A NEW WAY OF AUDITING – AUDIT IN KNOWLEADGE BASED ...

Annals of the University “Constantin Brâncuşi”of Tg-Jiu, No. 1/2008, Volume 3, 

ISSN: 1842-4856 

A NEW WAY OF AUDITING – AUDIT IN KNOWLEADGE BASED 

SOCIETY 

Radneantu Nicoleta, asist. univ.drd, Universitatea Romano-Americana 

Cruceru Anca, prep. univ.drd, Universitatea Romano-Americana 

ABSTRACT: 

The modern world is under going a fundamental transformation characterized by a lot of challenges, dynamism, 

globalization, and the increasing influence of Information and Communication Technologies. The particular 

importance, proved by the informatics and communication technology in all fields of economical and financial 

activities, has also occurred, within the informatics system environments, as a permanent companion of the 

accounting and audit from almost all entities. Passing towards the market economy has determined the 

importance increase of the audit activity and the introduction of new rules, methodologies and procedures 

adapted to the needs of economical reality and to the fiscal system generated by them. 

1. Introduction 

In the last decades we have noticed a lot of phenomena and processes which 

characterize the human society evolution on its whole and which indicate the fact that we are 

in the middle of a profound transformation period, transformations that define the transition 

from the industrial society to a new type of society – the society based on knowledge. 

Passing towards the market economy has determined the importance increase of audit 

activity and the introduction of new rules, methodologies and procedures adapted to the 

needs of economical reality and to the fiscal system generated by them.The company success 

does not depend any more on the production facilities, on the financial capital and on the 

properties, but it more and more depends on the immaterial values. The capacity essence of a 

person, an enterprise or an entire society, to yield wealth firstly consists of its specific 

knowledge. Referring to the role inversion of the two asset categories, material and 

immaterial, which has been realized and is amplified within the modern economy, A. Toffler 

stands: “what matters is not the buildings or the devices of a company, but the contracts and 

the power of marketing and of its sale force, the organizational capacity of the administration 

and the ideas that idle in the employees’ minds”. 

2. Changing at the level of auditing activity 

The increasing importance of the so-called knowledge economy, which is often 

associated with industries such as software, pharmaceuticals, the media, and financial 

services, will continue to change our image of the economy and of value creation. Factories 

and assembly lines will no longer form the wealth of a company; instead it will be the 

creativity and capacity for learning of the employees, innovation, and the ability to maintain 

long-term customer and business partner relationships. 

But there is no exclusive "either-or" between industrial and knowledge economy. 

Many products will continue to be manufactured industrially. However, the share of 

intellectual capital and therefore of intangible assets that flows into the development and 

design of new products and that forms the basis for modern competitive production and 

supply chain processes will increase. But to convert their knowledge capital into a 

measurable performance and results, companies require appropriate instruments for control. 

A combination of "old" and "new" is also valid here - for example, efficient cost 

management in combination with effective innovation, market, sales, and customer 

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relationship management. Here we need to catch up, both with regard to business science and 

theory as well as the practical aspects. 

The value of these companies is mainly determined by the employees’ abilities in 

designing informatics programs, in the Internet use, by professional experience, by their 

cleverness and reputation. But the enterprise activity cannot be conceived without the clients’ 

existence. Thus, elements related to its commercial aspect, as some good knowledge of the 

commodity market and of the clients, their loyalty, a good way of distribution, the marketing 

strategies, all contribute to the increase of the enterprise value. Through all these there will 

be reached the situation in which the market value of such a company is much higher than its 

accounting value. This tendency will be amplified in future and there could be a danger, 

namely the traditional financial situations would become, to a great extent, useless for the 

users of financial accounting information. 

The Office of the Auditor General promotes accountability and best practices in 

government operations. Methodology is how the Office codifies the standards and practices 

that are to be followed by auditors in carrying out their work. It is an inherent aspect of what 

we do, why we do it, and how we do it. It gives rigour and discipline to our work as well as 

provides the structure within which audit teams exercise professional judgment. 

Considerable effort has been put into updating our audit methodology in order to: 

• recognize the unique requirements of our different product-lines; 

• take advantage of the capability of electronic tools such as the Internet; 

• increase its usefulness to our practitioners 

The main feature of the audit process is the independence of the one that performs it: 

In all matters relatedto the audit, the IS (Informational System) auditor should be 

independent in both attitude and appearance. The independence of such an approach refers to 

the lack of any kind of restriction which could affect the checking purpose, efficiency and 

conclusions. The testing and the evaluation presuppose that the audit authority should firstly 

analyze the deeds, and after this express its independent opinion. 

By computer use, the audit approach is modified due to the new processing, storage 

and presentation modalities of the information given by the informatics applications, without 

changing the general objective and the audit purpose. The traditional procedures of data 

collecting and result interpretation are replaced, totally or partially, with informatics 

procedures. 

The existence of the informatics system can affect the internal audit systems used by 

the entity, the way of risk evaluation, the performance of audit tests and basic procedures 

used in order to achieve the audit objective. 

Audit is designed to determine whether financial statements are fairly presented in 

accordance with International Accounting Standards (IAS) or Generally Accepted 

Accounting Principles (GAAP). In the United States, audit is required for all publicly 

registered companies. 

In addition, audit may be performed for private companies, registered charities, and 

some governmental and public entities. Certain forms of private companies are required to 

have an external audit. Private companies typically request financial audits year after year 

because lenders may have required an audit or owners may want to have external unbiased 

eyes look at the financial statements to determine if the company is complying with all the 

required accounting principles. Charities would require a audit to show the financial status of 

the organization to potential donors. Governments and government businesses are usually 

required to be audited by statutes to determine if all the money budgeted has been properly 

spent. Government financial reports are not always audited by outside auditors. Some 

governments have elected or appointed auditors. 

Other than testing the reliablility of a firm's controls, audits can alert management to 

weaknesses in the firm's controls, as well as suggest operational improvements that could be 

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undertaken. These are highlighted in the Management Letter from the auditors. Strategic 

systems auditors provide a top down approach to auditing by first examing a firm's business 

strategy and keys to competitive advantage. 

The development of an economy based on knowledge has led to the development of 

some new activities, as the electronic commerce (e-commerce), banking activities on Internet 

(e-banking), touristy activities on Internet, educational activities on Internet (e-learning) and 

the list could continue. This new development of informatics has led to the creation of some 

new economical activities (virtual enterprises), namely of some new economical activity 

categories which do not directly operate with physical products, but with virtual ones, 

through non-physical financing, but with physical results. 

The statistical data published by international institutions shows that the role of Small 

and Medium Enterprises in the economy is more and more important. This trend is not only 

determined by the SMEs characteristics, but also by the whole world economic environment 

evolutions. These two elements define SMEs as the main economic development determinant 

in the upcoming period. Romania’s integration in EU opens large development perspectives 

in all the sectors of the social-economic life. The Romanian companies, irrespective their size 

will be in an everlasting competition with those from EU. The competition will be also felt 

on all the markets approached by the Romanian companies. Like the SMEs from the EU 

member states, the SMEs have an important role in the Romanian economy. 

The introduction of the new technologies determines major changing in the audit 

activity flow, a series of laborious and manually difficult to achieve procedures being 

replaced by automatic procedures, and with the auditor’s activity changing the accent on the 

qualitative analysis part and on the result interpretation. 

Another challenge for the audit authority is the acknowledgement, the recording and 

the evaluation of the new assets within the non-corporeal immobilizations, such as: knowhow, 

the informatics programs, internet domains, etc, and also of the circulating assets (the 

relationships with clients and suppliers), the intellectual capital. 

The increase of the immaterial asset importance emphasizes the problems of the real 

taking-down in documents and the reflection, in the accounting, of the operations regarding 

this asset category. The actual accounting treatment of the immaterial, concerning the 

immediate passing to the period expenses, is always motivated by prudence. Prudence 

demands that the assets and the incomes should not be over-evaluated, and the debts and the 

expenses should not be under-evaluated. The procedures resulted from applying the prudence 

principle aims at moderating the board tendencies of presenting an as good as ossible 

company image. Even more, because the immaterial resource existence is difficult to be 

checked, they could be used in order to administrate or even manipulate the result. 

The reticence concerning the calculation of the intellectual capital value dimension is 

explained by the difficulty and the cost of existing measurement proceeding application, and 

of selecting the indicators that present the relevance managerially. In its turn, the reticence 

concerning the reporting of the existent intellectual capital measuring results devolves from 

the stressed relativism in the obtained value interpretation, from the risk of revealing 

company aspects of strictly internal importance, and from the lack of an established format of 

such reports. 

Up to present the companies have been owners or at least auditled anything they have 

considered affects the business. In future, the command and audit are more and more 

replaced by all kinds of relationships: alliances, mixed companies, partnerships, know-how, 

etc. Their strategies must be global at least regarding the technologies, the finance, the 

products and the markets. The focus on cost reduction and on profit could lead to the activity 

contraction, without the organization activity being improved. 

The future organization is characterized by responsibility, autonomy, risk and 

uncertainty. The chain services – advantages comes into new vision and approach. The new 

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economy determines the change of the auditor’s status, namely from specialist to generalist 

(the specialization could disappear or the client could demand another type of service). 

Therefore, we notice a change, we can say a historical one, in which the virtual is equal to the 

real and even exceeds it. 

In such situations the audit must have in view the following aspects: 

− providing the adequate framework, based on informatics technology integration, so that 

the activities accomplished during the carrying on of the project should be in accordance to 

the 

objectives and terms of accomplishing, approved at institutional level at the project 

substantiation; 

− the accordance to the program demands; 

− the recording of some technical difficulties during the project; 

− the activity modernization as a result of the new technology implementation; 

− the technical solution reliability and the implementations of the system functioning on the 

increase of the activity quality; 

− the training degree of users, related to the need of achieving the performance level required 

by the new approach, analyzed from the point of view of the impact with the new 

technologies; 

− the existence and the observance of the standards regarding system security, as well the 

quality oftechnical and methodological support. 

An informatics environment could offer the auditors the possibility of additional 

processing, by providing the information solicited in formats requested by the auditor, in 

order to interpret or use them as input data for specialized programs of audit assisted by 

computer. 

As a management tool data audit work should help organizations make best use of 

data in order to obtain the necessary information, often through the development of an 

information strategy. Data audit as part of the information audits indirectly: 

- aid management decision making 

- support and encourage competitive advantage 

- enable organizations to adapt and change 

- facilitate organizational communication 

- encourage use of, and investment in, IT 

- contribute to the value of manufactured products 

In order to develop ah high quality audit, the auditor must know the main goals of the 

audited organization and to determine the concordance between realities and the 

expectations. 

3. Conclusion 

In the case of computerization of a significant part from the entity activity, there is 

necessary the evaluation of the informatics system usage influence upon the audit risks, 

having in view the aspects related to the test relevance and credibility. The informatics 

system complexity is granted by a series of relative features at: the transaction volume, the 

procedures of data validation or of data transfers among applications, automatic engendering 

of transactions, the communication with another applications or informatics systems, the 

complexity of calculation algorithms, the utilization of some information coming from 

external data sources without their validation. 

In the first step, characterized by the utilization of some informatics procedures 

complementary to the traditional procedures for a series of specific activities: the data 

collecting and proper processing, the documentation of audit tests, the result interpretation, 

the communication between auditors and the checked entity, there is noticed an evolution of 

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motivation by accepting the new audit methods based on the use of informatics technology 

within the audit activity, by changing the auditors’ mentality, by the interest for providing the 

hardware, software and communication infrastructure, by the permanent training of the 

personnel, as well by the interest for developing some support applications for the audit 

activity. 

The natural evolution is towards the extension of the audit based on computer, 

through which a major part of the traditional routine procedures, time – intensive, having a 

high level of difficulty and which manipulate a large data volume, are substituted with 

specialized software programs, a solution that contributes to the increase of audit efficiency 

and quality. 

A perspective with a larger horizon is constituted by the implementation of on-line 

audit techniques which shall represent a qualitative step in audit performing through the 

transition from a lonely audit to a audit within network (in an environment based on 

computer networks: Internet, intranet). 

The main premise of such an approach is the technological feasibility: the accounting 

information registered and stored, in general, on an electronic support (or an alternative, but 

accessible environment). The implementation of the audit based on informatics technology 

usage signifies the implementation of a new working way, which presupposes the permanent 

auditor collaboration with the checked entities (central and local institutions and authorities, 

organizations and enterprises) under the conditions and according to the regulations 

associated to this system, in order to achieve the action convergence and the audit activity 

objectives. It is necessary that the new working way should provide coherence and 

concordance with the actual procedures, the problems tackled through informatics procedures 

constituting a dematerialized alternative of the existent traditional processes. 

Companies need management processes that permit quick and efficient exchange of 

knowledge between individual managers to ensure optimal usage of this information. Such 

processes include a strategic management process that establishes continuous, strategic 

dialog throughout the company and thus ensures that the company remains a nose ahead of 

external developments that could harm its intangible assets based competitive position. 

Companies must also have a process for performance management that optimizes the 

exploitation of existing assets in order to achieve short term income goals. Both processes 

need to be linked with each other to enable management to manage for growth and for short 

term results at the same time. 

From all those presented above there could be concluded that the modern technology 

integration represents an essential condition for increasing the efficiency of audit activity. 

The result of this integration should bring the auditors in an optimum position in order to take 

the pulse of an organization, under the conditions in which the planning, the proper testing 

and the reporting are performed in parallel and in real time. 

REFERENCES 

1. BANACU,C, 15/11/2006, Metode de evaluare a programelor de calculator, Bucuresti, 

Tribuna Economica 

2. BOULESCU, M, 2005, Auditul fiscal al agenŃilor economici, Bucuresti, Editura Tribuna 

Economica 

3. BusinessWeek (1999) – Knowledge markets. BusinesWeek Online, December 13, 1999 

4. http://www.businessweek.com/1999/99/99_50/b3659022htm. 

5. COLLASE, B., 2000, Encyclopédie de comptabilité, contrôle de gestion et audit, Paris, 

Economica 

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6. FELEAGA N., MALCIU, L., 2002, Politici si optiuni contabile, Bucuresti, Editura 

Economica 

7. FELEAGA, N., IONASCU, I., 1999, Tratat de contabilitate financiara, vol. I-II, Bucuresti, 

Editura Economica 

9. FELEAGA, N., 2000, Sisteme contabile comparate, vol. II, Bucuresti, Editura Economica 

10. MUNTEANU, V, 2006, Audit si audit financiar-contabil, Bucuresti, Editura Sylvi 

11.NICOLESCU, O., NICOLESCU L,2005,Economia, firma si managementul bazate pe 

cunostinte, Bucuresti, Editura Economica 

12. POPEANGA, P, 2004, Auditul financiar si fiscal, Editura „C.E.C.C.A.R.” 

13.XXX- LEGE Nr. 84 din 18 martie 2003 pentru modificarea si completarea Ordonantei 

Gvernului nr. 119/1999 privind auditul public intern si auditul financiar preventiv 

14. http://www.crie.ro/ 

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THE ACCOUNTING AND FISCALITY OF PROFIT REPARTITION 

Bengescu Marcela, conf. univ. dr. 

Drila Gherghina, lecturer univ. dr. 

Universitatea din Piteşti 

ABSTRACT: Cette étude se propose de réaliser une synthèse des dispositions législatives concernant la 

répartition du profit. La problématique abordée vise deux objectifs principaux : 1. les distributions provenant du 

profit brut ; 2. la répartition du profit net. Les aspects théoriques et méthodologiques ont été adaptés à la forme 

juridique d’organisation des entités économiques : 1. les sociétés nationales, les compagnies nationales et les 

sociétés commerciales d’État à capital intégral ou majoritaire, les régies autonomes ; les sociétés commerciales à 

capital majoritaire privé. 

L’étude veut souligner certains éléments de détail, tels que : la distinction entre la perte comptable et la 

perte fiscale ; les destinations du profit par rapport à la forme juridique d’organisation de l’entité économique, le 

traitement comptable et fiscal des répartitions provenant du profit. 

General Overview 

The result represents the indicator for evaluating the financial performance of the 

company, and is determined by subtracting the expenditure from the income of the ending 

year. Although it is presented as a global indicator in financial statements, it is determined 

monthly. 

Methodologically speaking, in order to calculate the result, the income and 

expenditure accounts have to be closed out. 

The image of the analyzed indicator is constructed from elements that comprise the 

results account, and also from those that refer to the changes of internal or external 

circumstances concerning the company. 

Companies have the tendency of modifying accounting practices and estimations in 

order to adapt to economic circumstances or in order to improve their image. 

Sometimes, retroactive modification of financial results questions the trust of the 

public interested in the company’s performance. IAS 8 states how annual accounts must be 

treated in order for the company to present its results on a coherent and permanent basis. 

All income and expenditure noticed in the financial year must be taken into 

consideration upon the calculation of the net result of the respective year, apart from the 

situation in which another international accounting regulation authorizes a different 

procession. 

Extraordinary elements and the effects of change in accounting estimations are part of 

the elements included in the net result. 

In certain circumstances, some elements can be excluded from the net result of the 

current period. IAS 8 mentions two of these circumstances: the correction of fundamental 

errors and the effect of changing the accounting methods 1 . 

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In accordance with those presented above, the Romanian accounting legislation states that: 

“In case of correcting errors that generate reported accounting loss, this must be covered 

before distributing profit. In the notes to the financial statements additional information must 

be provided regarding the errors that were noticed” 2 . 

Legal Provisions regarding Profit Distribution 

The dividends that are distributed to shareholders, proposed or declared after the 31 st 

of December, as well as other similar distributions made from the profit mass, must not be 

acknowledged as debt at the conclusion of the financial year. 

The distribution of the profit is recorded in accounting based on destinations, after the 

approval of annual financial statements. Profit distribution is performed in accordance with 

valid legal provisions. 

Amounts that represent reserves established out of the profit of the current financial 

year, based on some legal provisions, is recorded through the use of accounting article 

129=106. The accounting profit that is left subsequent to this distribution, are transferred to 

account 117, from where it is going to be distributed to its other legal destinations. 

The reported accounting loss is covered by the profit of the current financial year and 

the reported profit, by reserves and by the equity, according to the decision of the 

shareholders’ or associates’ general assembly, with the observance of legal provisions. 

Distributing the Gross Profit 

As regards the distribution of the gross profit, we take into consideration the following 

situations: setting up the legal reserve , covering the fiscal loss of the previous years and 

setting up other reserves equal to the amounts generated by the fiscal facilities stipulated by 

the norms regarding profit imposition. 

Regarding the legal reserves, the Fiscal Code, in art. 22, states dispositions regarding 

the limits of fiscal deductibility: „the legal reserve is deductible within a limit of 5% applied 

to the accounting profit, before determining the profit tax, out of which the non-taxable 

income is subtracted and the expenditure corresponding to this income is added, until this 

reaches the fifth part of the subscribed and submitted equity or of the patrimony, as the case 

may be, according to the laws of organization and functioning”. 

Observation: According to these regulations, the legal reserve is established at a 

different level than that listed in the Law Regarding Commercial Companies no. 31/1990, 

republished. Also, there is a necessity to simultaneously meet two requirements: 

Requirement No. 1: Legal reserve = 5% (profit before taxation – non-taxable income + 

expenditure corresponding to non-taxable income). 

Requirement No. 2: Legal reserve ≤ 1/5 x subscribed and submitted equity. 

According to the methodological norms the reserve is calculated cumulatively from 

the beginning of the year and is deductible upon the calculation of the monthly or trimonthly, 

as the case may be. Also, revenue mentioned by art. 20 of the Fiscal Code is included in the 

category of non-taxable income that is subtracted in the formula for the calculation of the 

reserve, with the exception of those stated at letter e) of the same article. The reserves set up 

in that way are appended or diminished based on the level of the accounting profit within the 

period of calculation. 

Conclusion: The formula can be performed monthly or trimonthly. 

The amount set up at the level required by the Fiscal Code is subtracted from the taxable 

income mass. 

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The profit of the current financial year is included among the sources for covering the 

accounting losses of previous years, within the limits established by decision of the 

shareholders’ or associates’ general assembly. 

Part of the gross profit is used only to compensate fiscal losses, at each deadline for 

profit tax payment 2 . 

In this case, distributing the profit represents a technical requirement in determining 

the fiscal result. An exception is represented by companies that have recovered fiscal losses 

out of legal reserves. According to current legislation, the re-establishment of the legal reserve 

will not be deducted from the taxable income mass 3 . 

Consequently, the legal reserve is re-established from the net profit subject to 

distribution. 

129 ”Profit Distribution” = % UGross profit 

1061 „Legal 

Reserves” 

1171 ”The reported 

result representing 

undistributed profit or 

uncovered loss” 

1068 ”Other 

reserves” 

13 

distributionsU 

5% x regulated base 

Fiscal loss 

Amounts generated by 

fiscal facilities 

After deducting the aforementioned amounts, the net profit is distributed by observing 

the path established by the law, for state enterprises, or by the shareholders’ or associates’ 

general assembly, for public companies. 

Accounting Records Performed At the Balance Sheet Date 

In observance of legal regulations the order of profit distribution is followed by the 

respective destinations, as follows 3 : 

a. Covering accounting losses of previous years: 

129 ”Profit Distribution” = 1171 ”The reported 


undistributed profit 

or uncovered loss” 

Accounting loss minus 

fiscal loss 

We assume that companies envisaged by the respective dispositions should deduct 

their fiscal losses from the taxable profit obtained in the next consecutive 5 years. For this 

reason, in the accounting formula above we could indicate an amount equivalent to the part 

exceeding the fiscal loss 4 . Under the assumption that the proposed evaluation is against legal 

provisions, the tax payer would owe the state budget a profit tax corresponding to the 

unreported fiscal losses. The consequences of such an approach have negative side effects 

over the financial stability of the company. 

b. Establishing other reserves, representing fiscal facilities granted by the law: 

129 ”Profit Distribution” = 1068 ”Other 

reserves” 


fiscal facilities


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c. A particular case is represented by the distribution of the amounts destined for the 

participation of employees in the profits. In case of economic agents with state owned equity, 

employees are granted amounts representing 10% of the net profit, without exceeding, for 

each employee, the level of an average monthly base salary for the company, in the respective 

financial year 

In this case, the new legal dispositions state the rule according to which „the employee 

participation is reflected in accounting by setting up a provision for risks and expenses equal 

to the estimated amounts representing the gross amounts to which the employees are entitled, 

as follows” 5 : 

6812 “Operational expenditure 

regarding provisions” 

= 1518 "Other 

Provisions” 

14 

10% x Net Profit 

d. After deducting the amounts corresponding to the destinations mentioned, the net 

profit that is obtained is recorded as follows: 

129 ”Profit Distribution” = 1171 ”The 

reported result 

representing 

undistributed 

profit or 


Net profit subjected to 

distribution in the balance 

sheet approval meeting 

Accounting records performed after the approval of the balance sheet 

a. The net profit obtained by the state venture „The National Lottery” from the sports 

bets activity will be transferred to the Ministry of Youth and Sports for financing athletic 

activities, including the Romanian Olympic Committee and the Romanian Football 

Federation 6 : 

1171 ”The reported result 

representing undistributed profit or 


b. Employee participation in the profits: 

b.1 In case of private equity economic agents: 




= 447 ”Special 

funds – 

assimilated fees 

and transfers” 

= 424 ”Premiums 

representing 

employee 

participation in 

the profit” 

Net profit from sports bets 

≤ 10% net profit subjected 

to actual distribution 

b.2 In case of economic agents with state owned equity: 

Liabilities towards employees corresponding to their participation in the profit will be 

recorded in accounting based on salary expenditure in the year following that in question and, 

at the same time, the provision that was set up will be recorded under income 5 .


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c. a minimum 50% of transfers to the state budget or to the local budget: 




= 446 ”Other 

assimilated taxes, 

fees and 

transfers” 

15 

≥ 50% net profit subjected 


d. a minimum of 50% dividends in case of national companies and commercial 

companies with partially or entirely state owned equity: 




= 457 ”Payable 

dividends” 



e. the rate of manager participation in the profit, established proportionately with the 

degree of fulfilment of the objectives agreed upon in the management contract 7 . 




= 462 ”Various 

creditors” 

Amount established 

proportionately with the 

degree of fulfilment of the 

objectives agreed upon in 

the management contract 

Note: Out of the manger’s participation rate in the company’s profit, 75% will be 

represented by distributed shares, for cash generated by this rate. 

f. the net profit remaining after establishing the amounts for the aforementioned 

destinations is distributed for the setting up of own financing sources: 




= 1068 «Other 

reserves» 


actual distribution 

(dividends + employee 

participation in the profit) 

An actual case regulated by national legislation refers to setting up own sources of 

financing for projects that are cofinanced through external loans, as well as for setting up the 

sources necessary to reimburse the equity instalments, to pay the interest rates, the fees and 

other costs corresponding to these external loans. In the spirit of these regulations, own 

financing sources for foreign loan projects include the contribution of the Romanian party to 

the completion of the project, as well as the amounts necessary to pay taxes and fees within 

the country and the value of other local costs, which cannot be paid for from external loans. 

We assume that this disposition is meant to ensure that net benefits obtained from such 

contributions remain intangible until the end of the year, thus ensuring an efficient 

management of economic resources. 

Legal and fiscal aspects regarding dividend distribution 

Regardless of ownership structure, dividends are distributed in relation to subscribed 

shares, if the constitutive act does not specify otherwise. They are paid at the date established 

by the shareholders’ or associates’ general assembly or, if so be the case, established by


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special laws, but no later than 6 months of the approval of the annual financial statement of 

the concluded financial year. Otherwise, the company will pay penalties for the delay, equal 

to the legal interest rate, if the constitutive act or the decision of the shareholders’ general 

assembly which approved the financial statement corresponding to the concluded financial 

year did not establish a higher interest. 8 

Dividends are taxable with a rate of 16%. Income payers under the regime of payment 

at the source have the obligation to file form 205 ”Informative declaration regarding tax 

withheld for income under the regime of withholding at the source, on income beneficiary 

structure”, code 14.13.01.13/l. In case of dividend tax, declaration 205 should be filed until 

the 30th of June of the current year, for income paid in the previous financial year. 

. 

BIBLIOGRAPHY 

1. van Greuning H., International Financial Reporting Standards– A Practical Guide, 

IRECSON Publishing House, Bucharest 2005 

2. Ministry of Public Finance Order No. 1,752 of November 17 205 for the approval of 

accounting regulations compliant with European directives (M.O. no. 1,080 bis/11.30. 

2005). 

3. Law no. 571 of December 2003 regarding the Fiscal Code with all the modifications 

brought by Law no. 343 of July 17 2006 for the modification and completion of Law 

no. 571/2003 regarding the Fiscal Code (M.O. no. 662/08.01. 2006). 

4. Bengescu, M., Studiu comparat al normelor contabile privind cheltuielile şi veniturile 

întreprinderii, Agir Publishing House, Bucharest, 2006. 

5. Ministry of Public Finance Order No. 418/ 4.06.2005 regarding certain accounting 

observations applicable to economic agents, published in Romania’s Official Monitor, 

Part I, no. 310 of April 13 2005. 

6. Government Urgent Order regarding the distribution of the profit of the 

”Administration of the State Protocol Patrimony” state enterprise no.91, published in 

Romania’s Official Monitor, Part I, no. 277 of June 17 1999, art. 2. 

7. Government Urgent Order No. 39 of July 10 1997 regarding the modification and 

completion of the Law of the management contract no. 66/1993 (M.O. no. 151/07.11. 

1997. 

8. Law no. 441 of November 27 2006 for the modification and completion of Law no. 

31/1190 regarding commercial companies, republished and of Law no.26/1990 

regarding the registry of commerce, republished (M.O. no. 955/11.28.2006). 

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ACCOUNTING HARMONIZATION – IN THE GLOBALIZATION 

PROCESS OF NATIONAL ECONOMY 

Dorel Mateş, Prof. univ. dr., West University of Timişoara, 

Faculty of Economic Science, J.H. PESTALOZZI, 

Veronica Grosu , Asist. univ. drd . 

„Ştefan cel Mare ” University of Suceava, 

Faculty of Economic Science and Public Administration, 

Marian Socoliuc , Prep. univ. 

„Ştefan cel Mare ” University of Suceava, 

Faculty of Economic Science and Public Administration, 

Abstract : On peut dire que la globalisation comptable est déjà une realité, les principes comptables 

nationales ayant substitué par une série de standards et normes reconnues au niveau international. 

L'Union Europèene suive l'harmonisation de l'information financière des societés coteés à la bourse, 

pour protéger et tuteller les investiteurs. Par l'application des principes comptables internationales IAS/IFRS on 

essaye de gagner de confiance dans les marchées financières, en facilitant les négociations transfrontalières et 

internationales des valeurs immobilières. 

L'importance de cette demarche – le passage des principes nationals envers des principes internationals, 

représentera une période délicate une modernisation inevitable, ainsi que beacoup des aspects legislatifs 

concernant l'organisation et le fonctionnement des entités économiques, les principes generales et les normes 

comptables nationales souffriront ou ont déjà souffert des transformations importantes. 

The globalization of the accounting process has already become reality, and the 

national accounting principles are being progressively substituted for international recognized 

rules and standards. The European Union is looking for a harmonization within the financial 

informational support of the companies enlisted on the stock exchange market, in order to 

create a safer environment for the investors. By applying the international accounting 

standards IAS/IFRS, one tries to give credit to the financial markets, and at the same time, 

tries to ease the international transactions of the stocks. 

The evolution from national regulations to international standards is in fact a delicate 

step determined by the inevitable upgrading of the legislation regarding the organization and 

functioning of the economic entities, and of the general principles and national accounting 

standards (the company law, fiscal code, accounting law). 

Adopting the International Accounting Standards by the IASB (International 

Accounting Standard Board) together with the IAS/IFRS standards, determined an 

irreversible progress by defining progressively the time and functioning conditions of an 

accountancy common language in Europe. Starting with the 1 st of January 2005, rule nr. 

1606/2002 (CE) given by the European Parliament and the Council from 19 th of July 2002, 

regarding the applying of international accounting standards, requires all European companies 

enlisted on the stock exchange market to draw up a consolidated balance sheet, according to 

the International Accounting Standards elaborated by the IASB. The member states accepted 

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the notification of the European Commission, and pointed out, that the comparability of the 

balance sheets of the stock exchange enlisted companies, financial and insurance companies, 

builds up an essential factor for the integration of the financial markets. In addition, the 

interested companies have appreciated the adoption of the new International Accounting 

Standards IAS/IFRS as a positive step, because it would facilitate the trade with stocks, 

fusions and international procurements, as well as with financing operations. 

