The Costs of Harmonizing Romanian Accounting with

International Regulations
Romanian Accounting has known several major waves of reform:
adopting the Accounting Law in 1991 and implementing a French-inspired
accounting chart and guidelines in 1993 or harmonizing the large entities
accounting with EU accounting directives and International Accounting
Standards/ International Financial Reporting Standards (IAS/IFRS) in 1999
and 2001.
Ion Ionascu, Mihaela Ionascu, Lavinia Olimid and Daniela Calu have
conducted a research among listed Romanian companies following three
main objectives: identifying the extent to which Romanian companies feel
the need for IAS/IFRS, identifying and evaluating the costs involved in the
harmonization of Romanian accounting with international regulations and
capturing the perception of finance directors regarding the costs and
benefits linked to the harmonization process.
They identified four main types of harmonization costs: personnel
training costs, adjustment of information systems, consultants fees and
double reporting.
Almost all the listed companies surveyed (94.7%) incurred personnel
training costs and 71.1% of them have encountered adjustments of
information systems (as seen in Table 1). 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.

Table 1: Types of harmonization costs

Type of costs
Percentages
Training of personnel
94,7%
Adjustments of information systems
71,1%
Consultants fees
65,8%
Double reporting
23,7%

The companies surveyed mentioned other IAS/IFRS implementation

costs, such as: audit costs, documentation costs and remuneration costs.
Since the financial statements prepared in accordance to the
Harmonization Regulation had to be audited, all companies actually
incurred audit costs.

Table 2: Main harmonization costs

Most important costs
Percentages
Training of personnel
36,8%
Consultants fees
28,9%
Audit
18,4%
Adjustment of information systems
10,5%
Other costs
5,4%
Total
100,00%

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. Therefore it is possible that some of them
overlapped and were reported in a less precise way.
Regarding the values of the costs, it has been noticed, during the
study, that the average implementation cost was of approximately 30,000
euros, 78.26% of the analyzed companies indicating costs lower than
50,000 euros. Compared to the results of other studies regarding this
subject in the European Union, the costs of Romanian enterprises that
have implemented IAS/IFRS are much lower, due to the highly qualified
professional services delivered at much lower costs than in Western
Europe and to a possible minimal application of the Harmonization
Regulation.

Cost intervals
Below 50,000
50,000 100,000
Over 100,000
Total

Table 3: Size of costs

Percentages
78.26%
17.39%
4.35%
100.00%

In conclusion, only a few companies were ready to prepare IAS/IFRS

conforming financial statements out of the need to obtain foreign financing
and the benefits of the harmonization were perceived as not being
significant by the majority of finance directors of listed companies, even
though implementation costs were rather low. The data analysis involved
had shown that the lack of necessary expertise of the finance directors

involved is strongly correlated with a disconsideration for the

implementation of the IAS/IFRS with the Romanian accounting. Therefore,
in 2005, the regulator decided to withdraw the Harmonization Regulations
and limit the application of full IAS/IFRS to the consolidated accounts of
public interest entities. of the finance directors surveyed were of the
opinion that the benefits of adopting IAS/IFRS do not cover related
costs at
present.