applicable
to credit institutions, Official Journal, no. 694/01.11.2001].

Ordinul MFP si al presedintelui CNVM nr. 1742/106/2002 privind aprobarea Reglementarilor
contabile armonizate cu Directiva a IV-a a Comunitatilor Economice Europene si cu Standardele
Internationale de Contabilitate aplicabile institutiilor reglementate si supravegheate de Comisia
Nationala a Valorilor Mobiliare, Monitorul Oficial, nr. 947/23.12.2002 [Order of the Minister of
Public Finance and of the President of Romanian National Securities Commission (RNSC) no.
1742/106/2002 for the approval of the accounting regulations harmonized with the Forth
European Directive and International Accounting Standards applicable to institutions under
the supervision of RNSC, Official Journal, no. 947/23.12.2002].

Ordinul MFP nr. 907/2005 privind aprobarea categoriilor de persoane juridice care aplica reglementari contabile conforme cu Standardele Internationale de Raportare Financiara, respectiv
reglementari contabile conforme cu directivele europene, Monitorul Oficial, nr. 597/
11.07.2005 [Order of the Minister of Public Finance no. 907/2005 for the approval of the categories of legal persons applying accounting regulations conforming to International Financial
Reporting Standards and accounting regulations conforming to European Directives, Official
Journal, no. 579/11.07.2005].

Ordinul ministrului finantelor publice nr. 1752/2005 pentru aprobarea reglementarilor contabile
conforme cu directivele europene, Monitorul Oficial, nr. 1080 bis/30.11.2005 [Order of the Minister of Public Finance no. 1752/2005 for the approval of the accounting regulations conforming
to European Directives, Official Journal, no. 1080 bis/30.11.2005].

Ordinul ministrului finantelor publice nr. 1121/2006 privind aplicarea Standardelor Internationale de Raportare Financiara, Monitorul Oficial, nr. 602/12.07.2006 [Order of the Minister of
Public Finance no. 1121/2006 for the application of the International Financial Reporting
Standards, Official Journal, no. 602/12.07.2006].

Instructiunea 3/2005 privind nchiderea exercitiului financiar 2004 pentru entitatile reglementate
si supravegheate de Comisia Nationala de Valori Mobiliare aprobata prin Ordinul Presedintelui

Regulations 201
CNVM 08/16.03.2005, Monitorul Oficial, 244/23.03.2005 [Instruction no. 3/2005 regarding the
closing of the financial year 2004 for entities regulated and monitored by National Securities
Commission approved by the Order of the President of CNVM 08/16.03.2005, Official
Journal, 244/23.03.2005]. Available at: http://www.cnvmr.ro/pdf/instructiuni/Instructiunea03-2005.pdf
Appendix A
ACADEMY OF ECONOMIC STUDIES BUCHAREST CENTRE FOR
ACCOUNTING AND MANAGEMENT INFORMATION SYSTEMS
QUESTIONNAIRE
Regarding the evaluation of the costs entailed by the harmonization of
Romanian accounting with international regulations
DIRECTIONS FOR FILLING IN THE QUESTIONNAIRE:
Excluding the case where several answers may be chosen, please fill in the
column on the right with the one option that you consider appropriate for your
enterprise.
Question
number:
1)
2)
3)
4)
Your
answer:
Your enterprise prepares its financial statements
according to:
a) the Order of the Minister of Public Finance no. 94/
2001;a
b) by restating the financial statements prepared in
accordance with the OMFP no. 94/2001b to the
requirements of IAS/IFRS;
c) applies only IAS/IFRS during the entire financial
year.
Since when does your enterprise apply the international
accounting standards (IAS/IFRS)?
The application of IAS/IFRS in your enterprise is due to:
a) the mandatory accounting regulations (OMFP no.
403/1999, OMFP no. 94/2001);
b) managements initiative
c) the request of the shareholders
d) the need for foreign financing?
In your enterprise the switch to IAS/IFRS has generated
costs related to: (several answers may be chosen):
a) training of personnel;
b) double reporting;
c) consulting services;
d) adjustment of computer information systems;
202
I. Ionascu et al.
Question
number:
5)
6)
7)
8)
9)
10)
11)
Your
answer:
e) other costs, please specify:
Please state which is the most important component of
the costs related to the implementation of IAS/IFRS
for your enterprise?
Please, evaluate the costs entailed by the switch to IAS/
IFRS for your enterprise.
Have the costs of implementing IAS/IFRS been
budgeted?
a) yes (continue with question no. 9);
b) no.
The costs of implementing IAS/IFRS have not been
budgeted because:
a) the change of relevant legislation was made rapidly;
b) the enterprise does not run a budget system;
c) other reasons, please specify:
In your opinion, the implementation of IAS/IFRS
reporting offers the following advantages: (several
answers may be chosen)
a) it is an appropriate accounting system for listed
companies as it offers relevant information to
investors;
b) permits the access to the foreign financing market;
c) offers solutions for transactions not yet regulated;
d) offers managers a good information resource for
decision making;
e) it is a straightforward accounting system;
f) other advantages, please specify:
How do you evaluate the relationship between the costs
and benefits related to the implementation of the new
reporting system in your enterprise?
a) the benefits of implementing IAS/IFRS do not cover
related costs;
b) the benefits of implementing IAS/IFRS do not cover
related costs at present, but these will be recovered in
the future;
c) the benefits of implementing IAS/IFRS exceed the
related costs.
The finance and accounting personnel has been trained to
apply IAS/IFRS:
a) by way of courses given by Romanian accountants;

