An Empirical Evaluation of the Costs of Harmonizing Romanian Accounting with International Regulations (EU Directives and IAS/IFRS)

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 IASB's 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.