Financial Accounting: An IFRS Perspective in Romania PDF
Preview Financial Accounting: An IFRS Perspective in Romania
Adriana Duțescu Financial Accounting An IFRS Perspective in Romania Financial Accounting Adriana Duţescu Financial Accounting An IFRS Perspective in Romania Adriana Duţescu Bucharest University of Economic Studies Bucharest, Romania ISBN 978-3-030-29484-7 ISBN 978-3-030-29485-4 (eBook) https://doi.org/10.1007/978-3-030-29485-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland F oreword I have been asked to provide a short introduction to “Financial Accounting-an IFRS perspective in Romania”, coordinated by Professor Adriana Duţescu, the product of an enthusiastic team of academics from Romania. I would like to stress that, in my opinion, this kind of academic endeavour is important because it offers a different perspective on finan- cial reporting, in which material cultural differences are explained and exemplified, in a clear and concise manner. Throughout cultural diversity and specific national standards convergence efforts we shall better under- stand the complexity and potential of IFRS implementation. As it has been stressed on several occasions, accounting should be the most straightforward of topics for policymakers to deal with. Accounting should keep capitalism honest, as Sir David Tweedie, my predecessor as Chairman of IASB used to say, and this expectation continues to put pressure on accounting standards and on their way of implementation. There is criticism in terms of ambiguity and lack of precision of accounting information but one has to be aware that this is the “nature of the beast”. Accounting is not an exact science; still, measurement techniques should aim to portray economic reality as closely as possible. I am deeply convinced that IFRS Standards are an essential ingredient of trust in our market economy. Romania, an EU Member State since 2007, has changed its specific regulatory reporting framework in order to accommodate the implementation of IFRSs. v vi FOREWORD The advantages of increasing comparability and transparency and reducing the cost of capital are obvious. This is especially the case for emerging countries, despite the high implementation costs. In this con- text, I salute the effort of Romanian academics, which have highlighted, in an effective pedagogical manner, the major outcomes of IFRS imple- mentation in Romania, offering examples, proposing solutions and allowing a broad field of debate for the ongoing controversies in the field. I would like to invite you to read this book and provide your feedback on the specific areas of interest to the authors. Enjoy the lecture! London, UK Hans Hoogervorst Chairman IASB P reFace We, the authors, strongly believe that the quality of thinking provides an important competitive advantage in todays’ data-driven, global envi- ronment. We are aware that not only the quantity but also the quality of knowledge and critical thinking make the difference. This book is dedi- cated to students enrolled in Economics and Business Programs, and to junior accountants in the beginning of their carrier. Other business pro- fessionals or individuals, seeking to improve their knowledge and exper- tise, might find this book useful and relevant. The value-added of the book is offered by the accounting knowledge reinterpretation, blended with best practices at global and local (national) level. All authors are Romanians, with solid academic background and some with international expertise. We choose to provide some examples and cases about Romania and the way it struggles with the accounting framework and techniques. One might consider this an extra bonus to readers, because Romania is an emerging market in Southeastern Europe, with an important growth potential and a good appetite for its business practices’ harmonisation. The current version of this book is based on the first Edition of Financial Accounting,1 by Adriana Duţescu and Lavinia Olimid. Although we used the same strategy of combining the fundamentals of accounting knowledge with business cases and current challenges brought by Accounting Standards and Regulations, this new version is 1Duţescu. A, Olimid L, Financial Accounting, CECCAR Publishing House, 2004. vii viii PREFACE more complex and meaningful. Each chapter is developing principles, concepts, techniques and practical tools that accounting is using to sup- port business decisions. The reader will find a comprehensive theoreti- cal framework, that is enhanced by practical examples, solved exercises, chapter summary issues, quizzes and complex cases, in each of the eleven chapters of the textbook. Another important characteristic is that we pre- fer to use the International Financial Reporting Standards (IFRS) and their specific Conceptual Framework, as the “benchmark approach” but we also dedicate an important effort to highlight some particularities that the Romanian regulation and practice are providing. In our opinion this is an important endeavour, that demonstrates that there are still discrep- ancies and cultural challenges, despite the globalisation efforts. Chapter 1 is introducing the business environment and the general impact of accounting standards and regulations on economic entities. Chapter 2 is developing the accounting framework, based on IFRSs, the importance of the financial information to stakeholders and impor- tant definitions of fundamental concepts. Chapter 3 is providing details on financial statements and their con- tent, use, particularities and connections. Chapter 4 is highlighting the accounting process and the transaction analysis flow, introducing the “T” account, the General Journal, the Ledger and the Trial Balance, as prerequisites of financial statements. Chapter 5 is providing an integrated accounting approach on inven- tories, providing extensive examples and cases on valuation and measure- ment, business inventory cycle and special cases and procedures. Chapter 6 is dedicated to non-current assets and their measurement, valuation, depreciation and amortisation, impairment, special cases and procedures. Chapter 7 is on liabilities, receivables and other related items, high- lighting best practices on trade payables and receivables, employees ben- efits and other related issues, Value-Added-Tax and other special issues. Chapter 8 is focusing on equity and different events enabling the dynamics of different specific equity items. Chapter 9 is dedicated to financial instruments and their complexity, importance, impact and challenge. Chapter 10 is providing a summary of best practices of closing proce- dures, their impact on financial statements and fundamentals of financial analysis. PREFACE ix Chapter 11 is based on fundamentals of taxation and the connections and convergences with accounting. We assume the limitations of the textbook and are grateful for com- ments and inputs from colleagues, students and other readers. We would like to thank to the editors, for allowing us to make our endeavour public and their effective guiding throughout the entire pro- cess of publishing. The last but not the least we would like to thank your families for their ongoing support and endless patience. Bucharest, Romania Adriana Duţescu c ontents 1 Introduction 1 Adriana Duțescu and Răzvan Hoinaru 1.1 About Accounting: A Brief History 1 1.2 Business Entities 3 1.3 Availability of Accounting Information 5 1.4 Financial Accounting and Managerial Accounting 6 1.5 The Regulation of Accounting in Romania 7 1.6 The Relationship Between Accounting and Taxation 7 1.7 Conclusions 8 2 The Conceptual Framework 11 Adriana Duțescu, Oana Stănilă, and Răzvan Hoinaru 2.1 Introduction 11 2.2 Users of Financial Information 13 2.3 The Objective of Financial Statements 15 2.4 The Qualitative Characteristics of Financial Information 16 2.5 The Elements of Financial Statements 19 2.6 Conclusions 25 Reference 28 xi
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