According to these regulations, the International Accounting Standards must be first 

approved, in order to check the comparability with the Accounting Community laws. On this 

purpose, a mechanism which will approve every standard has been created and activated, but 

it will be able to fulfill its amendments only after EFRAG (European Financial Reporting 

Advisory Group) and ARC (Accounting Regulative Committee), or the European 

Commission will approve its actions. These approved standards are being promulgated with 

the Rules, and then published in the EU Official Gazette GUUE, in every official language of 

the EU. Art. 5 of the Regulation No. 1606/2002/(CE) consented the member states to approve 

or to prescribe the adoption of the International Accounting Standards even after the stock 

exchange enlisted companies and the unlisted companies draw up their individual balance 

sheets. In other words, this regulation assures that the following categories of companies will 

adopt the IAS: 

- companies enlisted at the stock exchange market: must draw up an accrual balance 

sheet 

- companies that issue financial instruments: must draw up a balance sheet 

- Banks and financial institutions: must draw up an accrual balance sheet and a 

consolidated balance sheet, only if they are enlisted on the stock exchange market 

and haven’t drawn up yet a consolidated balance sheet. 

The Regulation foresees that the unlisted companies, which do not adopt internal rules 

(Civil Code, national accounting standards) can optionally adopt the IAS, and the companies 

that can draw up their balance sheet in a simplified form (abridged) according to the national 

accountancy legislation, are no longer compelled to adopt the IAS. 

As an example, starting with 2005, one can say that in Romania there are 2 categories of 

companies which draw up accrual and consolidated balance sheets, using 2 different and 

alternative accounting systems, which will probably coexist only for a limited period of time. 

1. The accounting system based on the International Accounting Standards of the IASB and 

adopted by the European Union, after their approval according to the mechanism described 

earlier. 

2. The accounting system based on the national regulations, approved by the OMFP 

1752/2005, modified and reedited accounting law 82/1991, modified and reedited company 

law. 

The authority in charge with the creation of the International Accounting Standards 

IAS/IFRS is IASB (International Accounting Standard Board), institution which was founded 

on 1st of April 2001, as a newer form of the IASC (International Accounting Standard 

Committee). IASC was founded in 1973 by the Federation of Accountants (IFAC), institution 

which represents the international profession of accounting, and it was created to promote the 

harmonization of the rules regarding how the economic entities draw up their balance sheets. 

Among the priorities of IFAC, the accounting harmonization objective should have 

been achieved by editing the international accounting standards, named IAS (International 

Accounting Standard), which will be used by the councils authorized to elaborate these 

standards in the IFAC member states. As for the IASC activity – the accounting standards 

which have been created in the beginning, gathered the accounting rules of the developed 

countries or the countries with an accounting tradition, especially the USA or the Anglo- 

Saxon countries, which already had criteria for relevating the assets, liabilities, expenditure 

and revenue, criteria which are very different from one another. Therefore, these accounting 

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ISSN: 1842-4856 

criteria could not establish a solid base for elaborating accounting standards from the IFAC 

member states; standards which should have substitute the national accounting standards of a 

country. For this reason, during the years 1999 and 2000 IASC initiated an updating process 

of the existent IAS accounting standards, in order to create a complete set of standards. 

Reviewing the IAS during the 90’s 

In 1989, the FRAMEWORK for the Preparation of Financial Statements had been published. 

It defines the informational objectives of the companies, showing the basic features of the 

balance sheet, gives the definition of the assets and liabilities of the patrimony, revenues and 

expenditures, also specifying the general principles of their accounting entry. This document 

also generates a theoretical support for the existent IAS, promoting the international 

accounting profession, the users, auditors and the countries, which want to adopt the IAS, to 

accept the IAS. 

In 1989 IASC started a revision process of the existent accounting systems; in order to 

improve their quality, reduce the number of rules, and to show the assets, liabilities, revenues 

and expenditures in a clearer way. Basically, the existence of different accounting systems, 

which are acceptable from a theoretical point of view, together with the accounting entry of 

the elements of patrimony, revenue increases or decreases, diminishes the comparability of 

the balance sheets, up to the inefficiency of the generated information. 

In 1993, the reviewing of the existent IAS determines the publication of 10 new 

accounting standards. Finally in year 1995, IASC sets up an agreement with IOSCO 

(International Organization of Securities Commissions) – organization which represents the 

commissions which supervise the world stock markets – regarding the integration of the 

necessary IAS standards, since IOSCO already approved for the cross border offerings 

balance sheet to be elaborated by the IAS standards. 

The reform in 2001 

During the first months of 2001, the revision and integration process of the existent 

IAS aimed the reform of IASC. Actually, the existent structure of IASC was being 

exclusively dependent on the international accounting profession – this was unfit to 

correspond with the IAS. The IASC Foundation was founded in March 2001, in Deloware 

USA, a non-profit and independent organization. SAC (Standards Advisory Council), IASB 

(International Accounting Standard Board) and SIC (Standing Interpretation Committee) are 

dependent on the IASC Foundation. This institution is being lead by a board of trusters, 

formed by 19 members, whose main function is to ensure the necessary financial support for 

the IASC. Basically, the IASC appoints the members of the SAC, IASB and SIC. 

Building up these institutions according to the IASC Constitution, ensures an adequate 

geographical representation for all the institutions that want clearer accounting standards: the 

international professional accountants, the financial investors and analysts, companies whose 

accounting systems are likely to be reformed, and finally, the auditors. 

The SAC Organization is built up by 45 professionals, from various countries, which have 

different technical background, and their position is to assist the IASB in determining the 

priority arguments in the process of elaboration and revision of accounting standards. IASB is 

formed by 14 international accounting experts. Their responsibility is to discuss and approve 

or disapprove of the international accounting standards and their interpretation. 

These processes are being organized by the IFRIC (International Financial Reporting 

interpretation Committee). After the IASC Foundation was created, and after the IASB 

members had been assigned, the newly elaborated accounting standards will be called IFRS, 

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and they will gradually substitute the existent IAS. This action had been established at the 

first reunion of the IASB, to ensure permanent connection with IASC and IFAC. 

At the moment, the IAS accounting standards can be considered as a group of shared 

standards, approved, independent and complete. Therefore, one can understand why the 

European Commission chose to refer to the IAS in relation to how the balance sheets of the 

European economic entities had been elaborated and edited. 

On the other hand, the European Commission could have decided upon the elaboration of a 

set of accounting standards, which could have had determine an accounting harmonization 

within the EU market. At the same time, these accounting standards within a unique European 

context would have inevitably become different from the international accounting standards. 

This could have had excluded Europe from the international accounting harmonization 

process, even more, it could have blocked the possibilities of European companies to obtain 

resources from the global markets. 

Bibliography: 

1. Mateş D. , Matiş D,- Contabilitatea financiară a entităţilor economice, Editura Mirton , 

Timişoara, 2006. 

2. Ristea M. - Contabilitatea financiară a întreprinderii, Editura Universitară, Bucureşti, 

2005. 

3. Gazeta Oficială a U.E nr. 392/2004. 

4. Gazeta Oficială a U.E nr. 299/2005. 

5. Regulamentul nr.1602/2002 al C.E. 

6. Regulamentul nr.1564/2005 al C.E 

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PRESENT PRIORITIES IN THE BANK MANAGEMENT 

Avram Costin Daniel, Prep. univ. drd. 

University of Craiova 

ABSTRACT: The maturation of the Romanian bank management has happened on the background of 

the growing complexity of the banking activity, required by a competitive market, that have known a constant 

growth starting with the year 2000. 

The recent integration in the European Union has given much more courage to the foreign banks which 

regard Romania like a promising economic space. New challenges have appeared in these conditions for the 

bank management in our country, generated primarily by the obvious transformation in the bank’s culture. 

These developments have increased the need for the function of the risk measurement, management and 

control. The new banking environment and increased market volatility have necessitated an integrated approach 

to asset-liability and risk management techniques. 

The bank management in Romania is adapting constantly to the transformation of the 

business environment and of the legal frame regarding the organization and the management 

of the economical system in our country. 

These tendencies are visible at the top management level – banks’ leadership – as well 

as medium management level –leadership of the branches and offices of the central banks – 

and they will continue to give shape to a new culture of the companies and to a active manner 

of approaching the specific market because “the gradual maturation of the bank system let to 

an increased complexity of the bank’s activity”[5]. 

The majority of the analysis made over the present situation and the perspectives of 

the Romanian bank system are presented most often in a grey colored palette that is far away 

from anything that could bring optimism and trust to a clientele found already in difficulty. It 

is obvious that the prosperity of the economic agents is the one leading to the achieving of 

performances in a bank system and when the winners are awarded by the underground 

economy and corruption the banks’ role is dropping continuously in spite of all the protection 

the banking secret offers. 

The significant crisis the Romanian bank system has surpassed was provoked by 

external factors linked to the business environment that can let an important mark upon the 

functioning of the bank system but also by a series of internal factors that are related to a 

certain conservatism, to a lack of adaptability that prevented the surpassing of the 

protectionist mentality in favor of a market active mentality inside the bank system. “It has 

been said that risk in banks grows exponentially with the change rhythm but bankers do not 

adjust their perception on the risk as fast as they are expected to. 

From a practical point of view, this means the market’s capacity to innovate is grater 

than its capacity of understanding and adaptation to the afferent risks indifferent of the 

circumstances”[7]. 

This study’s aim is to focus on the present tendencies of the bank management without 

minimizing the influence the knowledge of the tendencies may bring in the economy 

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Tendencies shown in the culture of companies 

The reality has proven that a culture of companies specific for the bank system has 

developed in time. “The concept Uculture of companiesU includes semantically the values, 

symbols, beliefs, myths, rituals, ceremonies and strivings which define the spiritual space of a 

company. 

The culture of companies represents intrinsically a part of the modern approaches to the 

organizational and strategic management because it includes thinking and behavior patterns 

generated during a lifetime in a company. 

The culture of companies is the invisible universe of a firm made up from its primary 

intangible elements – knowledge and emotions structured like values, rules, beliefs, myths, 

symbols, etc.”[2] 

We will try in this study to present the trajectory of the bank system from the 

bureaucratic management, excessively hierarchical, to a protectionist management practiced 

by the state banks and finally to the effective management. 

The majority of the banks from the present Romanian bank system try to achieve the 

last one, like the fig. nr. 1 proves. 

Beaurocratic 

Management 

Protectionist 

Management 

Fig. no. 1 Trajectory of the bank system management 

The statement “books are made from books and banks from other banks” has a little 

bit of truth, fact that has practically forced the banks in the beginning to apply to internal 

sources in the process of recruiting the personnel. 

The fast development of the bank system and the need to cover the whole country 

have encountered the weak motivation of the personnel to transfer in other towns to occupy 

better paid jobs in a bank, the lack of mobility and the conservatism being the main features 

of manpower in this domain. 

On the other hand, the level of remuneration of the bank’s personnel, situated in the 

top of the best paid jobs, has determined an infusion of personnel which theoretically should 

have brought a pure environment or “new openings, new ideas”. 

The characteristics of working in a bank made impossible for the moment a discussion 

about a new culture of companies in the bank system which is formed mainly by banks with 

state capital because it implies an excessively hierarchical environment, a rigid code of 

internal rules, a clearly shared work, little dynamics, and the type of personnel kept on the job 

even if it is unable to understand the standards of a competitive market and give up the 

bureaucratic work style. 

Even if there were only banks with state capital at the beginning of the transition 

period, the landscape of the bank system changed in 1991 when private banks emerged as 

well as banks with partial or total foreign capital. 1999 is the year when state banks gave up 

the initiative to banks with partial or total foreign capital through the process of selling B.R.D. 

and BANCPOST, followed decisively by the taking over of the B.C.R. in 2005 by ERSTE 

BANK Austria. 

The tendencies manifested throughout the entire period since 2000 made possible the 

present situation when five out of the first six banks operating in our country have partial or 

total foreign capital which means great transformations are expected from these banks 

concerning their management. 

22 

Effective 

Management


ISSN: 1842-4856 

It is indifferent if it is about a state or private bank; the passing to the new culture of 

companies has to make a successfully transition from the values of the present to those of a 

true market economy. 

For this objective, even from this period, the new values of the culture of companies 

must be promoted and awarded [3], like they are shown in figure 2. 

Historical values of the banks Specific values of market economy 

Bank office=hierarchical element Bank office= profit center 

Characteristics Characteristics 

↓ ↓ 

1. Addiction → 1. Autonomy 

2. Knowledge → 2. Motivation 

3. Quantity → 3. Quality 

4. Safety → 4. Risk 

5. Order → 5. Creativity 

6. Specialization → 6. Interdisciplinary sciences 

7. Stability → 7. Change/Transformation 

8. Monopoly → 8. Competition 

Fig. no. 2 The change of values in the culture of companies 

Banks seem more and more interested in introducing CRM (Customer Relationship 

Management) which allow them to guide their activity according to the customers’ requests. 

A person (that can be a possible or a real customer) may come in contact with the bank 

through a multitude of methods, such as: 

� Bank’s advertising; 

� Press announcements; 

� Information requested by phone; 

� Information requested in writing; 

� Asking at the front desk; 

� Accessing the bank’s site on the internet.. 

No matter the method chosen, the customer has certain expectations when they came in 

contact with the bank’s personnel, as follows: 

� To make himself understood; 

� To receive details regarding matters they are interested in; 

� To be addressed to politely, clearly, like to a true partner; 

� To be treated with patience and understanding; 

� To feel trust and interest from the bank’s personnel; 

� To encounter a warm, friendly environment in the bank. 

In consequence, the banks have the obligation to select the personnel and train it to 

have the appropriate behavior; the best advertising for the bank is the favorable impression its 

personnel gives to the possible and real customers. 

Bank-customer relationship is a continuous process that has as main subject satisfying 

the customers’ demands in order to maximize the bank’s profit. 

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Thinking and planning the bank’s activity must be oriented towards the comprehension 

of the customer’s requests, the acknowledgement of the bank-customer relationship being 

positive in any circumstance, respectively: 

� When the bank wants to be present and active on the market and have success, 

it must maintain its customers, because without them there is no activity. Satisfying the 

customers is essential foe keeping them and avoiding their migration to other banks. 

� When the banks want to extend, it must preserve the existing customers but 

attract new ones too:” the satisfied customer is the best and the cheapest marketing 

instrument. This kind of client will tell his friends and colleagues what type of services had 

been offered to him, therefore increasing the bank’s number of customers.” 

It is generally considered that there are four levels leading to “positive feelings of 

satisfaction” [6], meaning: 

� Precision (exactness, accuracy) – level defined by a services’ quality equal to the 

standard promoted in the offer; 

� Accessibility (guarantee, availability) – bank’s services should be offered all over 

in time and space without other expenses for waiting or moving; 

� Partnership – customers expect the bank to understand and solve their problems, in 

order to allow them to respect their obligations; it is a situation in which both sides win; 

� Counseling - customers to see the bank like a counselor who help them win 

together. 

The first two levels are absolutely necessary to prove the measure of the quality and the 

quantity of the given services; the next two levels prove to be essential for gaining the clients’ 

loyalty. Some priorities of the customer relationship management in the banks’ area are: 

� The necessity to bring in new customers; 

� The growth of the deposits’ quantum and of the number of opened accounts for 

credit; 

� The growth of the number of eligible clients for the proposed loan policy; 

� The growth of the money circulation through the customers’ accounts; 

� The diversifying of takings and paying and the growth of incomes from 

commissions. 

� Higher degree of loyalty from the existing customers; 

� The increase in the functional capacity of the bank and the improvement of 

services’ quality for the customers. 

The bank must design a database with information on every single customer that needs 

to be upgraded periodically in order to acknowledge and evaluate the clients from economical 

and financial point of view, in the present and in the future, and to correctly appreciate the 

banking risk in the loan activity. 

The principal sources of information are: 

1. Information given by customers: 

� The application for opening the account; 

� The loan application; 

� The constituting documents of the firm or of the legal person; 

� Marriage certificates; 

� Financial reports and declarations made by the client. 

2. Information from the bank’s books: 

� the total amount of takings and payments, their periodicity, the direction of 

treasury main funds; 

� loan categories, volumes, payback deadlines, guarantees, insurances, spreading 

over another period; 

� duty service; 

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� banking risk information; 

� information regarding payments incidents; 

� Internal audit. 

3. Information from external sources that may be obtained from: 

o Trade Register Offices; 

o Romanian National Bank, 

o National Institute of Statistics; 

o County Offices of the National Institute of Statistics; 

o National Committee for Movable Properties; 

o National Committee of Insurances’ Control; 

o Control Committee on the Fund for Private Pensions; 

o Chamber of Commerce, Chamber of Industry, Chamber of Agriculture; 

o Public Notary Offices; 

o other banks and institutions that have relation with customers; 

o insurance companies, Mayor’s offices, external audit; 

o Mass-media. 

The bank-customer relationship has for main target to bring additional value to both 

partners on the basis of the following principles [4]: 

� The mutual relationship must bring growth to both partners; 

� The bank must focus on assisting a reasonable number of clients, the loyal ones 

before the others. This attitude brings a “premium” for the bank and “Valuable 

customer” tag for the client. 

� Value means transparency and continuity in satisfying the basic banking 

necessities for the client; 

� The customer should compensate the bank by a swinging of cooperation 

opportunities; 

� The customer expects cooperation from a healthy, strong bank system that 

should offer a large category of banking services. 

Banks have already structured their activity with the customers by separating it into 

front-office activities and back-office activities. 

The personnel working in front-office is situated in the first line of the bank-customer 

relationship and it must respect some image standards because this merges into the bank’s 

image in most of the cases. 

Young persons are preferred, with good looks, with good IT and technology skills very 

communicative, carefully dressed, who know very well the products and the services offered 

by the bank and the norms and procedures of work. 

The front office persons must add to the qualities mentioned above the development of 

the following skills: 

� the art of active listening; 

� the art of asking the right questions 

� the fast acknowledgement of customers’ needs and finding the most appropriate 

solution to those; 

� the habit to easily negotiate 

� the possibility of thinking on long-term; 

� acting approachable, energetic, efficient; 

� the ability to gain customers’ trust easily. 

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REFERENCES: 

1. Avram, V., Sisteme monetare, Editura Universitaria, Craiova, 2005, p 276 

2. Brãtianu, C., Management şi marketing, Editura Comunicare.ro, Bucureşti, 2006, p 

145 

3. Bucciarelli, M., Tendenze nel management bancario, Editura Sarin, Roma, 1988, p 48 

4. Dãnilã, N, Berea, A. O, Managementul Bancar-Fundamente şi Orientãri, Editura 

Economicã, Bucureşti, 2000, p. 129 

5. Opriţescu, M. (coord.), Managementul Riscurilor şi Performanţelor Bancare, Editura 

Universitaria, Craiova, 2007, p.141 

6. Herghelegiu, C., Managementul relaţiei cu clienţii, Revista Piaţa financiarã Nr. 

9/2007, p 52 

7. Van Greuning H., Brajovic Bratanovic, S., Analiza şi Managementul Riscului 

Bancar- Evaluarea guvernanţei corporatiste şi a riscului financiar, Editura Irecson, 

Bucureşti, 2003, p.16 

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APPLYING THE NET PRESENT VALUE CRITERION 

0BIN 

THE CASE OF MIXED FINANCING 

Prof. Nicolae SICHIGEA, Ph.D 

Assoc. Prof. Dorel BERCEANU, Ph.D 

Ec. Dan Florentin SICHIGEA 

Faculty of Economy and Business Administration 


ABSTRACT 

32BLe 

developpement des entreprises se realise á travers des investition et par conséquent la decision 

d'investicement a un importance différenté dans l'activité manageriale. 

L'oeuvre elaboré est centre sur la presentation d'un critere esentiale, qui repond a l'obiectif de baze de la 

fonction financiare, maximiser la valeur de l'entreprise c'est-à-dire, VAN (valeur actualise nette). 

Dans le méme temp en fonction de la modalité de financement des projets des investices on 

exemplifique le mode d'appliquer de differents methodes derivé de VAN. 

The investment option implies selecting the investment projects according to their 

profitability, comparing their cost to the sum of the net income gained from their exploitation. 

This comparison can be done without the updating, according to the principle of the 

arithmetic sum of the incomes and expenses estimated for the life span of the good, or by 

confronting the net income per year, brought in up until the moment of the option for 

investment, to the expense of the investment. That is why, in taking the investment decision, 

we use option methods without updating and methods with updating. 

The most frequently used updating method is the net present value (NPV), which 

answers to the main objective of the financial function of the enterprise, which is the 

maximizing of the enterprises’ value. 

Economical theory has instituted the law of the descending efficiency of the 

investment opportunities in economy, according to which the marginal efficiency of the 

investment is descending. Meaning, the larger the investment, the weaker the efficiency 

obtained for the last leu invested. That is why the one taking the decisions must know when to 

stop investing, without receiving a clear response from the theory, but only the basic 

characteristics of the analysis. However, the placement of the available sums in the goods and 

services market (corporal investments) is done only if their efficiency is superior to the riskfree 

interest rate in the financial market. 

The net present value is decided for each and every investment project, and the 

criterion does a comparison between the projects only by its size. It only compares an actual 

capital with a future one. 

The net present value is calculated as a subtraction between the present future cashflows 

and their present value and the invested capital. 

The net present value (NPV) is determined according to the following calculus 

relation: 

n FL 

NPV = 

∑ 

i − I 

i = 1 + 

( 1 a) 

i 

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in which: 

I – the value of the investment; 

a – discounted (updating) rate (interest rate of the risk-free asset); 

FLi – net annual cash-flow. 

The annual net cash-flow is determined as follows: 

FLi = PNi + Ai 

or 

FLi = EBEi(1-T) + AixT 

in which: 

PNi - net annual profit; 

Ai - annual depreciation; 

EBEi - gross annual exceeding from exploitation (earnings before interests, taxes, 

depreciation and amortization); 

T - tax on profit quota. 

The graphical representation of the relation of determining the net present vale is the 

following: 

0 1 2 3 … … … ......... n 

-I 

1/(1+a) 2 

1/(1+a) 

1/(1+a) 3 

FL 1 

1/(1+a) n 

FL 2 

Figure 1. Analysis of the investment project at moment 0 

FL 3 

The problem is in choosing the updating rate. So, in order to compare the future 

cash-flows with the expenses of the investments we update the cash-flows at an updating rate 

which, in a certain environment, can be: 

� opportunity cost type; 

� inflation rate; 

� weighted average cost of the capital. 

In the category of the updating rates of the opportunity cost type are included: the 

rate of the risk-free profitability (interest rate for the state bonds, interest rate for the CEC 

deposits or the interest rate at the commercial banks, within the upper limit of deposit 

guarantees), the interest rate for the deposits applied by one of the commercial banks, an 

average of deposit interest rates applied by the commercial banks approves by the Romanian 

National Bank, the average profitability rate in the firm’s sector of activity and the investment 

project’s sector of activity, average profitability rate of the economy. 

These rates of the opportunity cost type became used because of the fact that they are 

easily identifiable, in an objective way. Moreover, most of the time, as we have presented in 

the previous subchapter, the investors’ tendency to compare the hypothetical profitability of 

28 

FL n


ISSN: 1842-4856 

the investment project with the one offered by other investments opportunities offered by the 

market is natural. 

The inflation rate is a minimal guideline which can be considered an updating rate 

because of the fact that every investor wants that the major objective of maximizing his 

wealth start from a minimum, represented by preserving it. And this means that the 

profitability rate, in nominal terms, must be at least equal to the inflation rate, in order to have 

a profitability rate, in real terms, larger or at least equal to zero. 

Using the two categories of rates presented above creates a major inconvenience, 

meaning the fact that, at the practical level, these rates have little or nothing in common with 

the analyzed project. 

Keeping in mind the fact that the financing of the investments is done both from 

equity, and from borrowed ones, it is advised to use as an updating rate of the weighted 

average cost of the invested capital. This is calculated by moderating every financing source 

with the proportion of the respective source of capital in the total of the invested capital and 

the sum of them. 

If NPV > 0, the investment project leads to an increase in the value of the enterprise, 

and so, it is accepted. In case the contrary occurs, the project is rejected. If for the same 

objective there are two versions of project, the one with the higher NPV is chosen. 

The action of comparing future cash-flows and investments can also be done by 

expressing the values to be compared at the purchasing power at the end of the life duration of 

the investment. The comparing criterion will thereby be the net future value (NFV), which is 

nothing else than the capitalization of NPV, for the life-duration of the investment.(n). 

The calculus formula: 

n 

∑ 

i= 

1 

n− 

i 

n 

NFV = FL ⋅ ( 1 + a) 

− I ⋅( 

1 + a) 

i 

meaning: 

NFV = NPV⋅(1+a) n 

Expressed in a different way, NPV is the present value of NFV for the same period the 

economical life of the investment (n): 

NFV 

NPV = n 

( 1 + a) 

In practice, the tendency to use the NPV approach when taking decisions, in the 

detriment of the NFV, although, in essence, neither one is superior to the other, because of the 

fact that: 

• when the investment opportunities are compared, if the future net values is used, we 

must know the number of years for which we are doing the capitalization, and if the 

opportunities have different life spans, difficulties can occur; 

• as long as the opportunity is appreciated by establishing the effect on the value of the 

firm, it seems much more logical to look at the present effect, that at the future one. 

In the determination relation of the net present value, the actualization is done a the 0 

moment (the moment when the investment is done). With enough knowledge about what 

actualization and capitalization mean, we can do an analysis of the project, in any one of its 

points, during the n years of life span of the investment. 

The NPV criterion has a very interesting quality, that of aditivity. This means that the 

net present value of a sum of projects is equal to the sum of the present net values of each and 

every individual project. 

So: NPV (project 1 + project 2 + ... + project n) = 

= NPV (project 1)+ NPV (project 2)+...+ NPV (project n) 

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It is assumed that the n projects do not exclude each other. The value of a firm is thus 

equal to the sum of the net present values of the different investments it manages. This 

property is very interesting, because it simplifies the process of choosing investments. 

When elaborating investment budgets, increasing the value of the firm for the existing 

stock-holders at the time of the drafting of these budgets is equal to sum of the present net 

values of all of the accepted projects. 

This description of the process is a rather simplified one. Both the financial analysts 

and the investors assume that the firms will identify and accept projects whose present net 

value is a positive one, and the exchange rate of the stock on the market reflects those 

assumptions. In conclusion, the stock exchange rate is very "sensitive" to the announcements 

of the firms of getting involved in certain projects, only if these projects are true surprises, 

meaning if they were not already expected to happen. In this respect, we can consider the 

value of a firm as having two components: 

♦ the value of the existing actives, owned by the firm; 

♦ the value of the "growth opportunities ", or of projects with a positive net present 

value. 

The real-estate analysts and the investors analyze firms based upon a series of actives 

which bring in profit, plus a series of growth opportunities which will come into play in the 

future, if and only if the firm can generate projects with a positive net present value within the 

budgeting process of the capital. 

Applying the method in this way takes place only if the projects are entirely financed by 

their own capital. 

If the projects are financed both with personal funds and with borrowed ones, three 

methods can be used (variants of the net present value): 

• adjusted net present value; 

• cash-flow for the stockholders method; 

• average moderated cost of the capital method. 

1. The method of the adjusted net present value (ANPV), according to which the value of 

a mixed financing project, meaning from equity and debt, is greater than the value of a similar 

project financed entirely from equity, with the value of the side effects of the debt. 

The adjusted net present value is determined as a sum of the net present value (NPV) and 

of the tax economy related to the loan (RV), as follows: 

n 

FLCi 

ANPV = NPV + RV = ∑ - I + RV 

i = 1 ( 1 + r ) 

i 

o 

where: 

FLCi - annual cash flows for investments financed from equity; 

ro - cost rate of the equity. 

Consequently, when determining the adjusted net present value the secondary effects 

generated by the loan are also taken into consideration, which are the following: 

- the fiscal economy relative to the debt. A perpetual loan generates an economy of profit 

tax equal to Tx D (where: D – the market value of the loan), a fact demonstrated by 

Modigliani and Miller when they developed the theory of the value of the enterprise; 

- issuance cost linked to the new financial titles, respectively the commissions paid to the 

banks participating in the process of placing these titles o the market, a cost which has as an 

effect the diminishing of the cashed value; 

- bankruptcy risk, often associated with debt, whose present cost diminishes the value of 

the tax economy related with the deductibility of the interest and, implicitly, the value of the 

indebted firm; 

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- subventions or financial aids the firms and receive. The interests related to loans emitted 

by certain local organizations are, in some countries, tax deductible for the investors 

subscribing to them. 

Although every one of these possible effects of the financing by loan can be important, 

the one with the highest impact on the investment project is the effect of the tax economy 

reflected as such and in the presented formula. 

This method is applied especially when the value of the debt is a fix percentage from the 

value of the financing. 

2. The flow-to-equity approach implies to determine the net present value of the 

investment project financed both with equity and with borrowed one, as a subtraction between 

the amount of the cash flow for the stockholders present with the profitability rate claimed by 

the stockholders and financing part done from their capital. Consequently: 

MNPV = ∑ 

n FLEi 

i = 1 ( 1 + r ) 

i 

c 

– (I – D) 

where: 

MNPV - net present project of the investment project financed both with equity and 

with borrowed one; 

FLEi - annual cash flows meant for the stockholders after subtracting the interests and the 

tax on profit; 

rs - profitability rate requested by the stockholders; 

I - value of the investment; 

D - value of the debt. 

The profitability rate requested by the stockholders is determined as follows: 

D 

rc = ro + ⋅ ( 1 −T 

) ⋅ ( ro 

− d ) 

C 

where: 

C - value of the equity; 

d - interest rate of the debt. 

This method considers the effect of the debt both in the case of the flows meant for the 

stock holders by reducing the interests paid and in the case of the updating rate, by taking into 

account the leverage effect of the debt. 

3. The Weighted Average Cost of Capital method, where the net present value is 

determined as follows: 

n 

FLCi 

NPVWACC= ∑ - I i 

i= 

1 ( 1 + WACC) 

where: 

WACC – rate of the weighted average cost of capital, which is determined as follows: 

C D 

WACC = rs 

+ d ⋅( 

1 −T 

) 

C + D C + D 

This method follows to update the cash-flows as if the project were entirely financed with 

equity, with a rate that considers both the financing with equity and borrowed ones. 

Even if the three methods imply the use of specific formulas of determining the net 

present value of the investment projects, the result obtained is the same, if we consider the 

fact that the treasury flows are perpetual. 

Of the three methods, ANPV and NPVWACC are the closest ones. Both assess the project 

based on cash flows in he hypothesis that the debt is zero. ANPV readjusts this value with the 

tax economy related to the deductibility of the interest, and NPVWACC integrates the fiscal 

impact of the debt in the updating rate, respectively the rate of the weighted average cost of 

capital. 

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ANPV applies only if the amount of the debt is known for the entire life span of the 

project, and NPVWACC if the debt rate (the D/C relation) is the same for the entire life span of 

the project. 

The cash flow meant for the stock-holders method is very different from the other two 

methods. It compares the cash flows meant for the stock holders, after the deduction of the 

expenses with the interest rates of the loaned capital with the part of the value of the 

investment project financed by the firm’s stock-holders. This method also applies when the 

debt rate is constant for the entire period of exploiting the project. 

As an example we consider an investment project of 10 million lei, with an exploitation 

period of 5 years. The depreciation is determined according to the linear system, and is of 2 

million lei per year. From the exploitation result annual gross profits (EBE) of 3 million lei, 

and the tax on profit rate is of 16%. The risk-free profitability rate for the treasury certificates 

issued by the state is of 10%, and the cost of equity for projects of the same risk, in the 

hypothesis of zero debt, is of 15%. 

1. The method of the adjusted net present value (ANPV) 

a) the projection of the cash-flows is presented in the following chart: 

Flows No N1 N2 N3 N4 N5 

I - 10 

TxA 0,16x2 = 0,32 0,32 0,32 0,32 0,32 0,32 

EBE(1-T) 3(1-0,16)= 2,52 2,52 2,52 2,52 2,52 2,52 

b) The net present value in the hypothesis of zero debt is (tax economy related to the 

deductibility of the depreciation is present with the interest rate of the risk-free asset, being a 

non-risk component): 

5 0, 

32 5 2, 

52 

NPV = ∑ + ∑ −10=0,32 

x 3,7908 + 2,52 x 3,3522 - 10= 

i = 1( 

1+ 

0, 

10) 

i 

i = 1( 

1+ 

0, 

15) 

i 

= 1,2 + 8,45 – 10 = - 0,35 million lei 

As NPV is smaller than zero, the project must be rejected. Still, the effect of debt on the 

investment project has not been considered. 

c) If the firm gets a loan by issuance of bonds for the amount of 6,06 million lei, with an 

interest of 10% per year, for a period of 5 years and a placement commission of 1%, the 

issuance expenses are of 0,06 million lei. Per year, the net cost of the issuance expenses is 

determined in the following way: 

Expenses No N1 N2 N3 N4 N5 

Issuance costs 0,06 

Amortizing the 0,06/5 = 0,012 0,012 0,012 0,012 0,012 0,012 

issuance costs 

Tax economy 0,16x0,012 0,002 0,002 0,002 0,002 0,002 

= 0,002 

The present tax economy will be: 

5 1 

0,002 x ∑ = 0,002 x 3,7908= 0,008 million lei 

i = 1 ( 1 + 0 1, ) i 

The present value considering the issuance costs is equal to: 

- 0,35 + 0,008 = - 0,342million lei 

d) The tax economy related to the deductibility of the interests will be: 

Elements No N1 N2 N3 N4 N5 

Gross value of the 

loan 

6,06 

Paid interests - 10%x6,06=0,606 0,606 0,606 0,606 0,606 

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Supported interest - (1-0,16)x 

0,606=0,5 

0,5 0,5 0,5 0,5 

Reimbursement of the 

loan 

- - - - - 6,06 

e) The net actual value of the debt is determined according the following formula: 

NPVloan = Gross loan – Actual value of the interest– Actual value of the reimbursements 

Meaning, 

5 1 6, 

06 

NPVloan = 6,06 – 0,5x ∑ - = 6,06 – 0,5x3,7908 – 6,06x 0,6209 = 

i = 1 ( 1 + 0 1, ) 

i ( 1+ 

01, 

) 5 

= 6,06 – 1,90 – 3,76 = 0,4 million lei 

ANPV= - 0,35 - 0,008+ 0,4= 0,042 million lei 

As the adjusted net present value is positive, the project financed also by debt must be 

approved. 

In conclusion, the result obtained by applying the adjusted net present value is completely 

different from the normal calculus of the net present value, which determines the taking of a 

contrary decision regarding the acceptance of the investment project. 

2. The cash-flow for the stock-holders method 

a) Determining the cash-flows intended for the stock-holders: 

Nr. Elements Sum (million lei) 

1. Gross exploitation profit 3 

2. Depreciation 2 

3. Result from exploitation 1 

4. Interests 0,606 

5. Gross result 0,394 

6. Tax on profit 0,063 

7. Net result 0,331 

8. Stock-holders’ cash flow – (SCF) 

b) Determining the profit rate claimed by the stock-holders: 

2,331 

rc = r 

D 

+ ⋅ ( 1 −T 

) ⋅ ( r 

6 

− d ) = 0, 15 + ⋅ ( 1 − 0, 

16) 

⋅ ( 0, 

15 − 0 1, ) =0,21⇒ rc = 21% 

o 

C 

o 

4 

c) actual net value of the investment project financed both from equity and from debt: 

MNPV = ∑ 

n FLEi 

i = 1 ( 1 + r ) 

i 

c 

– (I – D) = 2,331 x ∑ 

5 1 

i = 1 ( 1 + 0, 

21) 

i 

33 

- (10 – 6) = 2,331x 2,9260 – 4 2,82 

mil. lei 

It is shown that for the part of the capital which is meant for financing the investment 

paid by the stockholders, the net present value is very much larger, a fact which encourages to 

take the financing decision in this form. 

3. The Weighted Average Cost of Capital method 

a) The weighted average cost of capital is determined as follows: 

C D 

4 6 

WACC = rc 

+ d ⋅ ( 1 − T ) = 0, 

21 + 0 1, ⋅( 

1 − 0, 

16 ) = 0,084 + 0,050 = 13% 

C + D C + D 

4 + 6 4 + 6 

b) The net present value is determined according to the weighted average cost of capital: 

n 

FLC 

5 

i 

2, 

84 

NPVWACC= ∑ - I = ∑ -10 = 2,84x3,5172 -10 ⇒ NPVWACC = - 0,01 

i 

i= 

1 ( 1 + WACC) 

i = 1 ( 1 + 0, 

13 ) 

i 

million lei 

We can see that the net present value in this case is slightly negative, but the resulted 

value is close in size to the one resulted from applying the adjusted net present value (maybe 

as a result of the rounding we have done while determining the rate of the weighted average 

cost of capital).


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By analyzing the results obtained in stages, by applying these three methods, we conclude 

that the person making the decision goes from a categorical decision of rejecting the 

investment project, to decision of accepting it, reflected in the criteria of adjusted net present 

value and stock holders’ cash-flows method. 

We then ask the question when we must apply one or the other of these three methods. 

If the risk of the project remains constant for the entire life span of the project, 

obviously the capital cost rate will remain constant during this period of time. If the debt rate 

(and proportion) remains constant, then the rate of the weighted average cost of capital will 

remain constant, which makes it easier to apply the method of the weighted average cost of 

capital method and the stockholders’ cash-flows method. 

As a matter of fact, the firm must propose, fro the investment projects, a debt target 

rate, which must be identical with the existent financing structure of the enterprise, so as not 

to modify the risks associated with debt. We thereby recommend the use of the weighted 

average cost of capital method and the stockholders’ cash-flows methods. 

If the amount of the debt is known for the entire life span of the project, then the method 

of the adjusted net present value is easier to apply. But this method is frequently used in the 

following cases: 

- when a valorized interest rate exists; 

- when the firm gets the right to use the machines through leasing; 

- if the sale of the firm is done by LBO method (leveraged buyout, buying the firm from 

a small group of investors by a loan to be reimbursed based on the cash-flows generated by 

the firm’s activity and/or by selling some of the actives), a case in which the degree of debt is 

very high, but the reimbursement plan is known. 

Bibliography 

1. Berceanu, D. The Firm’s Financial Decisions, 2nd edition, Universitaria 

2. Ross, S.A. 

Westerfield, R.W. 

Jaffe, J.F. 

3. Sichigea, N. 

Giurcă, L. 

Publishing House, Craiova, 2006 

Corporate finance, Dunod Publishing House, Paris, 2005 

Corporate finance, Universitaria Publishing House, Craiova, 

2007 

4. Stancu, I. Finances, 3rd Edition, Economical Publishing House, 

Bucharest, 2002 

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CHALLENGES OF THE BANKING SYSTEMS FROM THE CENTRAL 

AND EAST EUROPEAN COUNTRIES, IN THE CONTEXT OF 

EUROPEAN UNION INTEGRATION AND THE ENTRANCE IN THE 

INTERNATIONAL FINANCE CIRCUIT 

Autor: Tanascovici Marinela, preparator Facultatea de Ştiinţe Economice, 


ABSTRACT 

From the moment that the Central and East European countries will reach the convergence criteria, thus they will 

be prepared to be integrated in the European Union, implicitly the European banking market will extend its 

borders, also including their banking societies. 

The East and Central European banks must gradually put into practice the organizational changes, in accordance 

with the apparition and development of the operating possibilities on the European banking market, for every 

market it will be necessary to modify, correspondently, the work procedures, the documents that will have to 

contain specific elements, particular for every banking society and for every type of activity as well as elements 

in common, in communitarian vision, obtains as a consequence to the legislative, normative, procedural and 

institutional harmonization. Another request for the banks in East and Central European countries, in the context 

of participation to the sole European market, is the diversification and development of the offered products and 

services. 

The participation of the banks from the ex-communist countries at the European competition for funds implies, 

except the ones previously mentioned, a harmonization of the banking regulations and the interne legislation, 

especially the fiscal one. 

Once the banks from East and Central European countries will succeed to penetrate on the European market and 

to benefit from their own membership in the Union, they will operate in a competitive space in which an 

important aspect is the one of the competition for funds and placements. 

Obviously, the East European countries do not share the same recent history like the 

Occidental ones do, and, therefore, did not follow the same development or the same capacity 

of adapting to the environment like the banks from the developed countries, and, even so, on 

their turn, they confront themselves with a lot of „challenges” that „historically” far surpasses 

those of West European banks by the simple fact that they have to keep up with the transition 

to the market economy, as well as with the conjuncture development of the beginning of 

XXIst century. 

From the moment that the Central and East European countries will reach the convergence 

criteria, thus they will be prepared to be integrated in the European Union, implicitly the 

European banking market will extend its borders, also including their banking societies. From 

now on the banks will be confronted with supplementary risks, which are actually none other 

than those stipulated in the banking risk theory, and already taken into consideration by the 

bank’s risk committees. The problem is that those risks increase their complexity in 

correspondence with the new development frame of the banking operations. 

From the bank’s management point of view, the problem is reduced to the following 

situation: the respective bank, having the permanent interest to look for new funds placement 

possibilities, following the profit and risk objectives previously set, it has the possibility to 

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work in the frame of the singular European banking market, without the obligation of making 

work units in different EU countries, benefiting of all rights and having all obligations (it is 

only about the obligations supposed by the interbanking relations or the bank-client one) that 

banking societies have towards the countries in which they activate, but submitting the 

regulations and surveillance of their country’s National Bank. This situation involves specific 

dimensions for each kind of activity, as for a commercial bank activity and, respectively, that 

of an investment bank. The first will know new interbanking market values regarding credit 

and the request for credit, and the banking activity of investment will be confronted with the 

supplementary problems of the extending operating market. 

Although one of the main implicit objectives of the unique European market is that to 

attenuate the differences in the economical context between the member countries, so that for 

the inhered modifications, and usually cyclic, in the national economic medium, to be as 

possible, coordinated, to be able to speak of a concordance between the national economic 

factors, that would find a common factor and a correspondent in the European economic 

factors. Unfortunately this will not happen too soon, but instead will be a process in stages, 

which will probably last for some decades. This is because the differences in economical 

development and of law base between the member states were, in many cases, considerable 

from the moment of the unifying debut and these differences will not attenuate too soon. Here 

the example of United States can be mentioned where, even now, after a century of economic 

development and more than two centuries since the unification, there are still some 

differences in the economic potential between some areas, differences that the investors need 

to take in consideration. Certainly, the founding of the European Union is substantially 

different, firstly due to the economic starting level of every country, and yet the difficult 

problem of law harmonization, procedural, normative and institutional will be a lasting 

process because of the effect that they induce an the national level. 

To put it in other words the three main activities which lead to the underlying of the 

placement decision, as follows: the analyzing of the present economic situation, the 

identication and dimensioning of the risks and the elaboration of the foresights, know at the 

bank’s level, a complexity specific to bivalent trait, at least at the economic level, of European 

Union, as follows: 

* there is an economic context of the community which, correspondently, has influential 

factors and personal tendencies; 

* there are national economical contexts of the member states, which, similarly have 

influential factors and specific tendencies; 

This frame of the economic activities deployment, with the passing of time, it will surely 

modify towards the amplification of communitarian context and in the disadvantage of the 

national economic contexts. Even so, it should not be forgotten that for a long time from now 

the national economic contexts will carry weight in the decisional process of the funds 

placements. At the bank’s level this will transpose into the necessity of creating services 

specific for permanent monitoring activities of the evolution of different communitarian 

markets, looked upon as potential markets for funds and in the amplification of economical 

analysis, risk analysis and foresight services to correspond the requirements of the operating 

bank, in the conditions of capitalization and safety, in an economic environment in permanent 

changing. It can be outlined that this situation of permanent changing of the economic 

environment, created though the foundation of the European Union, will be from the 

geographic point of view and/or from the communitarian acquis point of view a permanent 

evolution, and from the economical performances point of view, like any other economic 

environment, will have a cyclic evolution. 

Besides the mentioned organizational changes, which the East and Central European banks 

must gradually put into practice, in accordance with the apparition and development of the 

operating possibilities on the European banking market, for every market it will be necessary 

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ISSN: 1842-4856 

to modify, correspondently, the work procedures, the documents that will have to contain 

specific elements, particular for every banking society and for every type of activity as well as 

elements in common, in communitarian vision, obtains as a consequence to the legislative, 

normative, procedural and institutional harmonization. Another request for the banks in East 

and Central European countries, in the context of participation to the sole European market, is 

the diversification and development of the offered products and services. This a prioritary 

necessity for these banking societies, imposed by the intention of integration in the European 

banking system itself, but, more importantly, of the implicit entrance at the same time with 

the integration in the competition for the funds with the banking societies of the developed 

states, in many cases powerful and with experience. 

Therefore the banks need to extend more the operating frame, being obligated to do, in a 

not so short period of time, the leap towards the self operating status of a bank in the market’s 

economic structures, economic status whose most important treats are the competition and the 

permanent changing of the economic factors that influence the defining indicators of the 

various activities. This supposes the changing of the banking management through the 

legitimating of some modern managerial methods, for these 

ex-communist countries, clearly established, for the UE countries, management that through 

its flexibility must correspond to the requirements of an economic environment in permanent 

evolution. 

The participation of the banks from the ex-communist countries at the European 

competition for funds implies, except the ones previously mentioned, a harmonization of the 

banking regulations and the interne legislation, especially the fiscal one. This is because, for a 

fair and efficient participation, from the competitive point of view of these banks on the 

European market, where they benefit from the same rights and obligations with the European 

banks. An internal fiscal treatment is also necessary, similar to the one that the original 

European banks offer, the necessity of this proposition comes from the desire to not be 

created competitive advantages, respectively disadvantages, but also from the importance of 

the present consolidation of banking societies from these countries. 

Through the participation of ex-communist countries to the European market, they 

implicitly come in contact with banking or commercial societies from other states, links that 

materialize through discounts and payment which implies foreign currency exchange. In this 

context two kinds of risks appear, that need to be foreseen, like: the foreign currency 

exchange risk and the operational risk. As far as the total elimination of foreign currency risk 

is concerned, it is generally accepted the idea that the only possibility is to reduce this type of 

risk, through quantification, management and limitation of effects. These are some of the 

most important points that the banks from ex-communist countries, which will want to 

operate on the European market, will have to strengthen their foreign currency risk strategies. 

Another major risk that the banks need to be aware of is the context of European integration, 

is the operational risk determined especially by the quality of the bank’s assets and by the 

compartments which fulfils its basic functions. The fundamental risks in this field manifest in 

accordance with the fund transfer system and the operational method of payment instruments. 

As far as the risks are concerned the essential problem is reduced to the rise of the 

management quality from these banking systems up to the point where these risks can be 

controlled. Thus, for the banking societies of these countries, the European integration 

requirements can be presented as a necessity of adopting a system of managerial measures 

which will confer the necessary posture for participating in the European market. 

Once the banks from East and Central European countries will succeed to penetrate on the 

European market and to benefit from their own membership in the Union, they will operate in 

a competitive space in which an important aspect is the one of the competition for funds and 

placements. 

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ISSN: 1842-4856 

In many situations, especially those represented by increased placement opportunities 

and/or entail funds from other international markets, comparative with the European market, 

the banking institutions will have to, due to the necessity of obtaining larger profits in the 

conditions of lower risk, to operate on other markets other than the European one. Thus 

comes, as a necessity, the integration of the banking systems in the international financial 

circuit. Most banking managerial problems this step raises are similar to those specific to the 

European integration, with the mention that, naturally, the amplitude of the problem is even 

greater, in accordance with the increased complexity of the operating activity frame. There are 

also some differences that will be analyzed in the following passage. 

In contrast with the founding conditions of the European banking system, in order to 

operate in other non-European areas, the banks must first establish branches in those 

countries, branches that will subdue to the laws and regulations of the country in which they 

operate. The second difference is that of the foreign currency risk which, is larger in 

comparison with its correspondent from the European banking system, because there is no 

unique currency and because there are no commune regulations, and the number of foreign 

currencies is larger. Also, an increasing element of both the foreign currency risk and other 

risks is the increased heterogeneity of the economical conditions from different areas. 

In order to be prepared to take these steps, the banks from these countries, besides 

accomplishing the already mentioned requirements, need a serious financial consolidation, 

and in ashort period of time, which can not be accomplished in another way than by attracting 

foreign capital. It must also be mentioned that, in the same time with the preparation of the 

internal banking system, for the integration in the European and international finanicial 

system, the economy of these countries must become attractive for the foreign capital 

investments. 

In conclusion, the European and international banking integration is for the banks from excommunist 

countries, an existential necessity, and not an obligation. The process of 

economical European integration has two motivating factors which operate in parallel: the 

legitimizing of the communitarian acquis and the economic development of these countries, a 

multi-steps process which, through many other sectors to which it addresses, gives the banks 

the possibility of integration. But it must be mentioned that the bank’s shareholders are those 

who make decisions regarding the dimensions of the business. Even so, it should be said that 

a bank that will not approach an international managerial line, flexible and sensible to the 

permanent changes of the economic environment, will not manage to survive the competition 

in the field. 

The present context of the European integration process cannot be looked at without taking in 

consideration the substation modifications which took place on the political map of the 

continent in 1989. The emancipation of the East and Central European countries from the 

soviet domination, as well as the collapsing of the socialist empire, which, practically 

controlled directly or indirectly the Oriental Europe, lead to the opening of a vast financial 

and products market for all communitarian countries. But in the same appeared many 

problems not only of economical nature, the solution or at least the approach of which were to 

depend on one hand both the direction and the evolution rate of ex-communist countries to the 

status of democratic countries engaged in the competitive environment characteristic for the 

market’s economy, and on the other hand, the orientation that the group of the developed 

countries from the West of the continent was decide regarding the integration of the East and 

Central European countries in the Community. 

Bibliography: 

1) Spulbăr C., Monedă şi Credit,Tipografia Universităţii din Craiova-2002 

2) Spulbăr C., Management bancar,Editura Sitech, Craiova 2003 

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3) Cristea M., Operaţiuni valutare în numerar desfăşurate de băncile comerciale, Revista 

Finanţe-Publice şi Contabilitate, Nr. 5/2004 

4) Gaftoniuc S., Practici bancare internationale, Bucureşti, 1995 

5) Andronache V., Bancă şi Operaţiuni Comerciale:Speţe şi soluţii practice în raporturile 

dintre bancă şi client, Bucureşti, 2006 

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CONCISE ASPECTS REGARDING THE ACCOUNTING TREATMENT 

FOR PROPERTY, PLANT AND EQUIPMENT 

IN ACCORDING WITH IAS 16 

Ecobici Nicolae PHD lect. univ., 

Constantin Brâncuşi University from Targu Jiu 

ABSTRACT: The objective of this paper is to describe the accounting treatment for property, plant and 

equipment, in according with the IAS 16, including: timing of the recognition of assets, determination of 

asset carrying amounts using both the cost model and a reevaluation model, depreciation charges and 

impairment losses to be recognized in relation to these values. 

The accelerating process of capital free market’s development and also the 

accentuating of the globalization phenomenon have imposed the continuous development of 

the Romanian accounting system. The goal was to fully harmonize the Romanian accounting 

with the European Directives and with the International Accounting Standards. 

Thus, the Romanian accounting system evolved and starting with 2006 the Romanian 

organizations and institutions apply accounting regulations fully harmonized with the 

1 

European Directives (The 4th and 7th Directive)F F, regulated by OMF 1752/2005. 

In this paper I want to discuss concisely about the main aspects of IAS 16 (Property, 

plant and equipment). The main issue for accounting of property, plant and equipment is to 

identify the moment of its recognition, the amount value and the relevant depreciation. 

The IAS 16 standard deals with all property, plant and equipment, including those 

which is held as lessee under a finance lease according with IAS 17 (Leases) and property that 

is being constructed or developed for future use as investment property according with IAS 40 

(Investment property). 

It is important to specify that the IAS 16 does not apply to: 

1. property, plant and equipment that is clasified as held for sale according with IFRS 5 

(Noncurrent assets held for sale and discontinued operations); 

2. biological assets related to agricultural activity according with IAS 41 (Agriculture); 

3. mineral rights and mineral reserves, such as oil or natural gas, or similar 

nonregenerative resources; 

4. recognition and evaluating the exploitation assets according with IFRS 6 (Exploitation 

and evaluating the mineral reserves). 

The property, plant and equipment will be recognized as assets only if they fulfil both 

of the following creteria: 

1. it is probable that future economic benefits associated with the items will flow to the 

entity; 

2. the cost of the items can be mesured reliably. 

1 The 4th Directive was adopted in 1978 and it offers the European Union Member States a series of options 

concerning the financial statements formats, the assessment rules and the requirements concerning financial 

communications. 

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An entity prove that one asset satisfy the first criterion by establishing the degree of 

certainty for the future economic benefits based on the available evidence in the initial 

recognition moment. Thus, the entity must undertake even the benefits and the losses relevant 

to the asset. 

The second criterion – reliability measuring cost of the items – is usually satisfied 

because the acquisition cost is known and the costs directly attributable to the purchased 

assets is certainly identified. 

For self constructed asset the cost could be objective determined considering the 

materials, labor and other inputs necessary for its production. 

Safety and environmental assets qualify as property, plant and equipment if they 

enable the entity to increase future economic benefits from related assets in excess of what it 

could derive if they had not been acquired (for example, chemical protection equipment). 

Insignificant items such as molds and dies could be aggregated as single asset items. 

Specialized spares and servicing equipment are accounted for as property, plant and 

equipment. 

Any recognized item of property, plant and equipment must be measured at the initial 

cost, which includes: 

� its acquisition price and duties paid; 

� any costs directly attributable to bringing the asset to the location and condition 

2 

necessary for it to be capable of operating in its intended mannerF F; 

� the initial estimate of the costs of dismantling and removing the asset and restoring the 

site according with IAS 37 (Provisions, contingent liabilities and contingent assets). 

These costs is reflected in accounting through an adequate provision which will grow 

the assets value, afterwards year by year this value will be recovered through the 

depreciation; 

� materials, labor and other inputs for self constructed assets. 

The cost of an item of property, plant and equipment excludes start-up costs and 

general and administrative expenses. The initially losses from use of the asset before reaching 

the planning indicators are recognized as expenses.. 

The cost of an item of property, plant and equipment might include the effects of 

government grants (according with IAS 20 - Accounting for governmentgrants and disclosure 

of government assistance) deducted from cost or set up as deferred income and even the 

effects of self-constructed assets which include materials, labour and other inputs. 

Subsequent to initial recognition, an entity should choose either the cost model or the 

revaluation model as its accounting policy for items of property, plant and equipment and 

should apply that policy to an entire class of property, plant and equipment. 

The cost model presume that the carrying amount of an item of property, plant and 

equipment is its cost less acumulated depreciation and impairment losses. 

The revaluation model presume that the carrying amount of an item of property, plant 

and equipment is its fair value less subsequent accumulated depreciation and impairment 

losses. If an item of property, plant and equipment is revalued then the entire class of 

property, plant and equipment to which that asset belongs should be revalued. Assets should 

be regularly revalued so that carrying value does not differ materially from fair value. 

Increases determined by revaluation should be credited directly to equity under the heading of 

revaluation surplus. A reversal of a previous loss for the same asset is taken to the income 

statement. Decreases should be recognized (debited) in profit or loss. A reversal of a profit 

previously taken to equity can be debited to equity. 

Both of the models presume that assets classified as held for sale are shown at the 

2 Examples of costs directly attributable: the initial cost of delivery and handling, the assembling cost, wages of 

the speciality staff (architects, engeneers and so on). 

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lower of fair value less costs to sell and carrying value. 

Depreciation of an asset is recognized as an expense unless it is included in the 

carrying amount of a self-constructed asset. It should be applied the following principles: 

� the depreciable amount is allocated on a systematic basis over the useful life; 

� the method reflects the pattern of expected consumption; 

� each part of an item of property, plant and equipment with a cost that is significant in 

relation to the local cost of the item should be depreciated separetely at appropriately 

different rates; 

� component parts are trated as separate items if the related assets have different pattern. 

The depreciation method applied to an asset should be reviewed at least at each 

financial year-end and, if there has been a significant change in the expected pattern of 

consumption of the future economic benefits embodied in assets, the method should be 

changed to reflect the changed pattern. Such a change should be accounted for as a change in 

an accounting estimate in accordance with IAS 8 (Accounting policies, changes in accounting 

estimates and errors). 

Depreciation starts when the asset is ready for use and ends when the asset is 

derecognized or classified as held for sale. 

When assets are exchanged and the transaction has commercial substance, items are 

recorded at the fair value of the assets received. In other cases, items are recorded at the 

carrying amount of the assets given up. 

The amount expected to be recovered from the future use or sale of an asset, including 

its residual value on disposals, is referred to as the recoverable amount. The carrying amount 

should be compared with the recoverable amount whenever there is an indication of 

impairment. If the latter is lawer, the difference is recognized as an expense according with 

IAS 36 (Impairment of assets). 

The original costs of acquired fixed assets are usually recognized over time by 

sistematically writing down the asset’s book value on the balance sheet and reporting a 

commensurate expense on the income statement. The systematic expensing of the original 

cost of physical assets over time is called depreciation. The systematic expensing recognition 

of the original cost of natural resources over time is called depletion. The systematic 

recognition of the original cost of intangible assets over time is called amortization expense. 

Esentially, all three of these concepts are the same. The cost of acquiring land is never 

depleted, however, because land does not get used up over time, but if it does it is depreciated. 

Depreciation is a method of expensing the original acquisition cost of physical assets 

over their useful lives. It is neither a means of adjusting the asset to its fair market value nor a 

means to provide funds for the replacement of the asset being depreciated. 

There are several methods of determining depreciation expense for fixed assets on the 

financial statements. In some countries, these depreciation methods include straight-line, sum 

of-the-years’ digits, double-declining balance, and units-of-production (service hours). 

Regardless of the terminology used, the principles that should be applied in IFRS financial 

statements are that: 

� the depreciable amount is allocated on a systematic basis over the useful life; 

� the method used must reflect the pattern of expected consumption. 

The straight-line depreciation method is generally used worldwide to determine IFRS 

depreciation. Both sum-of-the-years’ digits and the double-declining balance methods are 

clasified as accelerated depreciation (or rather, accelerated consumption-pattern methods; 

they are often used for tax purposes and do not comply with IFRS if they do not reflect the 

pattern of the expected consumption of the assets). 

In some countries, management has more flexibility than is permitted by IFRS when 

deciding whether to expense or capitalize certain expenditure which could result in the 

recognition of an asset that does not qualify for recognition under IFRS or the expensing of a 

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transaction that would otherwise qualify as an asset under IFRS. This flexibility will impact 

the balance sheet, income statement, a number of key financial ratios, and the classification of 

cash flows in the statement of cash flows. Consequently, the analyst must understand the 

financial data effects of the capitalization or expensing choices made by management. 

Management must make three choices when deciding how to depreciate assets. They 

must decide about: 

� the method of depreciation that will be used (straight-line, accelerated consumption, or 

depletion in early years); 

� the useful life of the asset, which is the time period over which the depreciation will 

occur; 

� the residual value of the asset. 

In IFRS financial statements, these choices are determined by the application of the 

principles in IAS 16. In some countries, however, management has greater flexibility. These 

choices affect the asset values reported on the balance sheet and the income reported on the 

income statement. They also affect several key financial ratios. The analyst should be aware 

of the effects of these choices. 

The easiest way to understand the impact of using straight-line versus accelerated 

depreciation is as follows: an accelerated consumption method will increase the depreciation 

expense in the early years of an asset’s useful life relative to what it would be if the straightline 

method were used. These lowers reported income and also causes the book value of the 

long term assets reported on the balance sheet to decline more quickly relative to what would 

be reported under the straight-line method. As a result, the shareholders’ equity will be lower 

in the early years of an assets’s life if accelerated depreciation is used compared with what it 

would be if the straight-line method is used. Furthermore, the percentage impact falls more 

heavily on the smaller income value than on the larger asset and shareholders’ equity values. 

Many of the key financial ratios that are based on income, asset values, or equity values will 

also be affected by the choice of depreciation method. 

No matter which depreciation method is chosen, however, the total accumulated 

depreciation will be the same over the entire useful life of an asset. Thus, the effects for the 

early year/years of an asset’s life tend to reverse over time. However, these reversals apply to 

the depreciation effects associated with an individual asset. If a company’s asset base is 

growing, the depreciation applicable to the most recently acquired assets tends to dominate 

the overall depreciation expense of the entity. Only if an entity is in decline and its capital 

expenditures are low will the reversal effects be noticeable in the aggregate. 

The choice of the useful life of an asset affects financial statement values and key 

financial ratios. All other factors being held constant, the shorter the useful life of an asset, the 

larger its depreciation will be over its depreciation life. This will raise the depreciation 

expense, lower reported income, reduce asset values, and reduce shareholders’ equity relative 

to what they would be if a longer useful life were chosen. Reported cash flow, however, will 

not be affected, because depreciation is not a cash expense. Key financial ratios that contain 

income, asset values, and shareholders’ equity will, however, be affected. A shorter useful 

lufe tends to lower profit margins and return on equity, while at the same time raising asset 

turnover and debt-to-equity ratios. 

Choosing a large residual value has the opposite effect of choosing a short useful life. 

All other factors being constant, a high residual value will lower the depreciation expense, 

raise to what they would be if a lower residual value had been chosen. Cash flow, however, is 

unaffected because depreciation is a noncash expense. As a result of a high residual value, an 

entity’s profit margin and return on equity increase, whereas its asset turnover and debt-toequity 

ratios decrease. 

When depreciation is based on the historical cost of assets, it presents a problem 

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during periods of inflation. When the prices of capital goods increase over time, the 

depreciation accumulated over the life of such assets will fall short of the amount needed to 

replace them when they wear out. So the accumulated depreciation will be less than what is 

required to physically restore the entity to its original asset position. In other words, the real 

cost of the equipment is higher, and the reported financial statements are disorted. So during 

periods of inflation, depreciatiating physical assets on the basis of historical cost, in 

accordance with the financial capital maintenance theory of income, tends to understate the 

true depreciation expense. As such, it overstates the true earnings of an entity from the point 

of view of the physical capital maintenance (replacement cost) theory of income. 

References: 

1. GÎRBINĂ, M. M., BUNEA, ŞT. – Sinteze, studii de caz şi teste grilă privind 

aplicarea IAS (revised) [Syntheses, Case Studies and Grid Tests Concerning the Application 

of IAS] – IFRS, 2nd edition, volume 1, CECCAR Publishing House, Bucharest, 2006 

2. GÎRBINĂ, M. M., BUNEA, ŞT. – Sinteze, studii de caz şi teste grilă privind aplicarea 

IAS (revised) [Syntheses, Case Studies and Grid Tests Concerning the Application of 

IAS] – IFRS, 2nd edition, volume 2, CECCAR Publishing House, Bucharest, 2006 

3. Hennie van Greuning – International Financial Reporting Standards: A practical 

guide, Irecson Publishing, Bucharest, 2005 

4. FELEAGĂ, N., MALCIU, L. – Politici şi opţiuni contabile (Fair Accounting versus 

Bad Accounting), Economic Publishing House, Bucharest, 2002 

5. Accounting of Commercial Companies – C.H. Beck Publishing House, Bucharest, 

2006 

6. International Financial Reporting Standard (IFRS) including International 

Accounting Standards (IAS) and their Interpretations on 1 January 2006, CECCAR 

Publishing House, Bucharest, 2006 

7. The Ministry of Public Finance – Practical guide for applying the International 

Accounting Standards, Economic Publishing, Bucharest, 2001 

8. OMF 1752/2005 for approval of Accounting Regulations in accordance with the 

European Directives, published in the Official Gazette 1080 of 30.11.2005. 

9. The 4th Directive of EEC 78/660/EEC of 25.07.1978 concerning the annual 

accounts of certain types of commercial companies, published in the Official Journal of EU 

no. L 222 of 14.08.1978, with its subsequent amendments and completions. 

10. The 7th Directive of the Council 82/349/EEC of 13.06.1983 concerning the 

consolidated accounts, published in the Official Journal of EU no. L 193 of 18.07.1983. 

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CONCISE ASPECTS REGARDING THE ACCOUNTING TREATMENT 

FOR INTANGIBLE ASSETS IN ACCORDING WITH IAS 38 

Ecobici Nicolae PHD lect. univ. 

Constantin Brâncuşi University from Targu Jiu 

ABSTRACT: The objective of this paper is to describe the accounting treatment for intangible assets, in 

according with the IAS 38, including: definition, recognition, determination of the carrying amount, 

determination and the treatment of impairment losses and finally the disclosure requirements. 

The accelerating process of capital free market’s development and also the 

accentuating of the globalization phenomenon have imposed the continuous development of 

the Romanian accounting system. The goal was to fully harmonize the Romanian accounting 

with the European Directives and with the International Accounting Standards. 

Thus, the Romanian accounting system evolved and starting with 2006 the Romanian 

organizations and institutions apply accounting regulations fully harmonized with the 

3 

European Directives (The 4th and 7th Directive)F F, regulated by OMF 1752/2005. 

In this paper I want to discuss concisely about the main aspects of IAS 38 (Intangible 

assets). 

The IAS 38 standard deals with all intangible assets that are not specifically dealt with 

in another IAS such as brand names, computer software, licenses, franchises, and intangibles 

under development. 

An intangible asset is an identifiable nonmonetary asset which: 

� is without physical substance; 

� is separable; 

� arises from contractual or other legal rigths, regardless of wether those rights are 

transferable or separable from the entity or other rights and obligations; 

� is capable of being separated from the entity and sold, transferred, licensed, rented 

or exchanged – either individually or together with a related contract, asset, or 

liability; 

� is clearly distinguishable and controlled separately from an entity’s goodwill. 

An intangible asset is recognized as an asset in accordance with IAS 38 if both of 

these principles are satisfied: 

� it is probable that the future economic benefits attributable to the asset flow to the 

3 The 4th Directive was adopted in 1978 and it offers the European Union Member States a series of options 

concerning the financial statements formats, the assessment rules and the requirements concerning financial 

communications. 

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entity; 

� the cost of the asset can be measured reliably. 

The second criterion – reliability measuring cost of the items – is usually satisfied 

because the acquisition cost is known and the costs directly attributable to the purchased 

assets is certainly identified. 

All other expenses related to the following categories are expensed. They include: 

� internally generated brands, mastheads, publishing titles, customer lists, and so on; 

� start-up costs; 

� training costs; 

� advertising and promotion; 

� relocation and reorganization expenses; 

� redundancy and other termination costs. 

In the case of a business combination, expenditure on an intangible item that does not 

meet both the definition and recognition criteria for an intangible asset should form part of the 

amount attributed to goodwill. 

On initial recognition, an intangible asset is measured at cost, whether it is acquired 

externally or generated internally. Subsequent to initial recognition, an entity should choose 

either the cost model or the revaluation model as its accountig policy for intangible assets and 

should apply that policy to an entire class of intangible assets. 

The cost model presume that the carrying amount of an intangible asset is its cost less 

acumulated depreciation and impairment losses. 

The revaluation model presume that the carrying amount of an intangible asset is its 

fair value less subsequent accumulated depreciation and impairment losses. If an item of 

intangible asset is revalued then the entire class of intangible asset to which that asset belongs 

should be revalued. Assets should be regularly revalued so that carrying value does not differ 

materially from fair value. Increases determined by revaluation should be credited directly to 

equity under the heading of revaluation surplus. A reversal of a previous loss for the same 

asset is taken to the income statement. Decreases should be recognized (debited) in profit or 

loss. A reversal of a profit previously taken to equity can be debited to equity. 

Both of the models presume that assets classified as held for sale are shown at the 

lower of fair value less costs to sell and carrying value. 

For any internal project to create an intangible asset, the research phase and 

development phase should be distinguished from one another. Research expenditure is treated 

as an expense. Development expenditure is recognized as an intangible asset if all of the 

following can be demonstrated: 

� the tehnical feasibillity of completing the intangible asset so that it will be 

available for use or sale; 

� the availability of adequate tehnical, and other resources to complete the 

development and to use or sell de intangible asset; 

� the intention to complete the intangible asset and use or sell it; 

� the ability to use or sell the intangible asset; 

� how the intangible asset will generate probable future economic benefits; 

� the ability to measure the expenditure. 

An entity should assess wether the useful life of an intangible asset is finite or infinite 

and, if finite, the length of its life, or number of production or similar units constituting its 

useful life. Amortization and impairment principles apply as follows: 

� an intangible asset with finite useful life is amortized on a systematic basis over 

the best estimate of its useful life; 

� an intangible asset with an infinite useful life should be tested for impairment 

annualy, but not amortized. 

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To assess wether an intangible asset might be impaired, an entity should apply IAS 36 

(Impairment of assets). Also, this standard requires an entity to estimate, at least annually, the 

recoverable amount of an intangible asset that is not yet available for use. 

Each class of intangible assets should distinguish between internally generated and 

other intangibles. 

Accounting policies should specify measurement bases, amortization methods and 

useful lives or amortization rates. 

Income statement and notes should disclose the amortization charge for each class of 

asset indicating the line item in which it is included, and the total amount of research and 

development costs recognized as an expense. 

Balance sheet and notes should disclose the following: 

� gross carrying amount named as book value less acumulated depreciation for each 

class of asset at the beginning and the end of the period; 

� detailed internized reconciliation of movements in the carrying amount during the 

period comparatives are not required; 

� if an intangible asset is amortized over more than 20 years, the evidence that rebuts 

the presumption that the useful life will not exceed 20 years; 

� carrying amount of an intangibles pledged as security; 

� carrying amount of intangibles whose title is restricted; 

� capital commitments for the acquisition of intangibles; 

� a description, the carrying amount, and remaining amortization period of any 

intangible that is material to the financial statements of the entity as a whole; 

� for intangible assets required by way of a government grant and initially 

recognized at fair value: the fair value initially recognized for these assets, their 

carrying amount, and whether they are measured at the benchmark or allowed 

alternative treatment. 

Additional disclosures required for revalued amounts are as follows: 

� effective date of revaluation; 

� carrying amount of each class of intangibles had it been carried in the financial 

statements on the historical cost basis; 

� amount as well as a detalied reconciliation of the revaluation surplus; 

� any restrictions on the distribution of the revaluation surplus. 

The IAS 38 determines that the intangible assets reported on a balance sheet are only 

those intangibles that have been purchased or manufactered, in limited instances. However, 

companies have intangible assets that are not recorded on their balance sheets; these 

intangible assets include management skill, valuable trademarks and name recognition, a good 

reputation, proprietary products, and so forth. Such assets are valuable and would fetch their 

worth if a company were to be sold. 

Analysts should try to assess the value of such assets based on a company’s ability to 

earn economic profits or rents from them, even though it is difficult to do so. 

Financial analysts have traditionally viewed the values assigned to intangible assets 

with suspicion. Consequently, in adjusting financial statements they often exclude the book 

value assigned to intangibles, reducing net equity an equal amount and increasing pretax 

income by the amortization expense associated with the intangibles. 

This arbitrary assignment of zero value to intangibles might also be inadvisable. The 

analyst should decide if there is any extra earnings power attributable to goodwill, or any 

other intangible asset. If there is, it is a valuable asset. 

An issue to be considered when comparing the returns on equity or assets of various 

companies is the degree of recognized intangible assets. An entity that has acquired many of 

its intangible assets in mergers and acquisitions will tipically have a significant higher amount 

of such assets in its balance sheet – and hence lower returns on equity and assets – than an 

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equivalent entity that has developed most of its intangible assets internally. 

References: 

1. GÎRBINĂ, M. M., BUNEA, ŞT. – Sinteze, studii de caz şi teste grilă privind 

aplicarea IAS (revised) [Syntheses, Case Studies and Grid Tests Concerning the Application 

of IAS] – IFRS, 2nd edition, volume 1, CECCAR Publishing House, Bucharest, 2006 

2. GÎRBINĂ, M. M., BUNEA, ŞT. – Sinteze, studii de caz şi teste grilă privind aplicarea 

IAS (revised) [Syntheses, Case Studies and Grid Tests Concerning the Application of 

IAS] – IFRS, 2nd edition, volume 2, CECCAR Publishing House, Bucharest, 2006 

3. Hennie van Greuning – International Financial Reporting Standards: A practical 

guide, Irecson Publishing, Bucharest, 2005 

4. FELEAGĂ, N., MALCIU, L. – Politici şi opţiuni contabile (Fair Accounting versus 

Bad Accounting), Economic Publishing House, Bucharest, 2002 

5. Accounting of Commercial Companies – C.H. Beck Publishing House, Bucharest, 

2006 

6. International Financial Reporting Standard (IFRS) including International 

Accounting Standards (IAS) and their Interpretations on 1 January 2006, CECCAR 

Publishing House, Bucharest, 2006 

7. The Ministry of Public Finance – Practical guide for applying the International 

Accounting Standards, Economic Publishing, Bucharest, 2001 

8. OMF 1752/2005 for approval of Accounting Regulations in accordance with the 

European Directives, published in the Official Gazette 1080 of 30.11.2005. 

9. The 4th Directive of EEC 78/660/EEC of 25.07.1978 concerning the annual 

accounts of certain types of commercial companies, published in the Official Journal of EU 

no. L 222 of 14.08.1978, with its subsequent amendments and completions. 

10. The 7th Directive of the Council 82/349/EEC of 13.06.1983 concerning the 

consolidated accounts, published in the Official Journal of EU no. L 193 of 18.07.1983. 

48


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CONSIDERATIONS REGARDING TAKEOVER BIDS IN 

EUROPEAN UNION COMPANIES 

MONEA ALIN, Lecturer, University of Petrosani 

ABSTRACT: This paper presents some aspects regarding measures coordinating the laws, regulations, 

administrative provisions, codes of practice and other arrangements of the Member States, including 

arrangements established by organisations officially authorised to regulate the markets, relating to takeover bids 

for the securities of companies governed by the laws of Member States, where all or some of those securities are 

admitted to trading on a regulated market within the meaning of Directive 93/22/EEC (on investment services in 

the securities field) in one or more Member States. 

‘Takeover bid’ or ‘bid’ shall mean a public offer (other than by the offeree company itself) made to the 

holders of the securities of a company to acquire all or some of those securities, whether mandatory or voluntary, 

which follows or has as its objective the acquisition of control of the offeree company in accordance with 

national law. 

General principles of takeover bids 

Member of European Union States should take the necessary steps to protect the 

holders of securities, in particular those with minority holdings, when control of their 

companies has been acquired. The Member States should ensure such protection by obliging 

the person who has acquired control of a company to make an offer to all the holders of that 

company’s securities for all of their holdings at an equitable price. Member States should be 

free to establish further instruments for the protection of the interests of the holders of 

securities, such as the obligation to make a partial bid where the offeror does not acquire 

control of the company or the obligation to announce a bid at the same time as control of the 

company is acquired. 

The obligation to launch a bid should not apply in the case of the acquisition of 

securities which do not carry the right to vote at ordinary general meetings of shareholders. 

Member States should, however, be able to provide that the obligation to make a bid to all the 

holders of securities relates not only to securities carrying voting rights but also to securities 

which carry voting rights only in specific circumstances or which do not carry voting rights. 

To reduce the scope for insider dealing, an offeror should be required to announce 

his/her decision to launch a bid as soon as possible and to inform the supervisory authority of 

the bid. 

The holders of securities should be properly informed of the terms of a bid by means 

of an offer document. Appropriate information should also be given to the representatives of 

the company’s employees or, failing that, to the employees directly. 

The time allowed for the acceptance of a bid should be regulated. 

To be able to perform their functions satisfactorily, supervisory authorities should at 

all times be able to require the parties to a bid to provide information concerning themselves 

and should cooperate and supply information in an efficient and effective manner, without 

delay, to other authorities supervising capital markets. In order to prevent operations which 

could frustrate a bid, the powers of the board of an offeree company to engage in operations 

of an exceptional nature should be limited, without unduly hindering the offeree company in 

carrying on its normal business activities. 

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The board of an offeree company should be required to make public a document 

setting out its opinion of the bid and the reasons on which that opinion is based, including its 

views on the effects of implementation on all the company’s interests, and specifically on 

employment. 

In order to reinforce the effectiveness of existing provisions concerning the freedom to 

deal in the securities of companies covered by 25 th Directive and the freedom to exercise 

voting rights, it is essential that the defensive structures and mechanisms envisaged by such 

companies be transparent and that they be regularly presented in reports to general meetings 

of shareholders. 

Member States should take the necessary measures to afford any offeror the possibility 

of acquiring majority interests in other companies and of fully exercising control of them. To 

that end, restrictions on the transfer of securities, restrictions on voting rights, extraordinary 

appointment rights and multiple voting rights should be removed or suspended during the 

time allowed for the acceptance of a bid and when the general meeting of shareholders 

decides on defensive measures. Where the holders of securities have suffered losses as a result 

of the removal of rights, equitable compensation should be provided for in accordance with 

the technical arrangements laid down by Member States. 

All special rights held by Member States in companies should be viewed in the 

framework of the free movement of capital and the relevant provisions . Special rights held by 

Member States in companies which are provided for in private or public national law should 

be exempted from the ‘breakthrough’ rule if they are compatible with the Member States’ 

law. 

Taking into account existing differences in Member States’ company law mechanisms 

and structures, Member States should be allowed not to require companies established within 

their territories to apply the provisions of this Directive limiting the powers of the board of an 

offeree company during the time allowed for the acceptance of a bid and those rendering 

ineffective barriers, provided for in the articles of association or in specific agreements. In 

that event Member States should at least allow companies established within their territories 

to make the choice, which must be reversible, to apply those provisions. Without prejudice to 

international agreements to which the European Community is a party, Member States should 

be allowed not to require companies which apply those provisions in accordance with the 

optional arrangements to apply them when they become the subject of offers launched by 

companies which do not apply the same provisions, as a consequence of the use of those 

optional arrangements. 

Member States should lay down rules to cover the possibility of a bid’s lapsing, the 

offeror’s right to revise his/her bid, the possibility of competing bids for a company’s 

securities, the disclosure of the result of a bid, the irrevocability of a bid and the conditions 

permitted. 

For the purpose of implementing of 25 th Directive, Romania as a Member State will 

ensure that the following principles are complied with: 

-all holders of the securities of an offeree company of the same class must be afforded 

equivalent treatment; moreover, if a person acquires control of a company, the other holders 

of securities must be protected; 

- the holders of the securities of an offeree company must have sufficient time and 

information to enable them to reach a properly informed decision on the bid; where it advises 

the holders of securities, the board of the offeree company must give its views on the effects 

of implementation of the bid on employment, conditions of employment and the locations of 

the company’s places of business; 

- the board of an offeree company must act in the interests of the company as a whole 

and must not deny the holders of securities the opportunity to decide on the merits of the bid;


ISSN: 1842-4856 

- false markets must not be created in the securities of the offeree company, of the 

offeror company or of any other company concerned by the bid in such a way that the rise or 

fall of the prices of the securities becomes artificial and the normal functioning of the markets 

is distorted; 

- an offeror must announce a bid only after ensuring that he/she can fulfil in full any 

cash consideration, if such is offered, and after taking all reasonable measures to secure the 

implementation of any other type of consideration; 

- an offeree company must not be hindered in the conduct of its affairs for longer than 

is reasonable by a bid for its securities. 

Protection of minority shareholders, the mandatory bid and the equitable price 

Where a natural or legal person, as a result of his/her own acquisition or the 

acquisition by persons acting in concert with him/her, holds securities of a company which, 

added to any existing holdings of those securities of his/hers and the holdings of those 

securities of persons acting in concert with him/her, directly or indirectly give him/her a 

specified percentage of voting rights in that company, giving him/her control of that company, 

Member States shall ensure that such a person is required to make a bid as a means of 

protecting the minority shareholders of that company. Such a bid shall be addressed at the 

earliest opportunity to all the holders of those securities for all their holdings at the equitable 

price. 

Where control has been acquired following a voluntary bid made in accordance with 

law to all the holders of securities for all their holdings, the obligation laid down to launch a 

bid shall no longer apply. 

The percentage of voting rights which confers control for the purposes related above 

and the method of its calculation shall be determined by the rules of the Member State in 

which the company has its registered office. 

The highest price paid for the same securities by the offeror, or by persons acting in 

concert with him/her, over a period, to be determined by Member States, of not less than six 

months and not more than 12 before the bid shall be regarded as the equitable price. If, after 

the bid has been made public and before the offer closes for acceptance, the offeror or any 

person acting in concert with him/her purchases securities at a price higher than the offer 

price, the offeror shall increase his/her offer so that it is not less than the highest price paid for 

the securities so acquired. 

By way of consideration the offeror may offer securities, cash or a combination of 

both. However, where the consideration offered by the offeror does not consist of liquid 

securities admitted to trading on a regulated market, it shall include a cash alternative. 

In any event, the offeror shall offer a cash consideration at least as an alternative 

where he/she or persons acting in concert with him/her, over a period beginning at the same 

time as the period determined by the Member State and ending when the offer closes for 

acceptance, has purchased for cash securities carrying 5 % or more of the voting rights in the 

offeree company. 

Member States may provide that a cash consideration must be offered, at least as an 

alternative, in all cases. 

In addition to the protection, Member States may provide for further instruments 

intended to protect the interests of the holders of securities in so far as those instruments do 

not hinder the normal course of a bid.


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Obligations of the board of the offeree company 

During the period referred to in the second subparagraph, the board of the offeree 

company shall obtain the prior authorization of the general meeting of shareholders given for 

this purpose before taking any action, other than seeking alternative bids, which may result in 

the frustration of the bid and in particular before issuing any shares which may result in a 

lasting impediment to the offeror’s acquiring control of the offeree company. 

Such authorisation shall be mandatory at least from the time the board of the offeree 

company receives the information concerning the bid and until the result of the bid is made 

public or the bid lapses. Member States may require that such authorisation be obtained at an 

earlier stage, for example as soon as the board of the offeree company becomes aware that the 

bid is imminent. 

For the purpose of obtaining the prior authorisation, approval or confirmation of the 

holders of securities, Member States may adopt rules allowing a general meeting of 

shareholders to be called at short notice, provided that the meeting does not take place within 

two weeks of notification’s being given. 

The board of the offeree company shall draw up and make public a document setting 

out its opinion of the bid and the reasons on which it is based, including its views on the 

effects of implementation of the bid on all the company’s interests and specifically 

employment, and on the offeror’s strategic plans for the offeree company and their likely 

repercussions on employment and the locations of the company’s places of business as set out 

in the offer document. The board of the offeree company shall at the same time communicate 

that opinion to the representatives of its employees or, where there are no such 

representatives, to the employees themselves. Where the board of the offeree company 

receives in good time a separate opinion from the representatives of its employees on the 

effects of the bid on employment, that opinion shall be appended to the document. 

Where a company has a two-tier board structure ‘board’ shall mean both the 

management board and the supervisory board. 

Breakthrough 

Without prejudice to other rights and obligations provided for in Community law for 

the companies , Member States shall ensure that the provisions apply when a bid has been 

made public. 

Any restrictions on the transfer of securities provided for in the articles of association 

of the offeree company shall not apply vis-a-vis the offeror during the time allowed for 

acceptance of the bid. 

Restrictions on voting rights provided for in the articles of association of the offeree 

company shall not have effect at the general meeting of shareholders which decides on any 

defensive measures. 

Multiple-vote securities shall carry only one vote each at the general meeting of 

shareholders which decides on any defensive measures. 

Where, following a bid, the offeror holds 75 % or more of the capital carrying voting 

rights, no restrictions on the transfer of securities or on voting rights or any extraordinary 

rights of shareholders concerning the appointment or removal of board members provided for 

in the articles of association of the offeree company shall apply; multiple-vote securities shall 

carry only one vote each at the first general meeting of shareholders following closure of the 

bid, called by the offeror in order to amend the articles of association or to remove or appoint 

board members.


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To that end, the offeror shall have the right to convene a general meeting of 

shareholders at short notice, provided that the meeting does not take place within two weeks 

of notification. 

Where rights are removed, equitable compensation shall be provided for any loss 

suffered by the holders of those rights. The terms for determining such compensation and the 

arrangements for its payment shall be set by Member States. 

Optional arrangements 

The decision of the company shall be taken by the general meeting of shareholders, in 

accordance with the law of the Member State in which the company has its registered office 

in accordance with the rules applicable to amendment of the articles of association. 

The decision shall be communicated to the supervisory authority of the Member State 

in which the company has its registered office and to all the supervisory authorities of 

Member States in which its securities are admitted to trading on regulated markets or where 

such admission has been requested. 

Member States shall ensure that the provisions applicable to the respective companies 

are disclosed without delay. 

Member States shall provide that the time allowed for the acceptance of a bid may not 

be less than two weeks nor more than 10 weeks from the date of publication of the offer 

document. 

Provided that the general principle laid down in 25 th Directive is respected, Member 

States may provide that the period of 10 weeks may be extended on condition that the offeror 

gives at least two weeks’ notice of his/her intention of closing the bid. 

Member States may provide for rules changing the period referred above in specific 

cases. A Member State may authorise a supervisory authority to grant a derogation from the 

period referred above in order to allow the offeree company to call a general meeting of 

shareholders to consider the bid. 

The right of squeeze-out 

Member States shall ensure that, following a bid made to all the holders of the offeree 

company’s securities for all of their securities. 

Member States shall ensure that an offeror is able to require all the holders of the 

remaining securities to sell him/her those securities at a fair price. Member States shall 

introduce that right in one of the following situations: 

- where the offeror holds securities representing not less than 90 % of the capital 

carrying voting rights and 90 % of the voting rights in the offeree company, 

- where, following acceptance of the bid, he/she has acquired or has firmly contracted 

to acquire securities representing not less than 90 % of the offeree company’s capital carrying 

voting rights and 90 % of the voting rights comprised in the bid. 

In the case referred first, Member States may set a higher threshold that may not, 

however, be higher than 95 % of the capital carrying voting rights and 95 % of the voting 

rights. 

Member States shall ensure that rules are in force that make it possible to calculate 

when the threshold is reached. 

Where the offeree company has issued more than one class of securities, Member 

States may provide that the right of squeezeout can be exercised only in the class in which the 

threshold.


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If the offeror wishes to exercise the right of squeeze-out he/she shall do so within three 

months of the end of the time allowed for acceptance of the bid. 

Member States shall ensure that a fair price is guaranteed. That price shall take the 

same form as the consideration offered in the bid or shall be in cash. Member States may 

provide that cash shall be offered at least as an alternative. 

Following a voluntary bid, in both of the cases referred above, the consideration 

offered in the bid shall be presumed to be fair where, through acceptance of the bid, the 

offeror has acquired securities representing not less than 90 % of the capital carrying voting 

rights comprised in the bid. 

Following a mandatory bid, the consideration offered in the bid shall be presumed to 

be fair. 

Conclusions 

Romania as Member State must ensure that all takeover bids regulations applicable are 

according to the European Union treaty. 

There are some delays of law enforcements in Romania in comparison with European 

Union Member State but trough the content of recent law of company makes major steps in 

this way. 

Romania has no take over bids law before European Union adhering and beginning 

01.01.2007 we must apply European Union law regulation. 

References 

1. Bradgate R. – Commercial Law, Oxford University Press, 2002 

2. Hefferman Sh. – Modern Banking, John Wiley& Sons Ltd, Londra, 2005 

3. *** - Directive 93/22/EEC on investment services in the securities field 

4. *** - Directive 2004/25/EC on takeover bid


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33BCRITERIA 

OF RECOGNITION OF FINANCIAL 

1BREPORTS’ 

STRUCTURES 

Ligia Antonescu - PhD trainee 


Mihai Antonescu – PhD 

University Spiru Haret Craiova 

ABSTRACT: In financial reports there are presented the elements which comply with the criteria of 

recognition, their non-recognition being impossible to correct neither by the presentation of used accounting 

policies, nor by notes of supplementary information. To IASs and Romanian accounting settlements, recognition 

is defined as the process of incorporation within financial reports of an element which complies with the 

established criteria of recognition, a process which implies the description in words of the element in question 

and the association of a certain sum, respectively the inclusion of the sum in the total balance. 

General criteria of recognition of a financial structure, from the British point of view, are: the 

framework of the financial within the definitions of the elements of financial reports, the existence of sufficient 

proofs referring to the modification of assets, the objective measurement and expression of elements of financial 

reports, and IASC presents only two criteria of recognition: an element that must be recognized if it is likely that 

any future associated economic benefit enter of leave the enterprise and the element has a cost of value which 

can be evaluated in a credible way. 

Since the objective of financial reports is circumscribed to furnishing information on the financial position, 

on the performances and on the changes of the financial position of an enterprise, the financial structures 

elaborated and presented in this set of synthesis documents must be associated with these objectives. 

The definition and characterization of structures component of financial reports are not 

sufficient in order to establish and present the balance and the profit and loss account. 

That is why “for the establishment and presentation, the elements (structures) must 

satisfy a concept of recognition”.F 

4 

In other words, when an enterprise does a transaction or when within its framework 

takes place a relevant event, the effect of the transaction or of the event on the elements of 

financial reports will have to be recognized (ascertained) if certain criteria are observed. 

In this context, we can define the recognition as being the process of formal 

incorporation of an article in financial reports, by its description and by the integration of its 

value in the total of financial reports. 

With IAS and Romanian accounting settlements, recognition is “the process of 

incorporation within a balance or in the profit and loss account of an element that complies 

5 

with the established criteria of recognition”F F, a process that “involves the description in words 

of the element in question and the association of a certain sum, as well as the inclusion of the 

6 

sum in the total balance or in the profit and loss account”.F 

4 

Paşca N., Situaţii financiare ale unităţilor economice din România, Editura Presa Universitară Clujeană, Cluj 

Napoca, 2002. 

5 

***, Reglementări contabile pentru agenţi economici emise de Ministerul Finaţelor Publice, Editura 

Economică, Bucureşti, 2003. 

6 

***, Standardele internaţionale de Contabilitate, Editura Economică, Bucureşti, 2002.


ISSN: 1842-4856 

There is mentioned that only in the balance and in the profit and loss account must be 

presented the elements that comply with the criteria of recognition , since the non-recognition 

of these elements cannot be corrected neither by the presentation of used accounting policies, 

nor by notes or supplementary information. 

For the recognition of a financial structure it is necessary the cumulative observance, 

such as: 

• the financial structure is frameworked within the definitions of the elements of 

financial reports; 

• there is sufficient proof that there has been a change of assets or debts or that a 

positive flow or negative flow of benefits will occur; 

• the element can be measured and expressed in value with sufficient objectivity. 

These criteria are presented in the latest conceptual framework that is the one issued by 

British normalizers. 

IASC, within the formulated conceptual framework, formulates two criteria of 

recognition, so that an element must be recognized in financial reports if it is likely that any 

future economic benefit enter or leave the enterprise and the element has a cost or value that 

can be evaluated in a credible way. 

The same criteria of recognition of elements of financial reports are found also in 

national economic norms. 

FASB enunciates in the Statement of Financial Accounting Concepts no 5 the 

fundamental criteria that lie at the basis of recognition and presentation of the components of 

financial reports, such as follows: 

• “the definition-the element corresponds to the definition of an element that must 

be present in financial reports; 

• The measurable character-the element presents an adequate measurable character 

founded on a sufficiently reliable basis; 

• The relevance-to furnish or not this fundamental informational element has an 

incidence on the users’ decisions; 

• Reliability- the used information is reliable, verifiable and objective.F 

In formulating the criteria of recognition, American normalizers have taken into 

account the restriction cost-advantages and the criteria of relative importance. 

Coming back to IASC, we notice that this defines its own criteria of recognition, 

criteria which take into account the probability of appearance of economic benefits and the 

objectivity of measurement (evaluation). 

IASC has retained only two criteria of recognition, because some of these criteria 

enunciated by other conceptual frameworks have been placed in a much larger context, 

respectively that of the qualities of financial information. 

Considering that the first criterion of recognition of elements of financial reports as 

being the probability of obtaining several future economic advantages, we express the opinion 

according to which this concept is linked to the incertitude that characterizes the economic 

environment in which any organization operates. 

The second criterion, respectively the objectivity of measurement (evaluation) 

emphasizes the necessity and objectivity of rational estimations of the dimension of financial 

reports, estimations used in the elaboration and presentation of financial reports. 

When we cannot do a rational estimation of an element, this must not be presented in 

the balance account or in the profit and loss account. 

There are reports in which an element, at a given moment, cannot comply with the 

established criteria of recognition, but which later on can be recognized as a consequence of 

later circumstances or events. 

7 Feleagă N., Îmblânzirea junglei contabilităţii, Editura Economică, Bucureşti, 1996. 

7


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In IAS as well as in the national accounting norms, there is stipulated the fact that 

information regarding an element that has the essential characteristics of a structure of 

financial reports, but does not comply with the recognition criteria, can be presented in notes 

and supplementary information. 

Since the objective of financial reports is circumscribed to the furnishing of 

information on the financial position, on the performances and changes of financial position 

of an enterprise, the financial reports elaborated and presented in this set of synthesis 

documents must be associated to these objectives. 

Thus, the financial position will be reflected through the correlation between assets, 

debts and own capitals, components of the balance. 

The definition of assets considers that these are economic goods (with or without 

ownership right) owned by the enterprise, whose use will make the enterprise benefit by the 

future cash flows. 

The cumulative criteria established for the recognition of an asset are: 

• the probability of realization of a future economic benefit; 

• the determination of the value/cost of the asset in a credible way. 

According to us, this definition is influenced by several principles whose effect 

coexists, such as follows: 

• the economic prevalence on the juridical form (the asset is a controlled resource, 

without being also necessary to have an ownership right over it); 

• the principle of realization supposes that the controlled resource is 

realized/obtained as a consequence of past events; 

• the principle of continuity demands the estimation of the future benefits (direct or 

indirect) which the asset will generate, supposing that it will be used according to 

the expectations. 

The same principles are kept in mind in the case of debts assimilated as structures of 

financial reports. 

In order to be recognized as financial reports, debts must comply with the following 

criteria: 

• the probability of an exit of resources, bearers of economic benefit; 

• the evaluation is done in a credible way. 

We consider that it is highly recommended to make the distinction between present 

obligation and a future engagement, being recognized as debts included in the balance only 

the present obligations (also entitled current liabilities) appeared as a consequence of past 

events. We must, as well, not make confusion between obligation (debt) and commission. 

Even if the commission represents a present obligation, that will probably generate an 

exit of resources which affect the economic benefits and whose value is reasonably 

determined, the differences between this concept and that of debts are determined by the 

incertitude linked to the final value of the commission or by the exigibility (honoring) of 

debts. 

Since the own capitals (net assets) represent the difference between assets and debts, 

we emphasize the major importance that must be granted to the adequate recognition of the 

assets and debts in determining and delimitating this concept. 

An accurate representation of own capitals is realized if and only if the assets and debts 

are properly recognized and evaluated. In fact, the financial position of any entity, the 

dimension of own capitals is given by the way of managing the assets and debts. That is why 

we agree with the opinion according to which own capitals represent the essential indicator 

which the balance, in the present format, must represent. 

The recognition of performance elements of the entity is the subject of the process of 

recognition of incomes and expenses. Thus, the criteria of recognition are:


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• the increase of future economic benefits, by increase of assets or reduction of debts; 

• credible evaluation. 

We consider that it is necessary to make the distinction between incomes and gains, 

even if both are to be found in the same segment of the profit and loss account. The 

distinction consists in the fact that a gain implies a favorable result of a transaction, as a 

consequence of compensation of effects with adequate efforts, while incomes represent 

increases in economic advantages during a period of time, whose effects consist in the 

increase of own capitals. 

In order to be recognized, an income must be realized/obtained or there must be a 

sufficient degree of certitude for its accomplishment. 

The cumulative criteria of recognition of expenses are: 

• the diminution of future economic benefits, by the diminution of assets or increase 

of debts; 

• credible evaluation. 

In this context, acts the principle of connection of expenses with the incomes obtained 

during the same periods of management. 

There are expenses which are not recognized in the profit and loss account by 

systematic allocation, in a certain interval of time (for example, expenses with liquidation) or 

are recognized as expenses of the period, expenses which do not generate anymore economic 

benefits or associated assets present in the balance. 

Consequently, we express the opinion according to which an expense is immediately 

recognized in the profit and loss account when the payment does not produce a future 

economic advantage or when the future economic advantages do not give the right or cease to 

give the right to the recognition of an asset in the balance. 

The income sand expenses directly generate the result (profit or loss) that appears as a 

measure of performance or non-performance of the entity. The recognition of assets, debts, 

incomes and expenses must be done if and only if the two conditions are observed, and 

respectively the credible evaluation. 

Romanian accounting settlements consider that “evaluation is the process by which we 

determine the values at which the structures of financial reports will be recognized in the 

balance and in the profit and loss account, a process that supposes the choice of an evaluation 

basis”. Financial reports use different evaluation bases of its structures in varied 

combinations. 

For the evaluation of the structures of financial reports, we will retain the following 

evaluation bases: 

• the historical cost; 

• the current cost; 

• the achievable value (of discount); 

• the actualized value. 

There has been noticed that the evaluation basis most frequently adopted in the 

elaboration of financial reports is the historical cost which is usually combined with other 

evaluation bases. 

We notice the fact that the harmonization of the Romanian accounting system with the 

European Directives and IAS (International Accounting Standards) has lead to important 

changes in the evaluation problem, a domain in which the professional reasoning will find its 

meaning. Thus, great attention is granted to the evaluation at the elaboration of financial 

reports, respectively the evaluation of the outcome and effect in financial reports. 

Coming back to the bases of evaluation retained by IASB and to the national settlements 

in the domain, without expressing a preference for a certain basis, their content refers to: 

� the evaluation of the historical cost supposes that:


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• debts are registered at the values of discount in cash, in equivalents of cash or 

at the just value established at the moment of their purchase; 

• debts are registered at the value of equivalents obtained in their exchange or, in 

certain cases, at the value at which we expect for it to be discount in cash or 

equivalents of cash with the aim to pay them off.; 

� the evaluation at the current account supposes that: 

• the assets are registered at the value in cash or in equivalents of cash which 

must be paid if the same asset or a similar asset would be purchased at present; 

• debts are registered at the nominalized value in cash or in equivalents of it, 

necessary to presently discount the obligation 

� the evaluation at achievable value (of discount of obligation) supposes that: 

• the assets are registered at the value in cash or equivalents of it, which can be 

obtained by selling of assets; 

• debts are registered at the value of discount which represents the nonactualized 

value in cash or in equivalents of it that must be paid to pay off the 

obligation; 

� the evaluation at actualized value supposes that: 

• assets are registered at the actualized value of future net incomes of cash, 

which are going to be generated by the unfolding of the enterprise activity; 

• debts are registered at the actualized value of future outcomes of cash, which 

wait to be necessary for discounting the debts. 

In the elaboration of financial reports it is highly important to use the concept of used 

capital. The concept of capital and maintenance of capital include the financial capital and the 

physical capital. 

The financial capital is synonymous of the net assets/proper (own) capitals, being 

defined in the terms of nominal currency unities, and the physical capital is defined in the 

terms of productive capacity, respectively the capacity of production of the entity, expressed 

in physical units. 

We consider that the choice by an entity of the most suitable concept concerning the 

capital must have at its basis the necessities of information specific to the users of financial 

reports. Thus, if the users of financial reports are preoccupied by the maintenance of the 

invested nominal capital or by the purchase power of the invested capital, we must adopt the 

concept of financial capital of the capital. But, if they are preoccupied by the capacity of 

exploitation of the entity, we must choose the physical concept of capital. 

The maintenance of the level of capital leads to the following concepts: 

• the maintenance of the financial capital according to which the profit represents the 

increase of nominal currency capital along the period; it can be evaluated either in 

nominal currency units or in the constant purchase power; 

• the maintenance of fix capital, according to which profit represents the increase of 

the productive capacity along the period of time. 

The distinctions between the two concepts regarding the maintenance of the capital are 

represented by the treatment of the effects of the variation of assets’ prices and debts of the 

entity. 

We consider necessary to emphasize the link which is generated between the concepts 

of capital and profit through the concept of capital maintenance, without which the profit 

cannot be measured. 

Of the facts presented above, we can assert that, in general terms, an entity maintains its 

capital if at the end of the period it registers a similar level to the one at the beginning of the 

period. Any value in addition to the one necessary for the maintenance of the capital at the 

level from the beginning of the period is considered a profit.


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The criteria which determine the option towards a certain evaluation basis and a certain 

concept of maintenance of the level of capital depend on the entity’s policy, on the 

informational needs and on the professional reasoning. 

The evaluation basis and the concept of maintenance of the level of capital will 

determine the accounting model used for the elaboration of financial reports. Even if IFRS are 

open to diversity, they still limit the options, in the sense that when an entity will choose the 

alternative treatment of an economic specie it will have to offer in explanatory notes for 

compatibility, the effects of the basis treatment. 

That is why we consider it is highly justified that normalizers take into account the 

problem of determining the actualized values, a segment where there are still a lot of 

approaches, obviously with different effects on financial reports. 

BIBLIOGRAPHY 

1. Paşca N., Situaţii financiare ale unităţilor economice din România, Editura Presa 

Universitară Clujeană, Cluj Napoca, 2002. 

2. ***, Reglementări contabile pentru agenţi economici emise de Ministerul Finaţelor Publice, 

Editura Economică, Bucureşti, 2003. 

3. ***, Standardele internaţionale de Contabilitate, Editura Economică, Bucureşti, 2002. 

4. Feleagă N., Îmblânzirea junglei contabilităţii, Editura Economică, Bucureşti, 1996.


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INFORMATION QUALITY AND ACCOUNTING REPORT 

2BLigia 

Antonescu – PhD trainee 

3BUniversity 

of Craiova 

50BABSTRACT: 

The information furnished by accounting influence the users’ behavior in the process of 

substantiation of decisions, each user wishing to dispose of such information as to decrease incertitude and to 

offer the possibility to make the best decisions. 

From the analysis of accounting doctrine it results a pluralism of definitions of the concept of quality of 

accounting information, the differences referring to the selection and hierarchy of qualitative characteristics. 

Accounting systems which are based upon the existence of conceptual frameworks make a fundamental element 

out of the definition of information quality, their qualitative characteristics being presented explicitly by way of 

official documents (FASB, IASB, ASB). Comparing the points of view of these official documents, we can 

notice the influence of the American concept on IASB which identifies, the same way as FASB, four qualitative 

characteristics (intelligibility, pertinence, reliability and comparability), the first of them maintaining its place 

before any other quality. Unlike these, ASB emphasizes the relative importance of the primordial quality which 

must financial information must have. 

The users’ informational necessities must be continuously adapted to the changes in the economic, 

political, juridical and social environment thus leading to an equilibration of the contribution of different 

qualitative characteristics as far as the obtaining of good quality information is regarded. 

Accounting’s social role has significantly increased in the last decades and this is due 

to the fact that the information it furnishes influences the users’ behavior in the process of 

decision making. It is obvious that each user wishes to dispose of information which 

diminishes the uncertainties and offers him the possibility to make the best decisions, these 

requirements designating in fact, the necessity of accounting’s production of high quality 

information. 

Since the range of users of accounting’s products is relatively varied, and since their 

informational necessities are also diverse, sometimes even contradictory, the interpretation of 

the quality of the information furnished by financial reports is a process characterized by 

subjectivism. This is the reason why defining the concept of quality of accounting information 

starts, in specialty literature, from the definition and the peculiarities of the communication 

process and its aim is to establish quality criteria which information must comply with. 

Analyzing the act of normalization and the accounting doctrine we notice a pluralism 

of modalities that concern the definition of the concept of quality of accounting information, 

the differences being observed especially as far as the selection and hierarchy of qualitative 

characteristics are regarded. We will sustain this idea by the brief presentation of the way in 

which it sis defined the analyzed concept in accounting’s normalization, establishing as 

reference points the Anglo-Saxon conceptual frameworks, on the one hand, and French 

accounting, on the other hand. 

Accounting systems which are based on the existence of conceptual frameworks 

render the definition of the quality of accounting information as a fundamental element, its 

qualitative characteristics being explicitly presented through several official documents, such 

as follows:


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• FASB published in 1980, by way of the norm SFAC2, the qualitative characteristics of 

8 

accounting information;F 

• IASB included in 1989, within its conceptual framework, the qualitative characteristics of 

financial reports and the restrictions that must be observed in order to obtain quality 

information; 

9 

10 

• ASBF F published in 1991 the qualities of financial information.F 

As far as the definition of the concept of quality and of qualitative characteristics which 

concern the accounting information is regarded, we retain the following main ideas 

formulated by the American forum of normalization (FASB): 

• There are identified four qualitative characteristics: intelligibility, pertinence, reliability 

and comparability, which are subject to two major restrictions: 

-superiority of advantages obtained from the use of information as compared to the 

costs demanded by its use; 

- the signification threshold or the relative importance. 

• Criteria depending on which are considered pertinence and reliability, considered as 

primary characteristics, are expressed by: 

-the predictive value, the retrospective value and the opportunity value- for pertinence; 

-verifiability, neutrality and fidelity – for reliability. 

CHARACTERISTICS OF USERS 

GAINS BIGGER THAN COSTS 

The advantages offered by information must surpass the costs of obtaining it 

Compromise 

Predictive Retrospective Opportunity Verifiability Neutrality Fidelity 

Significant importance 

11 

Fig.1 Hierarchy of qualitative characteristics of accounting informationF 

As far as the conceptual framework proposed by IASB is regarded the promotion of the 

same four qualitative characteristics, as well as the constraint of the same general 

8 FASB- Statement of Financial accounting Concepts; Qualitative Characteristics of Accounting Information. 

9 Accounting Standards Board-the British system of normalization. 

10 ASB-Statement of Principles; the qualitative characteristics of financial information. 

11 B. Colasse- Comptabilité générale. 5e édition, Economica, Paris, 1996, p. 385-388 ; E. Lande, P. Blin, P. 

denos, M. Gouthier, E. Delesaille, R. Obert, D. Lechere- Contabilitatea financiară aprofundată, Editura 

Economică, Bucharest, 2002, p. 42.


ISSN: 1842-4856 

restriction as with FASB, which refers to the superiority of benefits as a result of the use 

of information as compared to the cost of obtaining it. To this general restriction, there are 

attached three other restrictions which must by observed in order for accounting 

information to be pertinent and reliable: the observance of deadlines; the balance between 

qualitative characteristics: loyal image/ loyal representation. 

At the same time, we also retain the explicit presentation of criteria that contribute to 

the obtaining of main characteristics which IASB proposes: 

• The significant measure (relative importance), for pertinence; 

• Loyal image, the dominance of the economic content on the juridical form, neutrality, 

prudence and exhaustivity, for reliability; 

• Permanence of methods, for the appreciation of comparability. 

Starting from this grouping there is realized a hierarchy of qualitative characteristics of 

information, as we can notice in fig.1. 

The user 

of annual 

accounts 

General 

restriction 

Qualities 

searched by 

users 

Fundamental 

qualities 

Annex 

qualities 

General 

Restriction 

A user who has sufficient knowledge regarding business, economic 

activities and accounting 

The production cost or the analysis cost of information is less than the 

benefit obtained as a result of the use of information 

UInformation contained in annual accounts 

Intelligible 

Prospective Retrospective Available Sincere Neuter Verifiable 

Comparable in time and space 

Permanence of methods 

Significance of methods 

Fig.2 Hierarchy of qualitative characteristics of accounting information according to IASB


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Analyzing the point of view of ASB concerning the qualitative characteristics of financialaccounting 

information we notice several differences as compared to FASB and IASB 

opinion, differences characterized by the following important elements: 

• The primordial quality that financial information must have is considered to be the 

relative importance; 

• Main qualities are considered to be pertinence (relevance) and reliability, while 

comparability and intelligibility are included in the category of secondary qualities; 

• As for the criteria according to which the four main characteristics are appreciated, ASB 

considers that: 

-pertinence is obtained when the information has a value of prediction and of confirmation 

as well as when there are selected pieces of information that influence the decisions; 

- reliability is obtained if the pieces of information do not contain errors or if there are no 

elements which lead to wrong interpretations and they are appreciated depending on 

neutrality, prudence, credibility and integrality; 

-comparability is given by the permanence of methods and by the communicability of 

information; 

-intelligibility has at its basis the possibility of classification and aggregation of information, 

as well as the users’ good mastering of economic and accounting language; 

• Obtaining quality is conditioned, in the opinion of English organism, by three 

restrictions: the equilibrium between qualities, opportunity, and the relationship costbenefit. 

As far as the hierarchy of characteristics previously evoked is concerned, certain 

differences can be noticed, as compared to hierarchies proposed by the American organism 

and by the international organism. 

Comparing the three points of view previously presented, we notice, on the one hand, the 

influence exerted by the American conceptual framework on IASB, which identifies four 

qualitative characteristics (intelligibility, pertinence, reliability and comparability) as 

FASB, which, in its turn, imposes intelligibility before any other quality, as well as the 

differentiation proposed by ASB, which consists in the amplification of the relative 

importance as a fundamental feature and in the grouping of the four characteristics in 

main and secondary. 

According to the vision of Anglo-Saxon countries, in French accounting the concept of 

quality of accounting information is not defined anymore by the explicit presentation of some 

traits, but by the interposition of several principles. 

We must emphasize the fact that in France the definition of qualitative characteristics of 

accounting information was not taken into account by the National Council of Accounting 

(CNC) and, consequently, in the French General Accounting Plan (PCG) there are only 

enumerated certain qualities of the information produced by accounting. 

According to PCG, “accounting information must give users an adequate, loyal, clear 

and complete description of operations, events and situations”, not proposing any hierarchy or 

articulation of quality criteria. Another element specific of French accounting is the fact that 

PCG does not designate the users of financial reports, the accounting information having as 

object the reflection of a loyal image to the represented reality, which, in the opinion of 

French normalizers, is obtained if there are observed two general principles: regularity and 

sincerity. There are also taken into account the exhaustivity and the coherence of information 

which must not lead to a condensation or external aggregation of it and ensure the 

comparability of data during successive periods.


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Following the objectives assigned to French accounting and to accounting principles that 

are associated to it, we can assert that accounting information is a compromise that must 

allow the presentation of a loyal image of the financial report, of correct and sincere 

accounts, and, at the same time, must observe a series of principles, among which those of 

evaluation (currency nominalism and prudence) have a major influence on loyal image 

conception. 

The comparison, for example, of the conceptual framework of FASB to the French 

accounting principles, as a consequence of the adoption of the 4 th and 7 th European Directives, 

brings about major differences, amongst which we retain as being linked to the approached 

topic the fact that, on the one hand, FASB defines a reference user, while French accounting 

does not mention the users or their needs, and, on the other hand, in France, the accounting 

objectives refer only to the intrinsic qualities of it (sincerity, correctitude, loyal image), while 

FASB explicitly reports the quality of information to the needs and expectations of users. 

In the attempt to approach the problem of accounting information quality in our country, 

we will make the distinction between the two major steps of accounting reform in Romania. 

In the first stage, which corresponds to the period 1991-1999, we can say that the 

problem of defining the quality of accounting information and delimitation of qualitative 

characteristics was not the subject of intense preoccupations on behalf of normalizers, 

because: 

• Accounting was conceived as an instrument of control; 

• The state plays a double role, of normalizer of the accounting system and of privileged 

user of accounting information, determining an asymmetry in the request and offer of 

specialty information in its favor in relationship to the other users; 

• Reliability was imposed as main characteristic of information due to the instrumentalist 

character of accounting; 

• In the vision of normalizers, loyal image was obtained if the “observance with good 

faith of rules regarding the evaluation of the patrimony and of the other norms and 

accounting principles”. 

Continuing with the accounting reform we pass, starting with 1999, to the next stage 

represented by the adoption of the Order of the Minister of Public Finances no 403/1999 

which was later replaced by OMFP no 94/2001 regarding the approval of the accounting 

Settlements harmonized with the 4 th CEE Directive and with IAS. 

Even if there can be identified numerous aspects that can be criticized, we must notice the 

fact that in the plan of defining the concept of quality of accounting information this stage 

has registered major progresses, which refer to: 

• The opening of accounting to external users; 

• The recognition of the role of accounting as instrument of information and assistance of 

decision; 

• The economic approach in the process of obtaining accounting information and the 

decrease of the juridical weight; 

• The increase of the degree of capitalization of accounting information in economicfinancial 

analyses; 

• The introduction of quality criteria in the elaboration and diffusion of accounting 

information. 

By the borrowing by Romanian normalizers of the “General framework of elaboration 

and presentation of financial reports”, elaborated by IASB, it results that the appreciation of 

the quality of financial information will be realized in Romanian accounting also depending 

on the four qualitative characteristics of financial reports retained by IASB: intelligibility, 

relevance (pertinence), credibility (reliability) and comparability.


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In their turn, relevance, credibility and reliability are interpreted according to secondary 

criteria which refer to: 

• The significance threshold, the predictive value and the retrospective value for 

relevance; 

• The loyal representation, the prevalence of the economic on the juridical, neutrality and 

integrality for reliability; 

• The permanence of methods and communicability for comparability. 

In order to present the existent hierarchy between these characteristics, we propose the 

following scheme (fig 3) which will allow us to emphasize also the restrictions which 

affect the relevance, credibility, and, in our opinion, the intelligibility of information. 

Theoretically, in order to be useful, a piece of information must have all the presented 

characteristics, the difficulties emerging when there must be determined the proportions in 

which these characteristics must be applied to a given situation, all the more so as certain 

criteria are complementary and independent, while the others are divergent. 

As, from a practical point of view, no information has all the above enumerated 

characteristics, most of the times we lay stress on a characteristics in disfavor of another, 

which leads to the appearance of conflict states at the level of accounting information such as: 

• Between relevance and credibility, believing that the increase of credibility is realized to 

the prejudice of relevance; 

• The increase of the rapidity with which it is obtained the information is produced to the 

prejudice of correctitude and integrality (exhaustivity); 

• The increase of the degree of uniformity affects the flexibility, determining its 

diminution and so on. 

The 

accounting 

culture of 

users 

THE INFORMATION FURNISHED BY FINANCIAL REPORTS 

Opportunity 

The 

relationship 

cost-benefit 

The balance 

between quality 

characteristics 

Loyal 

presentation 

Intelligibility Relevance Credibility Comparability 

Significance threshold 

Predictive value 

Retrospective value 

Loyal presentation 

Pprevalence of the 

economic on the 

juridical 

Neutrality 

Prudence 

Integrality 

Permanence of models 

Communicability


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Fig. 3 Hierarchy of qualitative characteristics in Romanian accounting 

12 

Even if some authorsF 

F consider that the diminution of possible conflicts could be 

obtained by the realization by the normalization organism of schemes of hierarchy of 

qualitative characteristics of financial-accounting information, as we have proposed in fig. 3, 

we think that this scheme does not thoroughly remove the risk of appearance of antonymic 

situations. In this sense, we believe that the continuous reconsideration of informational 

necessities of users, as a requirement for the adaptation to the changes of the economic, 

political, juridical and social environment, can lead, in a certain way, to a balance of the 

contribution of different qualitative characteristics as far as the obtaining of good quality 

information is regarded. 

BIBLIOGRAPHY 

1. B. Colasse- Comptabilité générale. 5e édition, Economica, Paris, 1996, pp. 385-388. 

2. E. Lande, P. Blin, P. denos, M. Gouthier, E. Delesaille, R. Obert, D. Lechere- 

Contabilitatea financiară aprofundată, Editura Economică, Bucharest, 2002, p. 42. 

3. L. Malciu. Cererea si oferta de informaţii contabile, Editura Economică, Bucureşti, 

1998, p. 37. 

12 L. Malciu. Cererea si oferta de informatii contabile, Editura Economică, Bucureşti, 1998, p. 37.


ISSN: 1842-4856 

FINANCIAL DEVELOPMENT IN NEW MEMBER STATES AND 

CANDIDATE COUNTRIES 

Nanu Roxana Maria, Lecturer PhD, University of Craiova 

Buziernescu Radu, Associate professor PhD, University of Craiova 

Gruescu Ramona, Associate professor PhD,University of Craiova 

ABSTRACT: Au cours des dernières années, les nouveaux Etats membres (Bulgarie et Roumanie) et des pays 

candidats (Croatie et Turquie) ont connu une forte croissance économique, associée à un faible taux d'inflation 

ou la désinflation. La demande intérieure, stimulée en partie par la rapide croissance du crédit et forte de 

capitaux, a été le principal moteur de la croissance. En outre, compte tenu de l'intégration croissante de la zone 

euro et l'UE, les résultats à l'exportation a été soutenue, mais dépassée par la croissance encore plus forte des 

importations. 

Le document met en lumière les particularités de l'évolution du secteur financier dans les pays à l'étude, à savoir 

la domination des banques dans l'intermédiation financière, la forte participation des banques étrangères, 

l'utilisation généralisée des monnaies étrangères et le renforcement de la supervision des cadres. 

Over the last years, new member states (Bulgaria and Romania) and candidate countries 

(Croatia and Turkey) have seen strong economic growth, coupled with disinflation or low 

inflation. Domestic demand, fostered partly by rapid credit growth and strong capital inflows, 

has been the main engine of growth. In addition, given the increasing integration with the 

euro area and the EU, export performance has been buoyant, but outpaced by even stronger 

import growth. 

Recently, however, inflation has picked up or disinflation has slowed down, as the expansion 

of domestic demand has been accompanied by several negative supply shocks, including a 

significant rise in energy prices, adjustments in regulated prices, exogenous shocks, such as 

floods, and increasing wage pressures. Current account deficits have remained high or 

increased from already high levels. External private debt has grown rapidly, as banks and 

enterprises have substantially increased their borrowing abroad. 

Against this background, monetary authorities have tightened monetary conditions. Monetary 

and exchange rate regimes vary between the countries under review, eliciting different policy 

responses. Countries with a peg or tightly managed float have mainly relied on tightening 

prudential measures, raising minimum reserve requirements and introducing limits on credit 

growth. By contrast, countries with a floating exchange rate regime and inflation targeting 

have also allowed for nominal exchange rate appreciation and have either raised or curbed the 

decline in interest rates. Moreover, in all countries, fiscal policy has lent some support to 

monetary policy in safeguarding macroeconomic stability, as fiscal deficits have either 

declined or turned into surpluses.


ISSN: 1842-4856 

1. Non-bank financial institution 

Financial markets and non-bank financial institutions are still relatively underdeveloped in 

the acceding and candidate countries. 

Although the banking sector remains the main pillar for financial intermediation in these 

countries, in recent years, non-bank financial intermediation has increased substantially, via 

non-bank financial institutions and financial markets. This increase, which started from 

initially low levels, can be attributed to, among other things, macroeconomic stabilization, a 

favorable external environment and structural changes within the sectors themselves. Over the 

next few years, the strengthening of candidate countries’ convergence efforts with the EU 

economies is likely to have a positive effect on the non-bank financial sectors in the acceding 

and candidate countries. 

Although the non-bank financial sectors of the acceding and candidate countries are still 

smaller than those of Western European countries, they have developed rapidly in recent 

years. 

In 2005 the assets of the non-bank financial institutions in the acceding and candidate 

countries was about 10-15% of total financial sector assets (see Table no.1), compared with 

only 7-10% in 2001/02. 

Assets of financial institution 

Tabel no. 1 

Bulgaria Croatia Romania Turkey 

Share of total assets (%) 

Banks 85,8 81,6 84,2 86,8 

Investment funds - 2,2 0,3 6,3 

Financial investment - - 3,3 0,5 

companies 

Insurance companies 3,3 5,2 3,5 2,8 

Pension funds 2,9 2,9 - 0,3 

Leasing companies 4,3 5,7 6,8 1,2 

Other 3,7 2,4 1,8 2,1 

Total 100 100 100 100 

Total 

billions) 

Assets (EUR 19,6 36,2 42,1 294,9 

GDP (EUR billions) 21,4 27,7 79,3 286,7 

Total asset’s share of GDP 91,3 130,7 53,2 102,7 

(%) 

Bank asset’s share of GDP 

(%) 

78,3 106,6 44,8 89,0 

Given the growth of the banking sector, this increase is particularly noteworthy. Efforts by 

regulators to curb banking sector credit growth may have shifted some lending to non-bank 

financial institutions, particularly leasing companies. 

Given the limited size of the non-bank financial sector, it is unlikely to have a determinant 

effect on the stability of the financial system. 

This is particularly the case for Bulgaria, which has the smallest non-bank f inancial sector. 

However, the non-bank financial sector in these countries is generally less regulated than the 

banking


ISSN: 1842-4856 

sector, and policy-makers should therefore be vigilant. To prevent regulatory arbitrage, the 

standards for supervision and regulation of non-bank financial institutions should be kept in 

13 

line with those of the banking sector.F 

2. The role of foreign banks 

Foreign banks play a key role in providing finance to the acceding and candidate countries. 

The foreign bank penetration in Bulgaria, Croatia and Romania, as measured by the amount 

of foreign claims held by major international banks on these countries, was rather low during 

1990s, but has increased substantially over the last five years. 

This development is similar to that of the eight new Member States of Central and Eastern 

Europe (NMS-8), albeit with some lag. In absolute terms, the involvement of foreign banks 

has traditionally been somewhat higher in Turkey, where the recent upward trend has also 

been notable. 

Foreign credit provision plays an important role in all four countries but the pattern of credit 

provision by internationally active banks differs. 

In absolute terms, foreign claims have risen rapidly in the four countries (see Table no.2). 

Total foreign claims as a percentage of GDP has also risen substantially in all the four 

countries, but (with the exception of Croatia) still remains below the levels seen in the NMS- 

8 (see Table no.2). Croatia stands out in terms of the level of foreign involvement, but, in 

terms of the channels of foreign involvement, Turkey is the exception. 

In Bulgaria, Romania and Croatia, the increase in foreign claims has been mainly due to the 

entry of foreign banks into the domestic markets. 

Foreign claims 

Total 

foreign 

claims 

Total 

foreign 

claims as % 

of GDP 

International 

claims 

Local 

claims 

Tabel no.2 

Local 

claims by 

foreign 

banks as 5 

of total 

foreign 

claims 

1996 2004 1996 2004 1996 2004 1996 2004 1996 2004 

Bulgaria 2,4 8,3 24,8 34,4 2,4 5,6 0,0 2,6 0,6 31,8 

Romania 3,1 17,2 8,8 23,4 3,0 13,2 0,1 4,0 2,4 23,1 

Croatia 1,5 30,1 7,6 87,8 1,5 19,3 0,0 10,8 0,0 35,8 

Turkey 23,3 54,1 12,6 18,2 22,6 50,2 0,6 3,9 2,7 7,1 

NMS-8 5,4 41,0 11,2 65,2 4,2 19,9 1,1 21,1 10,1 38,3 

Sources: BIS and IMF 

Table no.3 shows that while the number of all banks has declined somewhat over the last five 

years in the acceding and candidate countries and the NMS-8, the number of foreign-owned 

banks has increased, except in Turkey. This reflects the ongoing new entries of foreign 

entities into the domestic banking sector and the subsequent consolidation of the sector. 

13 In Romania, a new law has become effective in January 2006, establishing reporting requirements for non-bank 

financial institutions. While most of the application norms have been already published, the de facto reporting did 

not start yet. 

Assets of financial institutions at the end of 2005


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In the first half of the 1990s, foreign banks usually entered Central and Eastern European 

banking markets via greenfield investment, e.g. by establishing a branch or subsidiary. 

Towards the end of the 1990s, and especially over the last five years, the most usual way of 

entry has been to acquire local banks through privatisation. 

Moreover, some of the greenf ield-based 

subsidiaries and branches of foreign banks later participated in state bank privatisations. As a 

result, the share of foreign ownership of banks has increased considerably, reaching values of 

around 80-90%.26 Table no.3 shows this trend, with the increase in privatisations 

corresponding to the decrease in the share of state-owned banks. By contrast, Turkey’s 

banking sector is largely domestic-owned, with a significant share of state-owned banks of 

around 35%. 

Foreign ownership of banks 

Number of banks 

(of wich foreign 

owned) 

Asset share of 

foreign-owned 

banks (in %) 

Tabel no. 3 

Asset share of 

state-owned banks 

(in %) 

1999 2004 1999 2004 1999 2004 

Bulgaria 34 (22) 35 ()24 42,8 81,6 50,5 2,3 

Romania 34 (19) 32 (23) 43,6 58,5 50,3 7,5 

Croatia 53 (13) 37 (15) 39,9 91,3 39,8 3,3 

Turkey 81 (22) 48 (13) 5,4 3,4 34,2 35 

NMS-8 33 (16) 27 (18) 47,4 72,7 27,4 5,9 

Source: EBRD Tansition Report 2005 

Academic literature and practical experience have highlighted the significant benefits of 

foreign banks’ involvement in transition countries. These benef its include increased 

competition in the banking sector, better access of corporations and households to external 

finance, risk management, greater efficiency, corporate governance, and overall stability of 

the sector. Given the typically high capitalisation of foreign banks and access to liquidity 

from the parent office, credit supplied to the economy by banks with international owners 

may be more stable. 

There may, however, be also risks stemming from foreign bank penetration for financial 

stability. For example, foreign owners may push local managers into riskier business ventures 

with the promise of ambitious returns, especially 

if profit from local subsidiaries in the host 

countries is used to finance less profitable businesses in the home country. The repatriation of 

local banks’ profit may then also put pressure on the current account. Foreign-owned banks 

may prefer to provide local loans in foreign currency, especially in the currency of the home 

country if they ref inance themselves in the home market via the parent bank. This could 

make borrowers more vulnerable to exchange rate movements and increase credit risk for 

banks. Other risks may occur if decision-making and risk management activities are 

transferred to the foreign headquarters or if rules are standardised across the whole banking 

group without taking account of local interests, thus making it more diff icult for local small 

and medium-sized enterprises to access finance. 

3. The role of foreign currencies 

Foreign currencies, in particular the euro, play a significant role in the banking sectors of the 

acceding and candidate countries. Traditionally, deposits were in foreign currencies, reflecting


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a lack of confidence in the domestic currency due to periods of (hyper) inflation and strong 

depreciations. While the share of foreign currency deposits rose further in the run-up to the 

euro cash changeover, it has since gradually declined, albeit remaining at a comparativelyhigh 

level By contrast, the share of foreign currency loans in total loans has risen significantly in 

all countries. This reflects supply and demand effects. On the one hand, households and 

enterprises ask for foreigncurrency- denominated loans as they carry lower interest rates than 

loans denominated in domestic currency. On the other hand, given their increasing reliance on 

foreign borrowing, mainly from parent banks, banks have increasingly lent on to final 

borrowers in foreign currency to keep their net overall foreign currency positions small. 

Since borrowers, in particular households, are typically unhedged, banks’ loan portfolios are 

subject to possibly substantial indirect foreign exchange risks, as a depreciation in the 

domestic currency could lead to a deterioration in the borrowers’ debt servicing capacity. 

Table no.4 report data on the shares of foreign currency deposits and loans in all four 

countries at the end of 2005. It is worth noting that these figures may underestimate the full 

signif icance of foreign currencydenominated deposits and loans, as they exclude deposits and 

loans indexed to foreign currencies. Indexed instruments are particularly important in Croatia, 

where they accounted for 12.8% of total deposits and 66.6% of total loans of households and 

non-bank corporations at the end of 2005, while there are indications that foreign-currency 

indexation of loans is also significant in Turkey. 

Foreign currency deposits and loans, 2005 

Share of foreign currency deposits 

of households and non-bank 

corporations 

-share of foreign currency 

deposits of households 

- share of foreign currency 

deposits of non-bank corporations 

Share of foreign currency loans to 

households and non-bank 

corporations 

-share of foreign currency loans to 

households 

- share of foreign currency loans 

to non-bank corporations 

Source: National Central Banks 

Tabel no.4 


46,8 71,0 34,5 41,3 

54,2 80,6 37,0 42,0 

35,0 44,2 53,9 38,9 

47,3 10,2 54,0 15,9 

15,4 0,5 44,1 n.a 

66,9 21,7 59,4 n.a. 

Against this background, monetary authorities have introduced mandatory reserve regulations 

to discourage banks from further borrowing abroad. Moreover, they have tightened prudential 

measures and applied moral suasion at the creditor and borrower level to limit these risks. 

Although such measures have a dampening effect in the short run, experience suggests that 

they tend to be circumvented over time, as customers either sidestep the regulations or borrow 

directly from abroad. 

In the run-up to the euro cash changeover of January 2002, the share of foreign 

currencydenominated deposits was boosted in Bulgaria, Romania and Turkey, as residents 

deposited holdings of euro legacy currencies for conversion. In Croatia, the volume of both 

total and foreign currency-denominated deposits increased but the share of foreign 

currencydenominated deposits did not rise further, as it had already accounted for 87% and 

some of the foreign currency holdings were converted into domestic currency. After the


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introduction of the euro banknotes and coins, the share of foreign currency deposits began to 

erode in all four countries and this has continued since, reaching levels below those observed 

prior to the boost in all of the countries except Turkey. In Croatia, however, most of the 

decline in the share of foreign currency-denominated deposits was replaced by an increase in 

the share of foreign currency-indexed deposits. 

4. The supervisory framework 

Banking regulatory and supervisory frameworks have been substantially reformed in the 

acceding and candidate countries. In all four countries, banking supervision is now exercised 

by autonomous institutions: in Bulgaria, Romania and Croatia by the respective central banks; 

and in Turkey by the BRSA. 

Progress was reported in the IMF’s Financial Sector Assessments conducted for Bulgaria, 

Romania and Croatia. According to the reports, the banking supervisory framework was 

deemed to be fully compliant or largely compliant with almost all of the Basel Core Principles 

for Effective Banking Supervision in Bulgaria, compliant or largely compliant in Romania, 

and largely compliant in Croatia. 

In Turkey, a new banking law was passed in 2005. The 2001 banking crisis – as well as the 

Imar bank failure in July 2003 – exposed a number of serious shortcomings in Turkey’s 

institutional framework. The new banking law, which was adopted in October 2005, provides 

for increased transparency and disclosure requirements for banks. 

The new law brings the legal framework more into line with EU standards and international 

best practices. 

However, the provisions related to the supervision of f inancial conglomerates and consumer 

protection are not compliant with EU rules. 

The regulatory and supervisory frameworks are also being transformed to comply with the 

“acquis communautaire”. 

As the regulatory framework has been improved, supervisory capacity has also been 

increased. 

Further improvements to the supervisory frameworks are still necessary in a number of areas. 

In Bulgaria, progress needs to be completed as regards the single passport principle, the 

differentiation between foreign and EU credit institutions and the definition of branches. In 

Romania, the members of the peer advisory mission on financial services supervision, which 

took place in July 2005 under the auspices of the European Commission, concluded that more 

attention should be paid to the issue of financial conglomerates and to the preparation of 

International Accounting Standards. 

Supervision of non-bank financial activities is less developed than banking supervision. 

Following the FSAP recommendations, Bulgaria introduced a single supervisory agency for 

nonbank financial institutions. 

Romania has recently extended supervision to cover non-bank credit institutions in an attempt 

to control the growth of leasing and other nonbanking activities. In 2004 Croatia merged the 

supervisory authorities for the insurance sector, the pension funds and the securities markets. 

However, the European Commission’s latest monitoring report found that Croatia’s new 

Financial Services Authority still lacked the necessary legal basis to become the single 

supervisory authority for the non-bank financial system. In Turkey, the fragmented nature of 

supervision and regulation is a significant problem: while banks are regulated by the BRSA, 

leasing, factoring and consumer finance companies and the insurance sector are regulated and 

supervised by four different General Directorates of the Under-Secretariat of the Treasury. 

Progress has been made with regard to minimum capital requirements. At the time of the 

FSSA missions, the minimum capital adequacy ratios were found to be not fully consistent 

with the Basel I Capital Accord in Bulgaria, Romania and Croatia. The IMF noted that the


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calculation of the ratio was based on credit risk alone, and recommended that the ratio be 

calculated by including market and market-related risks and on a consolidated basis. These 

recommendations were implemented in Croatia and Romania in 2004 and in Bulgaria in 2005. 

An explicit and compulsory deposit insurance system is in place in the four countries under 

review. Schemes are funded by banks in Bulgaria, Romania and Croatia, and jointly by the 

government and banks in Turkey. 

Minimum capital adequacy ratios in international comparision 

Tabel no.5 

International 

standards 

(Basel) 


8 12 10 12 8 

Source: World Bank 

The guarantee covers domestic currency as well as foreign exchange account holders in the 

four countries. With regard to the specifics of these deposit insurance schemes, it is worth 

noting that Romanian scheme covers individuals as well as small and medium-sized 

companies. In Bulgaria, foreign branches covered by the schemes applicable to their head 

offices are not obliged to participate in the domestic scheme. 

The body of EU law requires in this case that at least an equivalent level of protection be 

offered. 

Only in Turkey is the guarantee per depositor in accordance with the level prescribed by EU 

rules. In Bulgaria and Romania, the guarantee has already been gradually raised and will 

reach the equivalent of €20,000 by the time they join the EU, foreseen on 1 January 2007, in 

order to be in line with the body of EU law. There is no limit per account in any of these 

countries, with the exception of Bulgaria, where it is set at the same level as the limit per 

depositor. Moreover, formal co-insurance only exists in Croatia (i.e. depositors are only 

insured for a percentage of their deposits even if the deposit is worth less than the established 

limit). 

Guaratee ceiling per depositor 

Directive 

94/19/EC 

Bulgaria Croatia 

(Euro)Tabel no.6 

Romania Turkey 

20.000 12.782 13.000 15.000 30.000 

Sources: World Bank 

Loan classification and provisioning requirements have been progressively strengthened in 

the four countries. The primary system of loan classif ication in Bulgaria and Croatia is based 

on both the number of days of arrears and a forward-looking estimate of the probability of 

default, whereas in Romania and Turkey it is based only on the number of days in arrears. In 

Romania, the regulations provide for three classif ication criteria: debt service (number of 

days of arrears), financial performance of the borrower and initiation of judicial proceedings. 

In all countries, specific minimum provisioning ratios are required for each category of loans. 

Acceding countries are also required to meet the EU’s anti-money laundering legislation. EU 

directives and regulations to combat money laundering and the f inancing of terrorism, 

especially the Third Directive that entered into force on 15 December 2005, incorporate the 

40 + 9 revised Recommendations of the FATF into Community law. The legislation 

establishes money laundering as a criminal offence and requires f inancial institutions to


ISSN: 1842-4856 

identify and know their customers, to keep appropriate records and to report any suspicious 

transactions. 

In the four countries under review, increased efforts are needed with regard to the 

implementation of legislation. The Commission has asked the authorities to further strengthen 

administrative and enforcement capacities, to reinforce controls on reporting entities and to 

ensure more effective cooperation between relevant authorities, especially the Financial 

Intelligence Unit (FIU) and the Prosecution Office. In all four countries, it emphasises that the 

effectiveness of the anti-money laundering framework is seriously hampered by corruption, 

organised crime and the large informal economy. 

REFERENCES 

1. Berg J., Rixtel van A., Ferrando A., Bondt de G., Scopel S., The bank leanding survey 

for the euro area, European Central Bank Ocassional paper, February 2005 

2. De Haas R., Lelyveld van P. I., Foreign bank penetration and private sector credit in 

Central and Eastern Europe, DNB Staff Report 91, 2002 

3. Dierick F., Pires F., Scheicher M., Spitzer G., The new Basel Capital framework and 

its implementation in the European Union, European Central Bank Ocassional paper, 

December 2005 

4. Weill L., Banking efficiency in transition economies, Economics of transition, 2003


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FINANCIAL PERFORMANCES OF THE ROMANIAN 

CORPORATIONS 

Laura Giurca Vasilescu Phd. Assist. Prof. 


Faculty of Economy and Business Administration 

ABSTRACT. The restructuring process and the favorable evolutions of the Romanian economy are reflected by 

the improved indicators which reflect the financial performances of the firms and especially, of the corporation 

(firms with an annual turnover higher than 50 million Euros and with more than 250 employees). Therefore it is 

presented the general image of these firms and their financial performances based on the profitability indicators 

(Return on Assets - ROA, Return on Equity - ROE), the liquidity indicators (general liquidity, acid test quick 

ratio, money ratio), the debt indicators (the financial leverage, the cost of debt), the activity indicators. From the 

point of view of the firms performances, it is important the efficient allocation of the financial resources in 

economy. The Romanian companies have different financing sources (equity; self-financing; bonds; credits; 

internal and external debts) but they are mostly financed by other credits than the banking ones. This rise on one 

side, the problem for companies to have the capacity to build realistic project for which demand financing and on 

the other side, the capacity of the financial sector to allocate efficiently the available resources for these 

companies. 


Over the last decade and more, Romania has moved increasingly from the margins of the 

European integration process towards full inclusion in its central embodiment, the EU. As a 

final result of this process, on January 1 st 2007, the European Union extended, by the joining 

of two new states, Bulgaria and Romania. 

The convergence process is relatively long and has multiple connotations with impact on the 

institutional frame, on the nominal economy and also on the real economy. At this stage, the 

new EU member countries have to face new challenges: how to catch up in terms of GDP per 

capita with the existing EU Member States, how to increase their competitiveness in order to 

respond to globalization challenges, how to get transformed into a knowledge-based 

economy. 

Romania has to face these challenges, as well. The economy structure is constantly evolving 

and this is shown by the changes in the economy’s structure, in the structure of various 

resource categories, which contribute to the development of the Gross Domestic Product, the 

changes in the structure of employed population and the financial stability of the economy. 

The first steps were done because the macro-economic achievements from the last years in 

Romania created a positive environment for economic development, in general, and for the 

development of small and medium enterprises, in particular. Besides, the positive evolutions 

worldwide, mostly in the Euro area and in the Central and Eastern European countries, 

generated a positive international environment that stimulated the commercial and 

information exchanges. 

According to the information provided by the National Statistics Institute and the National 

Bank of Romania, the performances registered by the Romanian economy after the year 2000 

where positive taking into consideration the economic development, the disinflation, the 

control of the budgetary deficit and the reduction of the unemployment rate. With an 

economic growth of 8.3% in 2004, Romania’s economy had the strongest dynamic ever


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recorded throughout the country’s transition to the status of functional market economy. 

During the year 2006, the Gross Domestic Product registered, on an inflation-adjusted basis, a 

growth of 7.7% compared with 4.1% in 2005. The main influencing factors of this particular 

economic growth were the increase in the internal consumption of goods and services and the 

investment flows into Romania. Also, the structure of GDP got closer to the developed 

countries one. Therefore, the GDP by economic sectors in 2006 was dominated by services 

(49.6%) and industry (23.9%) while construction held just 7.0% and agriculture 8.1%. 

The Romanian macroeconomic features starting with the year 2005 were the return to 

moderate economic growth pace, one digit annual inflation and the slowing down of the 

disinflation process, a high current account deficit etc. Romanian economy may continue in 

2007 the upward trend from the past few years and ensure favorable macroeconomic image 

over the following years, although there are pressures especially regarding the inflation and 

the external deficit. 

The progresses achieved by Romania within the accession process is a proof of a futureoriented 

and dynamic assessment on our country’s economic performance, thus 

demonstrating its capacity to meet the economic requirements, established by the European 

Council in Copenhagen. 

Despite these favorable evolutions of the Romanian economy and the restructuring process, it 

should be taken into consideration there are still difficulties the economy have to face, as 

follows: 

• the dependence of the economy on the traditional sectors; 

• exports are not oriented to high value-added products and services; 

• the innovative potential and the invention licenses are not encouraged enough; 

• high technologies are taken in but to a low level; 

• industrial productivity is lower than the European one; 

• foreign investments’ level is still low as compared with those of the Central 

European countries. 

Therefore the government’s policy is targeted on the development of an environment that 

could stimulate the firm’s development, increase the enterprises competitiveness, format a 

new enterprising attitude in order to face the pressures of the market competition. 

2. The importance of the corporate sector in the Romanian economy 

According to the Romanian legislation, the corporations are defined as firms with an annual 

turnover higher than 50 million Euros and with more than 250 employees and the small and 

medium enterprises are structured in three categories: micro-enterprises (less than 9 

employees and a net turnover/total assets less than 2 million Euro); small firms (between 10 

and 49 employees and a net turnover/total assets less than 10 million Euro); medium firms 

(between 50 and 249 employees and a net turnover less than 50 million Euro/total assets less 

than 43 million Euro). 

The positive economic development trend is reflected by the performance indicators of the 

firms: turnover, added value, net profit (figure 1). 

Despite the reduced number of the corporation the weight of the added value in the total nonfinancial 

firms produced by the corporations is 57.4%, the rest being produced by the SMEs. 

The number of employees decreased from 49% in 2004 to 43.3% in 2005 in the total active 

employees mainly because the increasing number of SMEs in the last years. 

The net profit produced by the corporations increased in the analyzed period and in 2005 it 

was 55.2% in the total net profit from the economy.


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The turnover registered a slightly increase in industry and energy and services sector in 2005 

in comparison with the previous years while in agriculture and constructions these indicators 

decreased in the same period. 

60 

50 

40 

30 

20 

10 

0 

-10 

57.5 

55.9 

58.8 

51 56.2 44.2 49 

54.1 57.4 55.2 

43.4 

-7.7 

2003 2004 2005 

Turnover Added Value Net profit Nr. of employees 

Fig. 1. Economic indicators of the Romanian corporations (%) 

Source: The Ministry of Public Finance 

These economic evolutions of the Romanian corporations should be considered in the general 

positive frame of the economy and also as a result of the legislative measures taken in order to 

stimulate the development and increasing competitiveness of the firms. 

3. Evolutions of the financial indicators of the corporations 

3.1. Profitability indicators 

The financial theories describe a wide range of indicators to measure the value creation of the 

firms: the profitability indicators (Return on Assets - ROA, Return on Equity - ROE), the 

liquidity indicators (general liquidity, acid test quick ratio, money ratio), the debt indicators 

(the financial leverage, the cost of debt), the activity indicators (Asset Turnover). 

In order to have a image regarding the financial performances of the non financial companies 

should be analyses the main indicators such as: Return on Assets (ROA), Return on Equity 

(ROE), cost of debt and financial leverage. 

The positive economic development in 2004 had as consequence the increase of the 

profitability of the Romanian firms (table 1). This was joined by an improvement of the 

financial leverage and an improvement of the firms’ capacity to cover their interest expenses. 

Table 1. Evolutions of the profitability indicators for companies (by size) 

Types of 

Companies 

ROA 

ROE 

Cost of Debt Financial 

(%) 

(%) 

(%) 

Leverage (%) 

2003 2004 2005 2003 2004 2005 2003 2004 2005 2003 2004 2005 

Corporations 0.74 3.49 4.11 -0.29 6.85 8.94 1.68 1.54 1.33 1.10 1.73 1.74 

SMEs 6.35 8.38 6.64 25.11 33.39 23.39 1.86 1.92 1.86 4.17 3.88 3.51 

Total 

Companies 

2.32 5.04 4.97 3.20 12.31 12.37 1.75 1.68 1.54 1.52 2.17 2.16


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Source: The Ministry of Public Finance 

The increase of the overall profitability can be explained by the improvement of the 

corporations profitability caused mainly by a better resources management. 

The increase of the ROE in the period 2003-2005 can be explained on one hand, by an 

increase of the return on assets and of the financial leverage and, on the other hand, by the 

reduction of the debt cost. 

The reduction of the debt cost was determined on one hand, by the decrease of the banking 

credits in total debts because the access of corporations for alternative financing sources (selffinancing, 

commercial debts) and on the other hand, by the descendant trend of the interest 

rate for the credits in national currency and the relatively constant cost of credit in foreign 

currency for the non financial companies. Also the perception of the creditors regarding the 

capacity of the non financial companies to reimburse their debts was improved and this fact is 

reflected by the decrease of the risk premium. 

For the SMEs, the positive evolution of ROE in 2004 in comparison with 2003 was 

counterbalanced by a high decrease in 2005 which can be explained by a lower efficiency, the 

increase of the equity and a constant debt cost. 

By sector activity, the services register the highest profitability (ROA) (table 2). Also, the 

sector of industry and energy registered a favorable evolution of ROA in the analyzed period. 

The privatization process from this period determined an improvement of the management 

quality and this leaded to an increase of the performances from these sectors. 

ROE has an ascendant trend in these sectors because an increased efficiency of the production 

factors and of the lower financing costs. 

Table 2. Evolutions of the profitability indicators for companies (by sector activity) 

Activity 

sectors 

ROA 

ROE 

Cost of Debt Financial Leverage 

(%) 

(%) 

(%) 

(%) 

2003 2004 2005 2003 2004 2005 2003 2004 2005 2003 2004 2005 

Agriculture -0.7 3.42 2.18 -11.6 13.56 4.19 1.68 1.69 1.52 4.69 5.86 3.05 

Services 4.70 6.58 6.55 9.67 25.88 25.85 1.73 1.53 1.43 1.67 3.82 3.77 

Industry and 

-0.09 3.46 3.87 -2.47 5.54 6.74 1.74 1.87 1.66 1.31 

Energy 

1.32 1.30 

Constructions 6.46 6.86 2.08 14.79 20.21 3.43 2.04 1.80 1.61 1.88 

Source: Ministry of Public Finance, own calculations 

2.64 2.92 

In the construction sector, the profitability (ROA) registered a decrease in 2005 because the 

increase of the operational expenses and the reduction of the turnover which had a negative 

effect on the ROA. Also the ROE decrease dramatically in 2005 mostly because the reduction 

of the efficiency of assets using. Despite these facts, the impact on the financial stability 

seems to be reduced because the exposure of the banking sector on this activity sector is 

reduced (only 6.5 from the total internal credits). 

The agriculture sector become profitable in 2004 when it was registered a ROA of 3.42% in 

comparison with –0.66% in 2003 because it that was an exceptional year for agriculture and 

this was materialized in a higher increase of the operational incomes than the operational 

expenses (the profit was 17 times higher in 2004 than 2003). 

In 2005 the financial results obtained in the agriculture sector were reduced and ROA was just 

2.18% mostly because the improper weather conditions. The reduction of the ROA in the 

agriculture sector in 2005 had a direct impact on ROE which also decreased from 13.56% to 

4.19%.


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34B3.2. 

Liquidity analysis 

The liquidity of the Romanian firms was improved in the analyzed period, all liquidity 

indicators (general liquidity, acid test quick ratio and money ratio) registering a positive 

evolution (table 3). 

From the point of view of the liquidity structure, the debts and inventories represents 80% 

from the current debts, percent which remain constant during the period 2003-2005. On the 

current debts, the short term debts represent 98%. 

Table 3. The liquidity of corporations and SMEs 

Types of 

Companies 

General liquidityAcid 

test quick ratio Money ratio 

(current rate) (%) (%) 

(%) 

2003 2004 2005 2003 2004 2005 2003 2004 2005 

Corporations 0.86 0.97 1.09 0.62 0.70 0.80 0.11 0.17 0.21 

SMEs 0.98 1.01 0.97 0.69 0.71 0.66 0.14 0.15 0.12 

Total Companies 0.9 0.99 1.03 0.65 0.71 0.73 0.12 0.16 0.17 

Source: Ministry of Public Finance, own calculations 

At the structural level, the corporations are more liquid than the SMEs. This can be justified 

by maintaining a reduced liquidity level by SMEs (in order to increase the profitability) or by 

existence at the corporation level of a surplus of funds which could generate opportunity 

costs. 

3.3. Cost analysis 

The cost analysis for the corporation evidence an increase of the operational expenses based 

on a higher activity volume and an increasing profitability (table 3). 

100% 

80% 

60% 

40% 

20% 

0% 

25.3 

1.9 

12.1 

27.4 

33.6 

27.6 

1.9 

10.6 

28.9 

30.9 

26.2 

2.5 

11.7 

27.1 

32.5 

2003 2004 2005 

Other expenses 

Depreciation 

Salaries 

Product cost 

Raw materials cost 

Figure 2. Evolution and structure of the operational expenses for corporations 

Source: Ministry of Public Finance 

The analysis of the cost structure reveals a concentration of the expenses with raw materials 

and products which represents 60% from the total operational expenses. This fact can be 

explained by the orientation of the Romanian economy towards the sector of services, 

industry and commerce. In the structure of cost with raw materials are included the utilities 

costs (energy and water) which represents just 3% from the operational expenses. In these 

conditions, an eventual shock on the administrate prices could not generate problems to the 

non financial companies.


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For the Romanian corporations, the salaries represents about 11% of the operational expenses 

in 2005 they registered a dynamic because the fiscal relaxation policy in the salary field. The 

salaries expenses are concentrated in the industrial and energy sector (51.5%) because in this 

sector work about half of the employees. 

The depreciation expenses represent just 2.5% from the total operational expenses in 2005. 

4. Financing sources for the corporations 

In general, the firms have different financing sources: own sources (equity); self-financing; 

bonds; credits; internal and external debts. 

In Romania, the banking credits in the total financing resources was constant in the last years 

(about 5%) (figure 3). This involve on one hand, the existence of a higher informational 

asymmetry in comparison with other countries and on the other hand, the reduced capacity of 

the companies to affect directly the financial stability in the case of occurring macroeconomic 

shocks. 

60 

40 

20 

0 

48.3 

56.8 

39.7 31.6 31.7 

6.7 5.9 5.8 

5.3 5.7 5.7 

2003 2004 2005 

56.8 

Equity 

External private debt 

Banking credits 

Other debts 

Banking credits External private debt Equity Other debts 

Figure 3. Financing sources for the Romanian firms 

Source: Ministry of Public Finance, National Bank of Romania 

Regarding the capacity of covering the interest expenses registered positive evolutions and 

even an increase from 3.3% in 2003 to 5.6 % in 2005 (figure 4). 

8 

7 

6 

5 

4 

3 

2 

1 

0 

3.3 

5.5 

3.3 

5.6 

6.7 

4.8 

5.7 

5.7 

2003 2004 2005 

Total firms 

Corporations 

SMEs 

Figure 4. The capacity of the Romanian firms to cover their interest expenses


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Source: National Bank of Romania, Annual Reports 

By activity sectors, the increase of the profitability determined an increase of the selffinancing 

capacity as a potential source of financing, increase which manifested especially in 

the services and energy sector. 

Table 4. The financing sources on the activity sectors (%) 

Activity 

sectors 

Equity Banking credits External 

2004 2005 

Other debts 

Private Debt 

2004 2005 2004 2005 2004 2005 

Agriculture 14.6 24.7 7.7 7.5 6.6 6.2 71.2 61.7 

Industry and Energy 43.2 43.4 5.6 5.3 5.8 6.3 45.4 44.9 

Construction 27.5 25.5 5.8 7.0 3.4 3.5 63.3 64.0 

Services 20.8 21.0 5.2 5.9 6.3 5.5 67.7 67.6 

Source: National Bank of Romania, Annual Reports 

In agriculture, the weight of equity in the total financing resources increased from 14.6% in 

2004 to 24.7% in 2005, concomitant with a decrease of the non-banking debts. This surplus of 

capitals, resulted from non-reimbursable external funds, was leaded towards investment in 

fixed assets. 

In construction can be noticed a reorientation towards the banking credits in 2005; their 

weights increased from 5.8% in 2004 till 7.0% in 2005 in the same time with an equity 

diminish. 

In industry and energy sector the structure of the financing sources was relatively constant in 

2005 in comparison with 2004; the most part being formed by equity and non-banking debts. 

5. Conclusions 

The favorable evolutions from the last years and the continuing process of economy 

restructuring determined an improvement of the financial solidity of the companies. This is 

reflected by the improved indicators which reflect the financial performances of the firms and 

especially, of the corporations. 

Despite the reduced number of the corporation the weight of the added value in the total nonfinancial 

firms produced by the corporations was 57.4%, the number of employees 

represented 43.3% in the total active employees while the net profit produced by the 

corporations was 55.2% in the total net profit from the economy in 2005. All these economic 

indicators reveal the important role of the corporation in the Romanian economy. 

The financial performances was analyzed taking into consideration the profitability indicators, 

liquidity indicators and the debt indicators. 

The analysis of the profitability indicators (Return on Assets - ROA, Return on Equity - ROE) 

indicates, in general, a positive evolution. This was generated mainly by a better resources 

management and a decrease of the debt costs. 

The liquidity of the Romanian firms was improved in the analyzed period; all liquidity 

indicators (general liquidity, acid test quick ratio and money ratio) registering a positive 

evolution. At the structural level, the fact that the corporations are more liquid than the SMEs 

can be justified on one hand by existence at the corporation level of a surplus of funds which 

could generate opportunity cost or, on the other hand, by maintaining a reduced liquidity level 

by SMEs (in order to increase the profitability).


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From the point of view of the firms performances, it is important the efficient allocation of the 

financial resources in economy. The Romanian companies have different financing sources 

(equity; self-financing; bonds; credits; internal and external debts) but they are mostly 

financed by other credits than the banking ones. This rise on one side, the problem for 

companies to have the capacity to build realistic project for which demand financing and on 

the other side, the capacity of the financial sector to allocate efficiently the available resources 

for these companies. The level of the banking credits offered to the firms and the associated 

costs determine the capacity of the monetary authority to influence the real economy. Thus, 

the mechanism of transmission of the monetary policy can influence the decision of the 

companies regarding the financing sources through: the interest rate channel; the credit 

channel and the companies’ balance sheet channel. 

The favorable macroeconomic evolutions from the last years determined an improvement of 

the financial performance of the Romanian corporations reflected by the increase of their 

profitability and liquidity; the decrease of the debt cost; the slight increase of the financial 

leverage; an improved liquidity. 

REFERENCES 

1. Giurca Vasilescu, L., – The banking credit in Romania. Retrospective and perspectives, 

Universitaria Publishing House, Craiova, 2005 

2. Ministry of European Integration – “National Development Plan 2007-2013” 

3. Mircea, R., Racaru, I., Margarit, A., – “Rolul companiilor nefinanciare din Romania in 

asigurarea şi menţinerea stabilitatii financiare”, Study - National Bank of Romania, The 

Direction of Financial Stability, 2006 

4. National Bank of Romania, Annual Reports 2004, 2005, 2006 

5. Porter, M. E. - Competitive Strategy: Techniques for Analyzing Industries and 

Competitors. New York: Free Press. 1980. 

6. Sichigea N., Giurca Vasilescu L.,– Corporate finance. Theory and Applications, 

Universitaria Publishing House, Craiova, 2007


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Fusions, Acquisitions, Concentration – Tendencies in the Modern 

Banking Systems 

Cristi Marcel Spulbăr, Assoc. Prof., PhD, Faculty of Economy and 

Business Administration, University of Craiova 

ABSTRACT 

The analysis of the national banking systems from the developed countries demonstrate that these are 

very different and consist of a great variety of institutions, especially within the frame of the European financial 

space. Concerning this, one can estimate that it is possible that the financial globalization process, which is 

perceived as a progressive emergency of a world banking industry, should favour a levelling tendency of the 

banking systems and of the banking activity. 

From the assessments of the developed European banking systems one can also observe that the banks 

will evolve, in the sense of concentration, which is achieved as well as by the overtake of the small banks by the 

larger ones and by the fusion or alliance of some financial and banking institutions, but also by the specialization 

according to the respective market sector. 

sector 

1.Regulation and deregulation – supporting of concentration in the banking 

The banking systems of the 70’s in the previous century, was characterized by an over 

regulation, wich has suffocated the banking activity by the increasing of birocratic blockings. 

Relevant examples of very regulated systems are the ones from Italy and France of the 70’s of 

the past century, wich was defined in that the central bank interfered directly in the activity of 

commercial banks, by establishing of interest limits and by normalizing some categories of 

operations, wich made them to become less competitive, this feature beeing the genesis of the 

question conducted to change: if a free regulation may induct, necessarily a strong 

competition. 

To this stage it follows the second one, the one of the 80’s in the past century – the 

liberalisation in the regulations area - in wich had place profound mutations of the 

competitive conditions in banking and financial markets. No matter that in some countries 

(Italy, France etc.) this deregulation was developed by public authoritis, or if in others 

(England, for instance), was developed as a result of the decisions of those wich interfere in 

financial area, at this time it is itensitying the competition that incites financial agents, so, and 

the banks, have to organize themselves to enhance the coinvolvement degree. The competitive 

deregution of this stage have incurajed the universalization of financial activities, and the 

concentration is for banks a factor to reduce the rivalryies with other financial agents. 

From our point of view, with all the diversity of national situations, the competition, 

the concentration and the universalization consitute a first common trend that alloows and the 

delineation of the big features of the future european financial space on the way of 

accomplishment, too. Another common trend would be the ampleness of the internalization 

phenomenom, the developing of international flows of capital as the developing of markets 

may be accomplished only if the financial markets are opened, sufficiently. As a mark of the 

second phase is the developing of regulation in the banking – financial area in european 

countries, in a “two- pole” juridicial frame. That is translating by the one that, on one hand,


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there are diverse national regulations, and on the other hand, the ensemble of european 

regulations, an set in motion by commendations and directives. If the commendations request 

the cooperation of the affiliate states, not beeing mandatary, instead the directives represent 

the general frame, determinant of the basic principles and of the targeted results, having a 

mandatory character. The deregulation had as a goal the enlargement of freedom to inovate 

and to enterprise, by attenuation and suppresion of the authoritarian regulations regarding to 

the functioning and the acces on different capital market, the role and the freedom of action of 

financial agents, the framing of loans operations by nature, the fiscal regim or theier 

objective. The term “deregulation” is, consequently, pretty innacurate actualy represented a 

new process of regulation, in most of the cases, the restrictive regulations beeing replaced by 

regulations much wider, wich describe the frame of the new regime,in detail. 

The trend of liberalisation of the services provided by financial institutions has the 

intention to encuurage the competition an all levells. Regrettably, this desegmentation of 

financial market bring a specific set of problems, too. First problem regard the normatives by 

wich different financial institutions are regulated. In an environment wereat different types of 

financial servicies are provided by different categories of institutions, the regulations may be 

distructiv both as regarding the product and the institution. Additionally the deregulation 

don’t have an uniform character, that is meaning that some segments in financial servicies 

domain are disengaged more rapidly than others. An eloquent example is consisting the way 

wereat it was permmited to the retail banks the extension of the servicies gamma, hereby 

becoming supliers of financial servicies in “ full package”. Another problem of deregulation 

is consisted the fact that the activity of the integrated financial servicies provider is very 

difficult to regulate. Wereas the products may be regulate implicit so that it coincide to certain 

standards, the servicies provider may get a competitive advantage by its capacity to use 

informations wich it has for crossed sells of products. 

In the some time we put in discussion the process of the market opening wich is 

deploying in two directions: into interior, by elimination the borders between traditional 

compartments, into exterior, by supressing the frontiers between national markets. Many 

banks is developing the activities at international level in order to participate on different 

markets that may consist: 

� additional sources of funds – in this case, a bank in an increasing country may 

establish a branch in a developed country in order to attract funds for investments in the 

residence country; 

� ways to capitalize available funds – case in wich, a bank that has resources to enter on 

a blowing foreign market in order to improve the existing opportunensses (an example in this 

way consists the investment banks from developed countries that involve in capital markets of 

the developing countries); 

� also banks with international activity may participate on a foreign market to capitalize 

on stability and a high degree of liquidity (as london market of euro currencies); 

� a combination of the above mentioned scenarios. 

One of the recent events has demonstrated to the entire world wich are the effects of 

the oppening of national market, it consists in the introduction of european currency.The 

trancparency that was generated by euro insertion and by a single monetary policy, allow to 

clients to compare banking servicies and the costs associated. This aspect amplifies certanly, 

the competition between banks. Although, by this, it is reducing the bank profit ratio, there 

are stimulated the reconstructuring and the consolidation of banks in euro area, allowing them 

to became more competitive in the globalisation context. Actually, these transformations are 

angoing: numerous banks form Europe fusioned or forms alliancies, concurring to a drastic 

change of national bank environments and creating networks at international level.


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2. Fusions, acquisitions, concentration in the european banking systems 

The emphasis of the competition and the agravation of economic conjuncture 

(especially between 1990 – 1993) have amplified the number of fusions, takeovers and 

associations, wich determined an considerable increase of the concentration degree in 

financial and banking area, both as number and as dimension of the engajed values in such 

operations, as it result from the next informations: 

1996 

Table no. 1 Fusions and acquisition in european banking sector, in years 1989 - 

35BCountries 

83BGermany 

4BNumber 

of operations 5BValue 

1989 

- 

1990 

1991 

- 

1992 

1993 

- 

1994 

1995 

- 

1996 

73B 

billions 

1989 

- 

1990 

1991 

- 

1992 

USD 

1993 

- 

1994 

1995 

- 

1996 

1989 

- 

1990 

in procent from fusions 

and aquisitions in the 

whole economy 

1991 

- 

1992 

1993 

- 

1994 

19 71 83 27 1,1 3,5 1,9 0,7 4,5 6,5 7,6 3,5 

France 52 133 71 43 2,7 2,4 0,5 3,2 5,1 4,3 1 10,4 

Italiy 41 122 105 65 8,2 5,3 6,1 3,0 22,7 15,6 17,7 19,7 

Great Britain 86 71 40 28 6,4 7,5 3,3 21,7 2,6 6,5 3,4 12,4 

Belgium 11 22 18 12 - 1,0 0,6 0,4 0,2 14,1 7 7,9 

Spanis 30 76 44 26 4,0 4,3 4,5 2,1 18,5 13,5 21,5 34,1 

Source: Cristi Spulbar, Comparated banking systems, Sitech Publishing, Craiova, 2005, pg.189 

Consequently, banks is orienting on the way of getting successe on a competitive plan, 

especially by concentration, by a continually reunition of units, more or less performant. 

Bellow, wereas the eloquent models of banking systems of the EU countries analised in order 

to eloborate this paper, we shall relieve the great fusions and banking acquisitions and theirs 

implications, considering as starting point the suggestive perioade of the years 1998 – 2002. 

In Great Britain, this phenomenom affected bussines banks, the mutual ones and the 

commercial ones. Hereby, in 1999, HSBC Holdings from Great Britain, allready on the third 

place in the world, is exponding in USA by purchasing New York Republic Bank. In the year 

2000 it is continuing consolidation exteending by the purchasing of two banks in France 

(prouving that it can work any where): Commercial Credit in France and Hervet Bank, 

reaching in 2001 on the fith position in “25 world top”, respective first position in “25 

Western Europe top”. 

The tendency of fusioning gave birth to some contested takeownes. In Great Britain, 

National Westminister has allied with Royal Bank of Scotland, against the offer made by 

bank of Scotland, as a result of the fact that at the leavel of the year 2000, Royal Bank of 

Scotland has won the bottle with its rivale Bank of Scotland, regarding the control over 

National Westminister. Hereby, it is reaching in “25 world top” from the fifty-sixth position 

in the year 2000, on the sixteenth position in the next year, wherethrough in 2002 to continue 

the expansion in USA. In the some year 2000, Barclays puchase The mortgage loan bank 

Woolwich, reaching from the 28’th position in 2000 on the 23’th position in the next year, in 

world top. 

Another significant fusion in UK is the one between Bank of Scotland and Halifax, 

wich conducted to the formation of HBOS Holding, that penetrated in “25 world top” straight 

in 19’th place (respective seventh position in “25 Western Europe top”). 

1995 

- 

1996


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In Germany, in the year 2000, Deutsche Bank was the biggest bank in the world 

according to the assets size, by purchasing Bankers Trust in 1999, but it was aced in 2001 and 

2002, reaching on the third position and respective on the forth place from this point of view. 

Formed as result of the fusion between Bayerische Vereinsbank and Hypo Bank in 1998, the 

bank holding Hypo Vereinsbank effectuates in2000 the regional aquisition of the Austia 

Bank, and that placed the outcome groupe in “the 25 world top” on the twelth place in 2001 

and 16’th place in 2002, respective position 4and 6 in “25 Western Europe top”. 

In France in 1999, the intervention of National Bank of Paris has left BNP a long with 

Paribas, without Societe Generale, resulting BNP Paribas Groupe, wich recorded an ascension 

in the world top, reaching on the 14’th position in the year 2000, staying in this position on 

the next year. 

In Spanish in 1999 it takes place the fusion between Banca Central Hispano, resulting 

BSCH Groupe, wich is continuating the consolidation in 2000 by fusion with Banespa and 

Serfin Bank, resulting Santander Central Hispano banking groupe, and enter in the 25 world 

top on the 24’th position in 2002. This groupe has concentrated on expanding of the consumer 

loan european network, by aquisition and selling shares of the listed companies, in attemting 

to increase their capital. Also, in the some year 1999, it takes place the fusion between Banco 

Bilbao Vizcaya and Argentaria, resulting Banco Bilbao Argentaria bannking groupe, and 

climbs in the world top on 25’th position, and in 2000 it is continuating consolidation by 

aquisition of Bacomer bank. 

In 1998, in Italy, it takes place the fusion between Instituto Bancaria Sao Paolo di 

Torino and Instituto Mobiliare Italian, resulting Sant Paolo IMI. In the next year, Credit 

Italiano by fusion with Unicredito, give birth to another banking groupe, called Unicredito 

Italiano. Also, it takes place the fusion between BCI and Intensa Bank, resulting Intensa BCI. 

In 2000, it takes place the aquisition of Banco di Napoli by San Paolo IMI, wich continauting 

the consolidation with Cardine Bank in 2002, year in wich it takes place the absortion of 

Carire Bipop Bank by Banco di Roma. 

In Belgium, in 1998, Kreditbank by fusion with Cera, is composing the KBC groupe. 

In 2000, Fortis Bank purchaced Banque Generale du Luxembourg, climbing in 25 european 

top on 21 position. In year 2001 it takes place the aquisition of Artesia bank by Dexia Bank. 

In conclusion, the new environment of the euro area, along with the competition in 

global banking businesses, has enhance the perception necessary for the attainment of an 

increase efficiency, that was reflected in a continuu wave of banking fusions, conducting to a 

substantial impact in the evolution of the banks number. Hereby, the number of banks in EU 

has reduced in the last decaded as a result the concentration process by fusions and 

14 

aquisitions, from 9.747 in 2001 to 8.684 in 2005F 

F. 

For the banking systems previous analised, the situation is presented in the next table. 

Table no. 2 The evolution of credit institutions number in Europe Union in years 

2001-2005 

Country 2001 2002 2003 2004 2005 

Great Britain 452 451 426 413 400 

Germany 2.526 2.363 2.225 2.148 2.089 

France 1.050 989 939 897 854 

Spanish 366 359 348 346 348 

Italiy 843 821 801 787 792 

Belgium 112 111 108 104 100 

UE 12 7.213 6.899 6.672 6.490 6.308 

UE 25 9.747 9.311 9.061 8.836 8.684 

Source: European Central Bank, HUwww.ecb.intUH 

14 European Central Bank, HUwww.ecb.intUH


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The fusions has accelerated, when the banks seeked to defend theirs position by 

consolidation. The increase competition drives to a rapid drop of the earnings. We will be 

spectators of a terible fight for the best seats on every european markets. It is expecting new 

consolidations, especially by fusions and international takeovers. 

We bring examples of the recent banking transactions wich put a hall mark over the 

concentration process by fusions and acquisitions in 2007 in Europe and mention only the 

purchase in 2006 by the italian bank Unicredito of the german bank HVB and fusion between 

the spanish bank Santander with Abbey National from UK in 2004. 

In april 2007 Barclays Bank, the third bank as size in England, is purchasing ABN 

Amro bank, the biggest dutch bank, and pays 91,2 billions dollars, and that is the biggest 

transaction on the european financial servicies market, that ever took place. Cosequently to 

this transaction, the banks were agreed with the selling of the LaSalle banking groupe from 

Chicago, held by ABN to, The bank of America for the amount of 21 billions dollars. The 

result of this takeover is the ascension of Barclays/ABN Amro on the second place in the 

european top of financial gigants with a market value of 142 billions dollars. In the some 

time, it is crating a bank with over 217.000 employees and 47 milions clientsF 

After the purchasing by Intensa Bank of San Paolo Bank, transaction concluded in 

January 2007 for the amount of 37,62 billions dolllars, the new groupe Intensa San Paolo with 

a market value of 76 billions dollars is taking the eighth place in the above mentioned top. 

The new bank is holding assets that worths 541 billions euro and it will serve 13 milions 

italien clients and on the international scale it will work with corporate clients in over 30 

countries, such as Rusia, China and India. The main advantage of consolidation is the 

fortification of the market position and it is appreciating that the new banking groupe will 

overcome almost all american banks with the exception of Citigroup, Bank of America and 

J.P. Morgan Chase. 

3. The situation in Romania 

We appreciate that the romanian banking system follows the tendency of glabalisation 

in the world economy as a result of fusions and aquisitions from Europe previous presented, 

and it will be exposed to a fully concentration process. 

16 

In a studyF 

F carry out in the past, we found out that the concentration degree of 

banking market in Romania, measured by the procentage of the five top banks of the system 

in total assets – 59,2%, is including among the lowest of the developing countries from 

Eastern and Central Europe. The increasing of the competition will impose mutations in the 

banks srategy, banks that record low market rations, by using eventual fusions and aquisitions 

and the orientation towords specialisation (niche bank). 

From our point of view, little banks, especially the ones that have market ratio under 1 

procent, if they don’t have in mind the increase of capital and if they don’t succed to get 

closer to a big banking groupe, on the medium and long term they will not hold out, opinion 

suported by experts wich consider that until 2009 will remain approximatelly 15 banks from 

the existing ones. We will have fusions and strategic partenership, both between banks from 

Romania and beween banks from Romania and foreign banks, affirmation supported by the 

example of the first romanian bank wich made this step – Tiriac Bank that performed the 

fusion with HVB Group, by a transaction of 248 milions euro. We mention the interest of 

spanish bank La Caixa, wich opened not so long ago, a branch in Romania, to purchase a 

bank with a market share at least 3-4% of the total asset of ramanian banking system on the 

15 Wall Street Journal, april 25, 2007 

16 . Spulbăr, The Integration in the European Banking System. Tendencies and Cgallenges for the Romanian 

Banks, Annals of the University of Oradea, Tom XVI, Volumul II, pg. 589 

15 

F.


ISSN: 1842-4856 

retail segment, such The Bank of Transilvania, Carpatica Bank or Libra Bank. What is relly 

important in the context of the present study, is the intention of the british groupe Royal Bank 

of Scotland, one of the top ten in the world as financial strength, to takeover the operations of 

ABN Amro in Romania. 

4. New challenges for banks 

At the start of the third millenium, the globalised economy is reserving favorable 

perspectives for the banking sector, but only the banks that will have the capacity to exploit 

the new opportunensses may benefit by this new context. Banks must have a distributive 

attention,in the way of surprising and adaptation to the main directions wich the globalised 

financial world is guiding. In this context, the major problem for banks is the one of survivol. 

It has to deal with twoo big objectives that are considered essential for their existance such as: 

to exploit to maximum the opportunensses offered by globalisation, and its result will be a 

planetary economy in a countinuating growth, an unprecedented expansion of the financial 

markets; the limitation to maximum of the generated risk by the accentuation of the 

competition and by the pendency wich is created by globalisation of banking servicies. In 

order to answer to such challenges, banks need prevalently: 

� a proper capitalisation, because only banks with solide financial base will exploit the 

opportunensses offered by banking globalisation and they will be able to answer allong with 

the growing of risks and of the requirements of the international banking prudency; 

� much more know-how, because it is needed of much information, high tecnology and 

experts that are capable to collect, to systematise data, and use them efficiently in the bank’s 

interest and its clients; 

� a well – defined strategy by wich it may establish the coordonates of future evolution, 

the organisational goals to reach; 

� massive investments in performant equipments, in labour force and in image. 

A big part of these problems by strategic nature is sets by fusions and aquisitions and 

the result is conducting to banking concentration wich differs from one country to another 

and is finding the expression by the growthing of capital volum and especially of resources, 

offering to banks the chance to increase the volume and the stucture of theirs operations. 

References 

1. Boncel F., L’Europe des banques, Sefi Publishing House, 1995 

2. Dupuch P., La Banque – un essai d’organisation, La Revue Banque Publishing House, 

Paris, 1990 

3. Garsuault P., Priami S., La Banque. Functionnement at strategies, Economica Publishing 

House, Paris, 1995 

4. Mehta D., Fung H.G., International Bank Management, Blackwell Publishing, 2004 

5. Spulbăr C, Nanu R. Berceanu O., Comparated Banking Systems, Sitech Publishing, Craiova, 

2005, 

6. Financial Paper, 2007 

7. Wall Street Journal, 2007 

8. HUwww.ecb.intUH 

9. HUwww.bis.orgUH 

10. HUwww.afb.frUH


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IMPLICATIONS OF TAXATION ON THE MANAGEMENT OF INTRA- 

COMMUNITY COMMERCIAL TRANSACTIONS 

PALIU-POPA LUCIA, professor, Ph.D., "Constantin Brâncuşi" University 

ABSTRACT 

The elimination of customs barriers between Romania and the Member States of the European Union 

has influenced the international commercial transactions, which as from 01 January 2007 cease to include the 

operations carried out within the Community. 

Starting from the meaning of the intra-Community acquisitions and deliveries, I shall try to point out 

the influence of the legal changes concerning the new fiscal regulations on the commercial transactions carried 

out within the European Union, the method of registration in accounting and the advantages and disadvantages 

of customs barriers elimination. 


Romania's accession to the European Union required the harmonisation of national 

legislation with the one in the Member States and significant changes were made in the fiscal 

field. The elimination of customs barriers between the Member States of the European Union 

resulted in the elimination of customs controls of movement of goods inside the Community, 

influencing the international commercial transactions that as from 01 January 2007 cease to 

include intra-Community acquisitions and deliveries. Therefore, the export and import 

concepts disappeared in the relationship between the Member States, being replaced by new 

concepts such as intra-Community delivery (instead of export) and intra-Community 

acquisition (instead of import). 

The intra-Community acquisition of goods is the acquisition of the right to dispose, 

as an owner, of goods which are dispatched or transported to the destination indicated by the 

buyer, by the supplier or by any other entity acting on behalf of the supplier or the buyer, to a 

Member State, other than that from which the goods are dispatched or transported. 

The intra-Community deliveries refer to deliveries of goods that are dispatched or 

transported from a Member State to another by the supplier or the person for whom the 

delivery is made, or by another party on their behalf, including transfer by a taxable person of 

goods belonging to the economic activity from Romania into another Member State. Based on 

the significance of intra-Community acquisitions and deliveries, I shall present hereinafter the 

influence of the legal changes regarding the new fiscal regulations on the management of 

intra-Community commercial transactions, the advantages and disadvantages of customs 

barriers elimination and the method of registration in accounting. 

2. The implications of accession to the European Union on the taxation of intra- 

Community commercial transactions


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Taxation represents the field that underwent the most changes after Romania's 

accession to the European Union, the Fiscal Code being entirely harmonized with the 

European legislation after 01 January 2007. Romania's accession to the European Union 

brought important changes regarding the value-added tax, due to both the elimination of 

customs barriers and the need to harmonize the national legislation with the one of the 

member states. 

The control of movement of goods inside the Community is made by the means of the 

electronic system VIES and statements of intra-Community acquisitions in Romania are made 

after checking the supplier's valid number assigned for VAT purposes in his member state and 

if he declared the operation. The economic operators registered for VAT purposes shall not 

make the VAT payment for intra-Community acquisitions, but shall apply the reverse charge, 

i.e. payment through the VAT return. 

Significant changes also occurred in the field of service delivery and new concepts 

appeared - intra-Community transport of goods, which has different regulations than the 

international transport of goods between EU Member States and third countries. 

Thus the international transport of goods afferent to an import or export was and 

remained exempt from VAT, while the intra-Community transport of goods is not exempt 

from VAT, unless a customer delivers the transporter a valid VAT code from a Member State 

other than Romania, from where the transport leaves. In this case the customer shall pay the 

tax in his country and the Romanian transporter shall make the invoice without VAT. 

If an economic operator from Romania contracts a transport with a transporter from 

another Member State, he will have to communicate his registration code for VAT purposes 

owing the afferent tax in Romania, however without making the actual payment, but applying 

the reverse charge rule. 

The communication of registration code for VAT purposes is very important, leading 

in most cases to provider's invoicing without the value-added tax and application of reverse 

charge by the customer from another Member State, provided that the latter is registered for 

VAT purposes. Since the 01 January 2007, the use of fiscal invoices with special regime is no 

longer mandatory, because by abolishing custom borders, the goods circulate accompanied by 

invoices issued in every Member State, documents which have to be accepted in the state the 

intra-Community acquisition is made, irrespective of its form, if they comply with the 

minimal information settled by the Directive. The economic operators who at the end of 2006 

had in stock special fiscal invoices could also use them after the accession date until 

consumption, being able to customize their invoices, but without being bound to do so. 

European regulations required the elimination of some VAT exemptions that were not 

in line with the Community acquis, such as: elimination of VAT exemption for researchdevelopment 

activities, fee for commodity exchange transactions and income obtained by 

Transferable Securities Companies for management and deposit of shares, equity securities, 

debt securities, for transactions financed from non-callable funds, granted by foreign 

governments and international bodies and for veterinary medical care. 

As from 01 January 2007 special regimes shall be applied for the value-added tax for: 

small enterprises, travel agencies, for investment gold, for second-hand goods, works of art, 

objects of collection and antiquities and also for domestic services delivered by persons who 

are not established within the Community, for non-taxable persons established in the 

Community. 

Since the accession date, in the category of goods and services for which 

simplification measures on reverse charge apply, there were also included the buildingsassembly 

works which were excluded as from 2008 with the buildings, building parts and 

grounds of any kind for whose delivery the charge regime applies. 

3. Advantages and disadvantages of intra-Community commercial transactions


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The intra-Community deliveries of goods are framed within the category of exempt 

operations with deduction right in the following conditions: 

� the supplier must have evidence that goods left Romania's territory; 

� the buyer communicates the supplier a registration code for VAT purposes 

issued in the destination Member State. 

Cumulative failure to meet the two conditions binds the supplier to collect VAT as in the case of an 

internal operation. 

The Romanian supplier has the following obligations: 

� registration in the invoice issued of the registration code for VAT purposes for 

both supplier and customer (codes shall be checked using VIES); 

� registration in the VAT return of the value of intra-Community deliveries; 

� to state the deliveries of goods in the quarterly recapitulative statement; 

� to have evidence that goods left the territory of the forwarding Member State. 

The intra-Community deliveries of goods have a series of advantages and 

disadvantages: 

a) Advantages : 

� the supplier, taxable person registered in the Member State as VAT payer is 

not considered as an exporter, for which reason the export customs declaration 

shall not be filled-in; 

� the VAT is not collected, the intra-Community deliveries of goods are framed 

within the category of exempt operations with deduction right; 

� compared to the previous treatment of the transaction, costs are lower. 

b) Disadvantages : 

� high costs regarding the value-added tax documentation mainly due to the 

recapitulative statement obligation; 

� costs with staff training; 

� costs generated by the implementation of the new software or change of the 

existing one. 

With reference to the intra-Community acquisition of goods we can mention as a 

general rule that the value-added tax is paid in the destination state and the place of the intra- 

Community acquisition is considered to be the place where the goods are when the dispatch 

or transport of goods is concluded. The customer, taxable person registered as a value-added 

tax payer in Romania, emphasizes the VAT by applying the reverse charge mechanism, in 

which the tax is not actually paid and the import customs declaration no longer exists. 

The beneficiary of the intra-Community acquisition has the following obligations: 

� to enter the value of intra-Community acquisitions in the VAT return; 

� to state the acquisitions of goods in the quarterly recapitulative statement; 

� to issue the self-billing invoice if he/she did not receive the invoice from the 

supplier. 

The intra-Community acquisitions have a series of advantages and disadvantages, i.e.: 

a) Advantages : 

♦ economies regarding the cash flows on the value-added tax by its nonpayment; 

♦ costs are reduced compared to the treatment of transactions before accession; 

♦ easier procedures. 

b) Disadvantages : 

♦ costs are increased because of reports made by the recapitulative statement; 

♦ staff training requires additional costs; 

♦ increased costs with the implementation of the new software or improvement 

of the existing one.


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The method of registration in accounting has simplified after Romania's accession to 

the European Union and the implications of taxation on the management of intra-Community 

commercial transactions can be synthesized as follows: 

� reflection of the intra-Community acquisition of goods: 

* 

3xx "Inventories" = 401 "Suppliers" 

* 

� concomitantly, the afferent value-added tax is pointed out: 

* 

4426 "Input value-added tax" = 4427 "Output value-added tax" 

* 

� reflection of an intra-Community delivery of goods (commodity): 

* 

4111 "Customers" = 707 "Income from sales of goods" 

* 


Romania's accession to the European Union required the harmonisation of national 

legislation with the Community legislation and significant changes were made in the fiscal 

field. 

At first sight the new procedures have a positive impact on the development of intra- 

Community commercial businesses due to the simplification of transactions with goods, by 

eliminating customs formalities and implicitly the fees paid to customs agents, by fluidizing 

logistic flows and also due to the elimination of costs related to cash flows, since the valueadded 

tax is no longer to be paid at customs. 

Nevertheless there are costs generated by the new legislation that refer to expenses 

made with the change of the accounting and informative system, changes necessary in order 

to fill in the declarations required by the new legislative stipulations on indirect taxes, 

expenses for proper and accurate records of all the operations made in the development of the 

activity, but also costs generated by rapid adaptation to the new regulations, concretized in the 

increase of expenses with services of accounting and fiscal records or for staff training. 

As a main advantage should be kept in mind the general modernization of the Romanian 

fiscal system and its connection to the European fiscal system and as a disadvantage one 

may speak of the costs generated by the period of transition. 

Bibliography: 

1.Paliu-Popa, L., – Contabilitatea comerţului interior şi exterior [Accounting of Internal and 

Ecobici, N. External Trade], Sitech Publishing House, Craiova, 2004. 

2.Popa, A.F. - Codul fiscal în contextul integrării europene. Ghid practic pentru înţelegere 

(coordinator) [Fiscal Code in European Integration Context. Practical Guide for 

Comprehension and Application], Contaplus Publishing House, Ploieşti, 

2004. 

3. xxx - Law no. 571/2003 on Fiscal Code, as further amended and supplemented. 

4. xxx - Internet sources: HUwww.mfinanţe.roUH, HUwww.infoeuropa.roUH, HUwww.finmedia.roUH, 

HUwww.teodoru.comUH .


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METHODS FOR PERFORMING INTERNATIONAL COMMERCIAL 

TRANSACTIONS 

PALIU-POPA LUCIA, professor, Ph.D., "Constantin Brâncuşi" University 

ABSTRACT 

Romania's accession to the European Union has caused a series of changes in the structure of the 

international commercial transactions, as from 01 January 2007 they do no longer include the acquisitions and 

deliveries performed between the European Union Member States. 

I shall try in this paper to point out the methods to perform the import and export operations, specifying 

the advantages and disadvantages of their use and also the specific aspects concerning the accounting 

organization for the entities that make such transactions. 


The elimination of customs barriers between Romania and the other Member States of 

the European Union has influenced the international commercial transactions, which as from 

01 January 2007 do not include the operations carried out within the Community. Considering 

the interdependence relationships between the parties, within the international commercial 

transactions, based on the stages of internationalization of business there are included: 

� international commercial transactions (external trade operations in a limited 

meaning); 

� strategic alliances and international co-operations (licensing, sub-production, 

franchising); 

� implantations abroad (direct investments in production and marketing). 

In a limited meaning we may say that the international commercial transactions 

involve the international exchange of goods and the main form of achievement is represented 

by the export-import operations based on the interdependence between countries within the 

scope of marketing, being founded on the Contract for the international sale of goods. 

I shall try in this paper to refer to the methods for performing the international 

commercial transactions, to the advantages and disadvantages of their use and also to the 

specific aspects concerning the organization of accounting for the entities that carry out such 

activities. 

2. Motivation and substantiation of international commercial transactions 

International commercial transactions are made through external trade organizations 

specialized in this field that perform import and export operations outside the Community, 

entities that prospect, promote, negotiate, contract and carry out the commercial transactions. 

Through the relationships they have with external markets on the one hand and with internal 

suppliers and beneficiaries on the other hand, they have a significant influence on both the 

production intended for export by adapting the former to the world market requirements and 

on the internal demand for goods and services, facilitating its diversification. 

Irrespective of the size of enterprises or their field of activity, business development 

on international level tends to become a necessary condition for the existence of enterprises 

and the business strategy must meet the exigencies of globalization. 

In practice economic agents are involved in international business through import and 

export operations, most frequently commercial transactions represent the exclusive form of 

internationalization in the case of small and middle enterprises.


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There are three categories of motivations that determine the export decision, i.e.: 

� demand related motivations referring to the products with commercial success 

on internal level and that can be marketed on the external market upon the 

foreign partners' request; 

� offer related motivations, implying that the exporter gets involved consciously 

on the external market in order to seize opportunities; 

� motivations concerning the attitude of management of pro-internationalization, 

orientation of the enterprise towards the outside. 

The substantiation of strategy of international commercial transactions is performed 

according to an analysis that considers on the one hand the business environment 

characteristics (external analysis) and on the other hand, the evaluation of the firm's capacity 

to integrate in the world market (internal analysis). 

The premise of strategy elaboration is created by the identification of advantages 

(opportunities) and evaluation of costs (risks) concerning the international extension (external 

analysis) and also by the diagnosis of the firm's economic capacity (internal analysis). 

3. Methods to perform international commercial transactions and specific 

aspects concerning their accounting and settlement 

External trade represents an important factor of the national economic increase, 

determined and determinative for the globalisation process. In order to make international 

commercial transactions, the external trade organizations, importer and exporter, may use 

several methods. Considering the access manner on the external markets, there are operations 

made directly by the firm or those where the importer or exporter goes to an intermediary 

agent or a trade house. Combining the previous criterion with the degree of involvement on 

the external market and taking into account the stages of business internationalization from 

the exporter's perspective, there result three methods to perform the operations, i.e.: 

� direct export; 

� indirect export; 

� export through intermediary agents. 

The direct export represents a form of international commercial transactions through 

which the producer concludes and performs the Contract for the international sale of goods, 

thus establishing a direct relationship with the external customer. 

The direct export knows several forms of achievement that go from performing the 

transaction with foreign customers through the organizational structure of the firm in the 

origin country, to using a representative abroad and to the creation on the international market 

of structures that depend on or are controlled by the exporter. 

The creation of a personal instrument of external trade has a series of advantages, 

such as: 

� producers are kept in direct contact with the market; 

� producers are offered the chance to promote their products, the factory mark 

which leads to the enterprise consolidation on the external market; 

� producers are offered the chance to participate in the appropriation of the trade 

profit. 

Direct export and import has also a series of disadvantage, i.e.: 

� the risks of the external trade activity affect the firm directly; 

� the constitution of services or compartments profiled on international 

activities, with speciality personnel, implies new costs and risks in the 

management plan; 

� because of the increased level of marketing expenses, the direct export 

becomes profitable only from a certain volume of sales.


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The indirect export implies the separation of marketing functions from the production 

ones in autonomous units that act as traders. Thus, the producer or exporter sells the goods to 

a trade organization that makes the export on its behalf and on its own account. 

In this case the producer does not undertake the expenses and risks for marketing his 

goods abroad, he is not in close connection with the external market and the external trade 

organization represents the interface between the internal and the external environment. 

Trader's purpose is to make profit from the difference between the selling price abroad 

and the purchase price in the country, undertaking both the price risk and the foreign 

exchange risk. 

As characteristics of the indirect export we can mention: 

� the external marketing function is fully transferred from producer to the trade 

organization; 

� the producer is separated on the external market, having indirect access to the 

information concerning the characteristics of request; 

� the activity of market prospecting, negotiation, contact and running is made by 

the external trade organization; 

� trade organizations provide suppliers the advantages of specialization in the 

field, qualified personnel and good custom. 

The choice of this method to perform international commercial transactions is 

recommended for the small and middle enterprises that cannot or do not think it is efficient to 

create their own export structures, or when export represents a relatively high quota from 

producer's turnover. 

The export through intermediary agents as a method to perform international 

commercial transactions by the means of a person other than the interest holder, whether it 

acts on one's behalf but on somebody else's account, is situated as a juridical and performance 

status between the direct and indirect export. 

The intermediary agents can be represented by: 

� the commercial agent or representative and commissioner, in continental legal 

terms; 

� the agent, in Anglo-Saxon legal terms. 

The commercial agent or representative is often a legal person that acts on the basis of 

the order received from the principal to perform commercial deeds concerning the sale and 

purchase of goods on his behalf and account based on a Representation or Agency 

Agreement. Commissioners can be natural persons or companies that take part in the 

conclusion of operations on their behalf but on others' account. 

Starting from the characteristics of the previous three methods to perform international 

commercial transactions, we can say that these commercial operations can be made directly or 

indirectly. According to the direct method the organization and performance of external trade 

operations (export and import) is made by the producing companies on their account and risk. 

The indirect method implies the intermediation of export and import by external trade 

companies, either on their account or as commissioners of the producing or beneficiary units. 

Thus, when external trade companies act on their own, they buy goods from internal or 

external suppliers (import) and then sell them again outside the country (export) or inside, on 

their behalf, account and risk. If the external trade companies act as commissioners of the 

producing or beneficiary units, exchanges are made on the behalf of external trade companies, 

but on the account and risk of principals (producing or beneficiary units). 

The method to perform international commercial transactions according to the indirect 

method from the point of view of their reflection in the accounting of external trade 

companies has the following characteristics: 

� in the case of those performed on one's account, external trade companies 

reflect in accounting all the results of the external trade activity, i.e. all the


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expenses and income concerning the marketing of goods and also the 

administration and management expenses; 

� in the case of those made in commission, external trade companies record in 

accounting only the income from due commissions and the administration and 

management expenses, the results of the external trade activity are recorded by 

principals. 

And from a juridical point of view, the indirect method leads to singularities. Thus, in 

the case of external trade performed on the external trade companies' own account, binding 

agreements must be concluded both internally and externally, and in the case of operations in 

commission, agency agreements must be concluded internally and binding agreements 

externally. 

Regarding the settlement of external trade operations, the procedure is as follows: 

� for the international commercial transactions made on one's account, the 

internal settlement is made upon the purchase of goods intended for the export, 

i.e. upon the sale of the imported goods internally; 

� in the case of international commercial transactions made in commission, 

settlement with internal producing units is made after the payment of the 

exported goods and settlement with internal beneficiaries of the imported 

goods is usually made before the import. 


The development of international business tends to become a necessary condition for 

the existence of enterprises, irrespective of size or activity field and its consequence is that 

internationalization and globalization are fundamental features of this beginning of century 

and millennium. The internationalization of commercial transactions, understood as carrying 

out these activities beyond national borders, except for the community space, is not a new 

phenomenon in the world economy. In the post-war period it gets an unprecedented boom 

under the impulse of several factors, such as: post-war reconstruction process, 

institutionalization of international economic relationships, progressive elimination of barriers 

from the international commercial and financial flows, reduction of transport and 

communication costs, technical evolution of transport means, extension of transnational 

companies' activity. 

BIBLIOGRAPHY 

1. Paliu-Popa, L., – Contabilitatea comerţului interior şi exterior [Accounting of Internal and 

Ecobici, N. External Trade], Sitech Publishing House, Craiova, 2004. 

2. Popa, I. – Tranzacţii comerciale internaţionale [International Commercial 

(coordinator) Transactions], Economic Publishing House, Bucharest, 1997. 

3. Popa, I. – Tranzacţii de comerţ exterior [External Trade Transactions], Economic 

Publishing House, Bucharest 2002.


ISSN: 1842-4856 

INFORMATION QUALITY AND ACCOUNTING REPORT 

6BLigia 

Antonescu – PhD trainee 

7BUniversity 

of Craiova 

51BABSTRACT: 

The information furnished by accounting influence the users’ behavior in the process of 

substantiation of decisions, each user wishing to dispose of such information as to decrease incertitude and to 

offer the possibility to make the best decisions. 

From the analysis of accounting doctrine it results a pluralism of definitions of the concept of quality of 

accounting information, the differences referring to the selection and hierarchy of qualitative characteristics. 

Accounting systems which are based upon the existence of conceptual frameworks make a fundamental element 

out of the definition of information quality, their qualitative characteristics being presented explicitly by way of 

official documents (FASB, IASB, ASB). Comparing the points of view of these official documents, we can 

notice the influence of the American concept on IASB which identifies, the same way as FASB, four qualitative 

characteristics (intelligibility, pertinence, reliability and comparability), the first of them maintaining its place 

before any other quality. Unlike these, ASB emphasizes the relative importance of the primordial quality which 

must financial information must have. 

The users’ informational necessities must be continuously adapted to the changes in the economic, 

political, juridical and social environment thus leading to an equilibration of the contribution of different 

qualitative characteristics as far as the obtaining of good quality information is regarded. 

Accounting’s social role has significantly increased in the last decades and this is due 

to the fact that the information it furnishes influences the users’ behavior in the process of 

decision making. It is obvious that each user wishes to dispose of information which 

diminishes the uncertainties and offers him the possibility to make the best decisions, these 

requirements designating in fact, the necessity of accounting’s production of high quality 

information. 

Since the range of users of accounting’s products is relatively varied, and since their 

informational necessities are also diverse, sometimes even contradictory, the interpretation of 

the quality of the information furnished by financial reports is a process characterized by 

subjectivism. This is the reason why defining the concept of quality of accounting information 

starts, in specialty literature, from the definition and the peculiarities of the communication 

process and its aim is to establish quality criteria which information must comply with. 

Analyzing the act of normalization and the accounting doctrine we notice a pluralism 

of modalities that concern the definition of the concept of quality of accounting information, 

the differences being observed especially as far as the selection and hierarchy of qualitative 

characteristics are regarded. We will sustain this idea by the brief presentation of the way in 

which it sis defined the analyzed concept in accounting’s normalization, establishing as 

reference points the Anglo-Saxon conceptual frameworks, on the one hand, and French 

accounting, on the other hand. 

Accounting systems which are based on the existence of conceptual frameworks 

render the definition of the quality of accounting information as a fundamental element, its 

qualitative characteristics being explicitly presented through several official documents, such 

as follows:


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• FASB published in 1980, by way of the norm SFAC2, the qualitative characteristics of 

17 

accounting information;F 

• IASB included in 1989, within its conceptual framework, the qualitative characteristics of 

financial reports and the restrictions that must be observed in order to obtain quality 

information; 

18 

19 

• ASBF 

F published in 1991 the qualities of financial information.F 

As far as the definition of the concept of quality and of qualitative characteristics which 

concern the accounting information is regarded, we retain the following main ideas 

formulated by the American forum of normalization (FASB): 

• There are identified four qualitative characteristics: intelligibility, pertinence, reliability 

and comparability, which are subject to two major restrictions: 

-superiority of advantages obtained from the use of information as compared to the 

costs demanded by its use; 

- the signification threshold or the relative importance. 

• Criteria depending on which are considered pertinence and reliability, considered as 

primary characteristics, are expressed by: 

-the predictive value, the retrospective value and the opportunity value- for pertinence; 

-verifiability, neutrality and fidelity – for reliability. 

CHARACTERISTICS OF USERS 

GAINS BIGGER THAN COSTS 

The advantages offered by information must surpass the costs of obtaining it 

Compromise 

Predictive Retrospective Opportunity Verifiability Neutrality Fidelity 

Significant importance 

20 

Fig.1 Hierarchy of qualitative characteristics of accounting informationF 

As far as the conceptual framework proposed by IASB is regarded the promotion of the 

17 FASB- Statement of Financial accounting Concepts; Qualitative Characteristics of Accounting Information. 

18 Accounting Standards Board-the British system of normalization. 

19 ASB-Statement of Principles; the qualitative characteristics of financial information. 

20 B. Colasse- Comptabilité générale. 5e édition, Economica, Paris, 1996, p. 385-388 ; E. Lande, P. Blin, P. 

denos, M. Gouthier, E. Delesaille, R. Obert, D. Lechere- Contabilitatea financiară aprofundată, Editura 

Economică, Bucharest, 2002, p. 42.


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same four qualitative characteristics, as well as the constraint of the same general 

restriction as with FASB, which refers to the superiority of benefits as a result of the use 

of information as compared to the cost of obtaining it. To this general restriction, there are 

attached three other restrictions which must by observed in order for accounting 

information to be pertinent and reliable: the observance of deadlines; the balance between 

qualitative characteristics: loyal image/ loyal representation. 

At the same time, we also retain the explicit presentation of criteria that contribute to 

the obtaining of main characteristics which IASB proposes: 

• The significant measure (relative importance), for pertinence; 

• Loyal image, the dominance of the economic content on the juridical form, neutrality, 

prudence and exhaustivity, for reliability; 

• Permanence of methods, for the appreciation of comparability. 

Starting from this grouping there is realized a hierarchy of qualitative characteristics of 

information, as we can notice in fig.1. 

The user 

of annual 

accounts 

General 

restriction 

Qualities 

searched by 

users 

A user who has sufficient knowledge regarding business, economic 

activities and accounting 

The production cost or the analysis cost of information is less than the 

benefit obtained as a result of the use of information 

UInformation contained in annual accounts 

Intelligible 

Prospective Retrospective Available Sincere Neuter Verifiable 

Comparable in time and space 

Permanence of methods 

Significance of methods

Fundamental 

qualities 

Annex 

qualities 

General 

Restriction 


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Fig.2 Hierarchy of qualitative characteristics of accounting information according to IASB 

Analyzing the point of view of ASB concerning the qualitative characteristics of financialaccounting 

information we notice several differences as compared to FASB and IASB 

opinion, differences characterized by the following important elements: 

• The primordial quality that financial information must have is considered to be the 

relative importance; 

• Main qualities are considered to be pertinence (relevance) and reliability, while 

comparability and intelligibility are included in the category of secondary qualities; 

• As for the criteria according to which the four main characteristics are appreciated, ASB 

considers that: 

-pertinence is obtained when the information has a value of prediction and of confirmation 

as well as when there are selected pieces of information that influence the decisions; 

- reliability is obtained if the pieces of information do not contain errors or if there are no elements which lead to wrong interpretations 

and they are appreciated depending on neutrality, prudence, credibility and integrality; 

-comparability is given by the permanence of methods and by the communicability of 

information; 

-intelligibility has at its basis the possibility of classification and aggregation of information, 

as well as the users’ good mastering of economic and accounting language; 

• Obtaining quality is conditioned, in the opinion of English organism, by three 

restrictions: the equilibrium between qualities, opportunity, and the relationship costbenefit. 

As far as the hierarchy of characteristics previously evoked is concerned, certain 

differences can be noticed, as compared to hierarchies proposed by the American organism 

and by the international organism. 

Comparing the three points of view previously presented, we notice, on the one hand, the 

influence exerted by the American conceptual framework on IASB, which identifies four 

qualitative characteristics (intelligibility, pertinence, reliability and comparability) as 

FASB, which, in its turn, imposes intelligibility before any other quality, as well as the


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differentiation proposed by ASB, which consists in the amplification of the relative 

importance as a fundamental feature and in the grouping of the four characteristics in 

main and secondary. 

According to the vision of Anglo-Saxon countries, in French accounting the concept of 

quality of accounting information is not defined anymore by the explicit presentation of some 

traits, but by the interposition of several principles. 

We must emphasize the fact that in France the definition of qualitative characteristics of 

accounting information was not taken into account by the National Council of Accounting 

(CNC) and, consequently, in the French General Accounting Plan (PCG) there are only 

enumerated certain qualities of the information produced by accounting. 

According to PCG, “accounting information must give users an adequate, loyal, clear 

and complete description of operations, events and situations”, not proposing any hierarchy or 

articulation of quality criteria. Another element specific of French accounting is the fact that 

PCG does not designate the users of financial reports, the accounting information having as 

object the reflection of a loyal image to the represented reality, which, in the opinion of 

French normalizers, is obtained if there are observed two general principles: regularity and 

sincerity. There are also taken into account the exhaustivity and the coherence of information 

which must not lead to a condensation or external aggregation of it and ensure the 

comparability of data during successive periods. 

Following the objectives assigned to French accounting and to accounting principles that 

are associated to it, we can assert that accounting information is a compromise that must 

allow the presentation of a loyal image of the financial report, of correct and sincere 

accounts, and, at the same time, must observe a series of principles, among which those of 

evaluation (currency nominalism and prudence) have a major influence on loyal image 

conception. 

The comparison, for example, of the conceptual framework of FASB to the French 

accounting principles, as a consequence of the adoption of the 4 th and 7 th European Directives, 

brings about major differences, amongst which we retain as being linked to the approached 

topic the fact that, on the one hand, FASB defines a reference user, while French accounting 

does not mention the users or their needs, and, on the other hand, in France, the accounting 

objectives refer only to the intrinsic qualities of it (sincerity, correctitude, loyal image), while 

FASB explicitly reports the quality of information to the needs and expectations of users. 

In the attempt to approach the problem of accounting information quality in our country, 

we will make the distinction between the two major steps of accounting reform in Romania. 

In the first stage, which corresponds to the period 1991-1999, we can say that the 

problem of defining the quality of accounting information and delimitation of qualitative 

characteristics was not the subject of intense preoccupations on behalf of normalizers, 

because: 

• Accounting was conceived as an instrument of control; 

• The state plays a double role, of normalizer of the accounting system and of privileged 

user of accounting information, determining an asymmetry in the request and offer of 

specialty information in its favor in relationship to the other users; 

• Reliability was imposed as main characteristic of information due to the instrumentalist 

character of accounting; 

• In the vision of normalizers, loyal image was obtained if the “observance with good 

faith of rules regarding the evaluation of the patrimony and of the other norms and 

accounting principles”. 

Continuing with the accounting reform we pass, starting with 1999, to the next stage 

represented by the adoption of the Order of the Minister of Public Finances no 403/1999


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which was later replaced by OMFP no 94/2001 regarding the approval of the accounting 

Settlements harmonized with the 4 th CEE Directive and with IAS. 

Even if there can be identified numerous aspects that can be criticized, we must notice the 

fact that in the plan of defining the concept of quality of accounting information this stage 

has registered major progresses, which refer to: 

• The opening of accounting to external users; 

• The recognition of the role of accounting as instrument of information and assistance of 

decision; 

• The economic approach in the process of obtaining accounting information and the 

decrease of the juridical weight; 

• The increase of the degree of capitalization of accounting information in economicfinancial 

analyses; 

• The introduction of quality criteria in the elaboration and diffusion of accounting 

information. 

By the borrowing by Romanian normalizers of the “General framework of elaboration 

and presentation of financial reports”, elaborated by IASB, it results that the appreciation of 

the quality of financial information will be realized in Romanian accounting also depending 

on the four qualitative characteristics of financial reports retained by IASB: intelligibility, 

relevance (pertinence), credibility (reliability) and comparability. 

In their turn, relevance, credibility and reliability are interpreted according to secondary 

criteria which refer to: 

• The significance threshold, the predictive value and the retrospective value for 

relevance; 

• The loyal representation, the prevalence of the economic on the juridical, neutrality and 

integrality for reliability; 

• The permanence of methods and communicability for comparability. 

In order to present the existent hierarchy between these characteristics, we propose the 

following scheme (fig 3) which will allow us to emphasize also the restrictions which 

affect the relevance, credibility, and, in our opinion, the intelligibility of information. 

Theoretically, in order to be useful, a piece of information must have all the presented 

characteristics, the difficulties emerging when there must be determined the proportions in 

which these characteristics must be applied to a given situation, all the more so as certain 

criteria are complementary and independent, while the others are divergent. 

As, from a practical point of view, no information has all the above enumerated 

characteristics, most of the times we lay stress on a characteristics in disfavor of another, 

which leads to the appearance of conflict states at the level of accounting information such as: 

• Between relevance and credibility, believing that the increase of credibility is realized to 

the prejudice of relevance; 

• The increase of the rapidity with which it is obtained the information is produced to the 

prejudice of correctitude and integrality (exhaustivity); 

• The increase of the degree of uniformity affects the flexibility, determining its 

diminution and so on. 

The 

accounting 

culture of 

users 

THE INFORMATION FURNISHED BY FINANCIAL REPORTS 

Opportunity 

The 

relationship 

cost-benefit 

The balance 

between quality 

characteristics 

Loyal 

presentation


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Fig. 3 Hierarchy of qualitative characteristics in Romanian accounting 

21 

Even if some authorsF 

F consider that the diminution of possible conflicts could be 

obtained by the realization by the normalization organism of schemes of hierarchy of 

qualitative characteristics of financial-accounting information, as we have proposed in fig. 3, 

we think that this scheme does not thoroughly remove the risk of appearance of antonymic 

situations. In this sense, we believe that the continuous reconsideration of informational 

necessities of users, as a requirement for the adaptation to the changes of the economic, 

political, juridical and social environment, can lead, in a certain way, to a balance of the 

contribution of different qualitative characteristics as far as the obtaining of good quality 

information is regarded. 

BIBLIOGRAPHY 

1. B. Colasse- Comptabilité générale. 5e édition, Economica, Paris, 1996, pp. 385-388. 

2. E. Lande, P. Blin, P. denos, M. Gouthier, E. Delesaille, R. Obert, D. Lechere- 

Contabilitatea financiară aprofundată, Editura Economică, Bucharest, 2002, p. 42. 

3. L. Malciu. Cererea si oferta de informaţii contabile, Editura Economică, Bucureşti, 

1998, p. 37. 

21 L. Malciu. Cererea si oferta de informatii contabile, Editura Economică, Bucureşti, 1998, p. 37.


ISSN: 1842-4856 

LE SYSTEME D’ INFORMATION FINANCIERE- COMPTABLE 

MULTIDIMENSIONNELLE 

Pana Daniela Nicoleta 

Doctorand, deuxième année, Comptabilite 

Université « Valahia« Targoviste 

ABSTRACT 

Le système informationelle financiere comptable multidimensionelle est un systeme ou les informations 

se propague dans plusieurs directions independente. 

Le professeur Robert Reix [42] propose la definition suivante:”un système d’information est un 

ensamble organize de resources: matériels, logiciels, personnels, données , procedures , permettant d’aquerir, de 

traiter, de stocker, de communiquer des informations dans l’organsation”. 

Le „système d’information” offre la possibilité de aquier d’information, de trater, de stocker 

l’information pour l’utilisateur final. 

Je propose des modèles de représentation : le modèle tripyramidal, le modèle ancre et algorithmique. 

En fin je présent les étapes de traitement d’information financière comptable. 

Chapitre1 

La carde général du système d’Information financière –comptable multidimensionnelle 

Chapitre 2 

La gestion, l’information et l’informatique 

Chapitre 3 

Modèles propres de représentation du systèmes d’information financiere –comptable 

Chapitre 4 

Le traitement d’ information et l’utilisateur final 

Conclusions 

Bibliographie

Chapitre 1 

La carde général du système d’Information financière –comptable multidimensionelle 

L’expression « Système d’Information« (en anglais MIS, Management Information 

System) date des années soixante. Elle designe les applications de l’informatique a la gestion de 

cette époque et leur usage par les entreprises. Ces aplications existent encore . Ces sont des 

applications collectives de l’informatique, internes a l’entreprise, éventuellement reliées a 

l’exterieur. Elle sont caractérisées par la mise en ouvre de procédures selon des règles formelles. 

On y trouve toutes les caractéristiques du fonctionnement bureaucratique des organisation, c’est – 

a-dire l’application de règlements. 

Le système informationelle financiere comptable multidimensionelle est un systeme ou 

les informations se propague dans plusieurs directions independente. 

Le professeur Robert Reix [42] propose la definition suivante:”un système d’information 

est un ensamble organize de resources: matériels, logiciels, personnels, données , procedures , 

permettant d’aquerir, de traiter, de stocker, de communiquer des informations dans 

l’organsation”. 

Le système d'information comptable dans une entreprise s'articule autour de l'organisation 

matérielle c'est-à-dire des moyens et méthodes comptables d'enregistrement des opérations 

respectant le principe comptable de l'«image fidèle» de la situation financière, économique et 

comptable de l'entreprise. Ce système d'information comptable doit assurer la saisie complète des 

documents de base ainsi que leur conservation, rendre disponible toutes les HinformationsH 

nécessaires à l'établissement des documents de synthèse, contrôler l'exactitude des données ainsi 

que celle des procédures internes. 

Le „système d’information” offre la possibilité de aquier d’information, de trater, de 

stocker l’information pour l’utilisateur final. 

La fonction principale est d’asigurer le gestionnaire avec les information pour le 

moment « decisons » . 

Le système d’information est formel est a les suivantes caractéristiques : 

• accessible 

• obligatoire et exhaustive 

• répétitif 

• le traitement d’information 

Chapitre 2 

La gestion, l’information et l’informatique 

Le „système d’information” offre la possibilité de aquier d’information, de trater, de 

stocker l’information pour l’utilisateur final. 

Les systèmes d’information servent de support a l’information dans l’entrprise. Dans les 

affaires, la confiance entre individus a été remplace par les document écrit, par le contrat. 

Maintenant, l’ordinateur est le support de toutes ces informations. Leur volume s’est accru avec 

le temps. Presque toutes sont orientées vers l’action et a la décision. La gestion n’est peut-être 

que traitement d’informations. Il n’existe pas de gestion sans information. 

Toutes les disciplines de gestion parlent d’informations. La comptabilité enregistre les 

informations sur les flux financières. Le marketing accumule des informations sur les clients et 

les produits. La gestion commerciale s’organise autour des commandes clients et des livrassions, 

qui ne sont qu’informations sur ce qui doit être fait ou qui a été fait.


ISSN: 1842-4856 

En mettant l’accent sur l’information, on glisse vers l’informatique comme moyen de 

traiter ces informations. Cependant, toute information ne peut être traitée automatiquement. Il 

reste des intermédiaires humains necessaires, les documentalistes poue interpréter les recherches 

sur la base de données, les journalistes pour trier, commenter et mettre en relief les nouvelles 

pléthoriques. Il est faux de croire que le concept d’information n’est que l’antichambre de 

l’informatisation. 

Vis–a-vis de l’informatique, le gestionnaire occupe une place multiple qui ne remplace 

jamais celle des informaticiens. Au conaitre le gestionnaire est indispensable pour que les 

systèmes d’information soient utiles et utilises dans l’entreprise. Le gestionnaire occupe six rôles 

types dans sa relation avec les informaticiens (utilisateur final ; porteur de l’idée d’une nouvelle 

application, il prend l’initiative d’une project ; partenaire de la conception, il aide les 

informaticiens a identifier les besoins des systèmes d’information collectifs dans le détail et il 

valide les spécification au début du Project ; client de l’informatique nouvelle, il contrôle la 

prestation de son fournisseur- en tant que maître d’ouvrage, il vérifie si le produit logicielle qui 

est livre par le maître d’oeuvre correspond a ses besoins et a ses demandes ; client de 

l’informatique anciene, il exige des comptes rendus du fonctionnement des applications- le 

tableau de bord des grandes application indique comment a été exécute la contrat de service ; 

responsable de l’usage stratégique de l’informatique, il envisage comment les technologies de 

l’information peuvent être mobilisées pour les objectifs stratégiques ou pour inciter a de 

nouvelles orientations stratégiques). 

Chapitre 3 

Modèles propres de représentation du systèmes d’information financiere –comptable 

Le modele tripyramidal 

Schème 1. Le modèle tripyramidal 

Dans cette modèle j’ai présente le circuit informationnel financière comptable. Apres 

l’opération de saisie, les informations sont enregistre, stocke et traite, en fin résulte les résultats. 

Le « fruit« obtenu arrive a l’utilisateur final, dans ce case, le gestionnaire qui est capable de 

prendre les plus bonne décisions. Les décisions sont diffuse a l’ employée. Et parce que ce n’est 

pas sufficient a dire « stop« ici, la rétroaction dit son mot. C’est très important que le message


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diffuse est claire et les charges sont respecte et résolve en temp. Le contrôle et l’analyse de 

l’informations financière- comptables ce sont opérations très importantes parce que seulement ou 

sont réseaux pour la gestion elle prendre un sens. Le nouveau élément dans cet modèle est l’ 

extraction- l’activite qui responde aux besoins de l’utilisateurs du système. 

Le modèle «ancre » 

Le modele Ancre 1 

Schème 2. Le modèle Ancre 2 

1- la saisie d’information 

2- l’enregistrement d’information 

3- le stockage d’information 

4- le traitement d’information 

5- les résultats obtenu 

On peut associe l’entreprise avec une « ancre hypnotique «. Les ancres hypnotique sont 

compose par l’utilisation de toutes les sentir, inclusivement la vue, l’odeur et les autres. Quand 

on applique un ancre hypnotique, si le numéro de sentir est grande, l’ancre devient plus forte. 

Avec l’aide du extrapolation, on peut dire que l’entreprise peut être plus forte, plus grande par 

une bonne utilisation du système informationelle financière comptable, du réseaux, sélecte très 

rigoureux les entrées, grandir l’attention et la correctitude dans le procès du traitement, et obtenir 

le plus bonnes résultats en temp réel. 

Le modele Ancre 2


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Schème 3. Le modele Ancre 2 

Cette modèle a été crée sur la base de première model Ancre. Par l’élever d’ancre- on peut 

dire l’utilisation de résultats , les gestionnaires peut prendre les décisions, ils arrive au bord- an 

peut dire qu’ils résoudre les objectifs. 

Le modèle algorithmique 

Dans la vision du mathématicien Markov, un algorithme peut être « tout ensemble de 

règles précises qui définit un résultat détermine a partir de certaines données initiales.« 

Parce que dans le système informationnelle financière comptable avec le processes du calcul et 

les autres se transforme l’informations, le modèle algorithmique peut être utilise pratiquement 

pour le traitement du processes complexe. Eu parce que dans aucun entreprise le system 

informationnelle est « soudée « avec le système informatique, on peut affirme que l’ 

algérianisation est une de le plus foundamentalle demande qui aide a la resoudration du aucun 

problème, utilise l’outil. Et parce que le rôle du système informationnelle financière comptable 

est d’aider le gestionnaire dans le procès de prendre les décisions, est besoin d'un algorithme. 

Schème 4. Le modèle algorithmique


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Chapitre 4 

Le traitement d’ information et l’utilisateur final 

Il est possible de décrire un système de traitement a l’aide d’un schéma très simple qui présente 

l’objectif même du système : 

Entree 

des 

donnees 

Les fonctions du système : 

Lecture 

Les organes du système : 

Organes 

d’entree 

Traiteme 

nt 

Transformation 

Oganes de 

calcul, de 

memorisation, 

de commandes 

Sortie 

des 

resultat 

s 

Ecriture 

Organes 

de sortie


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Les étapes du traitement de l’information 

On part des 

INFORMATIONS ELEMENTAIRES 

Qui après 

L’operation de saisie 

Deviennent 

DES DONNEES DE BASE 

Qui après 

L’opération de collecte 

Forment 

L’ENSAMBLE DES DONNEES UTILES AU TRAITEMENT 

Qui après 

L’operation de traitement proprement dit 

Devinent 

DES INFORMATIONS ELEBOREES 

Qui apres 

L’operation de diffusion 

Constituent 

DES INFORMATIONS PERTINENTES 

Qui sont 

LES RESULATS. 

Les moyens du traitement de l’information sont : 

- Le traitement manuel (le calcul par exemple) ; 

- Le traitement mecanise (utilisation d’une machine a calculer pour la fonction calcul) ; 

- Le traitement semi-automatise (machine a ecrire a commande automatique) ; 

- Le traitement automatise (toutes les fonctions du système sont realisee 

automatiquement) . 

L’outil informatique typique du cadre est ordinateur personnel (compatible PC), fixe ou 

portable, qui lui est attribue. Les logicielles sont d’abord des standards que tous les cadres 

emploient. Ce sont aussi logicielles spécifiques au métier exerce. 

Au résultat, les gestionnaires- utilisateurs final gagent: 

- en délai de fourniture d’information (rapports, présentation...) 

- En qualité des documents produits (présentation avec transpartens, tableaux, 

schémas, graphiques...) 

- en approfondissement des questions traitées (nombre des calcules faits, étude des 

variantes) 

- en diffusion de l’informatique (grand nombre de destinataires et fourniture a la 

demande) 

- en ampleur de la documentation utilisée (banques de données interrogées, 

services documentaires utilises) 

- en consultant un plus grand nombre de personnes sur les version provisoires du 

document (plus larges consensus).


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Conclusions 

Le travail intitule “Le système d’information financière comptable multidimensionnelle ” 

propose une série de modelés de représentation du système d’information financière comptable 

pour les entreprises. La problématique aborde commence avec le cadre général du système 

informationnelle financière comptable. La recherché effectué a vise en première fois l’evidence 

de l’évolution de cet concept. Analyse les opinions exprime dans la littérature de spécialité et le 

resultats de les propres recherché l’ai constate que l’entreprise peut devenir plus forte avec une 

rigoureuse sélection d’informations élémentaires, avec un traitement correcte. