Banking Performance. IFRS and RAS Comparative Analysis for the Romanian Banking System

Abstract

Abstract Credit institutions have a key role in the financial system of national economies, of their soundness depends the stability of the financial system as a whole. The financial data provided by banking financial statements offers indicators of significant value regarding the state of economy for a given period of time. Moreover, financial statements are an essential resource of financial information for decision-makers at economy level (population, economic agents etc.) influencing their expectations and behaviour and as a result impacting economic development. The regulatory reporting framework aims at setting certain reporting standards that would ensure a fair presentation of the financial position and performance of credit institutions. These reporting standards are periodically improved as to ensure adaptability to more complex financial instruments, to efficiently identify risks aiming at presenting financial information in a manner that would be easy to process and understand by its users. Romania targets at the normalization and harmonization of its financial reporting standards as to ensure a fair presentation and comparability of the financial position and performance of its credit institutions with financial institutions worldwide in the context of continuously expanding financial markets. The Central Bank of Romania regulates the preparation of individual financial statements under IFRS as of 1 January 2012 as per the agreement concluded in 2009 with the IMF-EU-IFI. This paper studies the impact of transition from RAS (Romanian Accounting Standards) to IFRS (International Financial Reporting Standards) on the financial position and performance of credit institutions. In order to identify the differences we analyzed the financial statements as per 2011 financial year for 5 Romanian banks considering their size in terms of assets. The research involved a comparative analysis and presentation of the major components of banking assets and liabilities emphasizing key findings. One of the major aspects identified relates to determining provisions under the IFRS model. Compliance with the NBR requirements was checked and prudential aspects were outlined.