ROMANIAN SPECIFIC ACCOUNTING RULES

• Fiscal and accounting year
• Accounting system
• International Accounting Standards
• Audit and reporting rules
• Currency rules
• Leasing

Fiscal and accounting year
The fiscal and accounting year is the calendar year.

Accounting system

The Romanian Accounting Law no 82/1991, modified, stipulates that accounts must be kept according to the Romanian chart of accounts, built based on the French chart of accounts and booking system. Nevertheless, each company is allowed to establish its own analytical accounts of the synthetic accounts, according to its specific activity. Accounting records are to be kept in Romanian currency and in Romanian language (bilingual records are permitted and dual currency records are required for transactions in other currencies).

The basis of accounting is historical cost; currently, there is no accounting for hyperinflation and no indexation is available for revaluation of assets (except revaluation of assets allowed by government decisions); however, indexation for revaluation of land and buildings became available in 1999. There are no consolidation rules available for holding companies. The function of Romanian accounting is tax collection, so the concept of prudence is less powerful than in international practice.

The Balance Sheet must be filled in on the shape that the Romanian Finance Ministry is issuing in electronic format each year around 01 February for the previous year. After the approval of the Balance Sheet and Administrators’ report by the General Shareholder Meeting, the Administrator(s) must register them at the territorial Finance Administration and then at the Trade Registry. Only after completing this procedure and only if the minutes of the General Shareholders Meeting stipulates the distribution of dividends, the shareholders will be allowed to take the dividends for the previous year.

The Romanian Company Law no. 31/1990 stipulates that the Administrator is responsible for organizing and keeping accounts. He/she is allowed to sign all the accounting documents and situations (monthly trial balance and VAT declaration, yearly Balance Sheet, etc), for a company having the turnover of less than 50,000. Should the company exceed this limit, it must employ an accountant or conclude a services contract with an accounting company.

International Accounting Standards

Currently, the Romanian accounting system is in process of applying the 4^th Decision of the Economic European Community and International Accounting Standards. Since 2000, the companies listed on the Bucharest Stock Exchange are applying them.

According to the Order no. 3055/2009 of the Public Finance Ministry for the approval of the Accounting Rules Harmonized with the E.U. Decisions, the companies meeting at the end of the previous 2 consecutive financial years two of the below-mentioned criteria would draft complete financial statements, including balance sheet, profit and loss statement, cash flow statement, explanatory notes:

:

• Turnover exceeding 7,300,000 EUR;
• Total assets exceeding 3,650,000 EUR;
• Average number of employees exceeding 50.

Since 01.01.2003, the companies that do not meet two of the above-mentioned criteria are drafting simplified yearly financial statements.

The Group of companies is drafting consolidated yearly financial statements, by the mother company; in this case, too, exemptions apply, if the member companies fell in certain categories mentioned by the law.

Audit and reporting rules

For companies using the International Accounting Standards, a certified financial audit is required at the end of the financial year. The financial audit can be performed only by an auditor that can be a natural person or company meeting some conditions stipulated by the Emergency Ordinance of the Government no 75/1999 regarding the financial audit activity.

CURRENCY RULES

The Currency Operations Regulation no. 4/2005 issued by the Romanian National Bank stipulates that payments between Romanian entities, with a few exceptions, must be made with local currency – Leu (ROL). Payments between resident and non-resident entities and payments between non-resident entities must be done in hard currency or local currency – Leu (ROL). Romanian legal entities are authorized to hold and use hard currency (arising from depositing of the social capital, loans, exports, etc). Non-resident entities are authorized to hold local currency in a bank account opened with a Romanian bank.

Romanian legal entities are allowed to make, without any prior approval, current account payment transactions from their hard currency accounts, but they must be well documented – these transactions are checked by Romanian National Bank, that requires to see the original documents on which the transactions are based (contracts, invoices, custom forms etc.). The current account transactions include, amongst other things, imports of goods and services, payments of dividends, and repatriation of profits.

Capital transactions between residents and non-residents deriving from Foreign currency financial credits and loans over 1 year, must be notified for statistical purposes by the National Bank of Romania.

Romanian and foreign entities are entitled to buy and sell hard currency on the Inter-bank Foreign Exchange Markets. When buying hard currency, a justifying document needs to be presented (for example a contract with a foreign entity showing the necessity to pay an import in hard currency).

LEASING

The Romanian definition of finance and operating leases given by the Government Ordinance no. 51/1997 regarding leasing operations closely resembles the definitions stipulated by the International Accounting Standards for Leasing Operations (IAS 17). A leasing operation satisfying at least one of the following conditions is defined to be a finance lease:

• The risks and benefits related to the ownership right are transferred to the lessee from the moment of concluding the leasing contract;
• The parties have expressly stipulated that on the expiration of the contract the ownership right of the good is transferred to the lessee;
• The usage period of the good under the leasing system covers at least 75 percent of the normal lifetime of the good, even if finally the ownership right is not transferred.

Any lease not qualifying as a finance lease will be considered an operating lease. Cross-border as well as domestic leases are possible. The lease contract itself represents an enforceable title for the lessor (i.e. the lessor is granted direct enforceability) in case the lessee does not return the goods to the lessor in breach of contract or at the end of the lease term. In the case of finance leases, the goods are booked and depreciated by the lessee, while for operating leases the goods remain on the lessor’s balance sheet and are depreciated accordingly.

Finance lease payments are subject to withholding tax on the interest portion of the payment. Operating leases are subject to withholding tax in the form of a royalty either on the whole payment (in case the payment is not split in depreciation and margin) or only on the profit margin.

The goods imported in leasing benefit from a beneficial customs duty and VAT treatment, under temporary import regime. The law provides for a minimum customs value of 20 percent upon final import. No VAT should be paid upon a lease payment.