Regulations 203
Question
number:
12)
13)
14)
15)
Your
answer:
b) by way of courses given by foreign accountants;
c) has not been trained.
Your enterprise has received/receives consulting
services provided by:
a) a foreign consultant/consultancy;
b) a domestic consultant/consultancy;
c) has not received/does not receive consulting
services.
What is your enterprises relationship with the foreign
financial market?
a) it frequently resorts to this type of financing;
b) it occasionally resorts to this type of financing;
c) does not resort to foreign financing market at
present, but envisages this type of financing;
d) it is not interested in this type of financing.
In the official classification, your enterprise is classified
as:
a) a small enterprise;
b) a medium-size enterprise;
c) a large enterprise.
The share capital of your enterprise is:
a) wholly or majority owned by Romanian
shareholders;
b) wholly or majority owned by foreign shareholders.
For collective investment undertaking, the Order of the Minister of Public Finance and of the President of Romanian National Securities Commission no. 1742/106/2002; for banking institutions, the
Order of the Minister of Public Finance and of the Governor of the National Bank of Romania no.
1982/5/2001.
b
Idem.
recourse to foreign financial markets cross-tabulation

Recourse to foreign financial markets
Date of
implementation
After the
Harmonization
Regulations
Before the
Harmonization
Regulations
Total
Envisaged or
Inexistent
Occasional or
frequent
Total
Count
% within Date of
implementation
% within Recourse to
foreign financial
markets
% of Total
Count
% within Date of
implementation
foreign financial
markets
% of Total
27
79,4%
7
20,6%
34
100,0%
96,4%
70,0%
89,5%
71,1%
1
25,0%
18,4%
3
75,0%
89,5%
4
100,0%
3,6%
30,0%
10,5%
2,6%
7,9%
10,5%
Count
% within Date of
implementation
foreign financial
markets
% of Total
28
73,7%
10
26,3%
38
100,0%
100,0%
100,0%
100,0%
73,7%
26,3%
100,0%
I. Ionascu et al.
Table B1. Date of implementation
204
Appendix B
Table B2. Type of reporting
recourse to foreign financial markets cross-tabulation
Type of
reporting
Harmonization
Regulations only
Restatement or full
IAS/IFRS
Total
Inexistent envisaged, or
occasional
Frequent
Total
Count
% within Type of reporting
% within Resource to foreign
financial markets
% of Total
24
96,0%
75,0%
1
4,0%
16,7%
25
100,0%
65,8%
63,2%
2,6%
65,8%
Count
financial markets
% of Total
8
61,5%
25,0%
5
38,5%
83,3%
13
100,0%
34,2%
21,1%
13,2%
34,2%
Count
financial markets
% of Total
32
84,2%
100,0%
6
15,8%
100,0%
38
100,0%
100,0%
84,2%
15,8%
100,0%

Regulations 205
Recourse to foreign financial markets
206
I. Ionascu et al.
Table B3. Type of Reporting date of Implementation Crosstabulation

Date of implementation
Type of
reporting
Harmonization
Regulations only
Restatement or
full IAS/IFRS
Total
After the
Harmonization
Regulations
Before the
Harmonization
Regulations
Count
% within Date of implementation
% of Total
25
100,0%
73,5%
65,8%
0
,0%
,0%
,0%
25
100,0%
65,8%
65,8%
Count
%within Date of implementation
% of Total
9
69,2%
26,5%
23,7%
4
30,8%
100,0%
10,5%
13
100,0%
34,2%
34,2%
Count
% within Date of implementation
% of Total
34
89,5%
100,0%
89,5%
4
10,5%
100,0%
10,5%
38
100,0%
100,0%
100,0%
Total
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Accounting in Europe

An Empirical Evaluation of the

The Process of Internationalization of Romanian Accounting: From

Table 1. Recent history of Romanian accounting regulations

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

To enact Fourth and Seventh

Costs of Harmonizing Romanian Accounting with International

Table 2. Yearly inflation rate in Romania during 1990 2006

Source: Romanian National Institute of Statistics.

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

The Bucharest Stock Exchange

GDP 2005 (euro

Sources: www.feas.org, www.fese.be, www.bvb.ro, www.eu.int/comm/eurostat/

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

HB1: Harmonization costs consist mainly of personnel training costs, consultants

Costs of Harmonizing Romanian Accounting with International

Most important cost

Costs and benefits

Has budgeted; has not budgeted

Results and Findings

A. Voluntary Adoption of IAS/IFRS

Table 6. Type of reporting

Harmonization Regulations only

Table 7. Date of implementation of IAS/IFRS

Costs of Harmonizing Romanian Accounting with International

It is noteworthy that, even now, enterprises having applied IAS/IFRS before

Table 9. Market capitalization

trend; Harmonization Regulations do not help companies needing IAS/IFRS

Costs of Harmonizing Romanian Accounting with International

Cost intervals (euros)

Costs of Harmonizing Romanian Accounting with International

C. Costs and Benefits

Costs and benefits

Summary and Conclusions

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

Ordinul MF nr. 403/1999 privind aprobarea reglementarilor contabile armonizate cu Directiva a

Costs of Harmonizing Romanian Accounting with International

Costs of Harmonizing Romanian Accounting with International

recourse to foreign financial markets cross-tabulation

Table B1. Date of implementation

Table B2. Type of reporting

recourse to foreign financial markets cross-tabulation

Costs of Harmonizing Romanian Accounting with International

Recourse to foreign financial markets

Table B3. Type of Reporting date of Implementation Crosstabulation

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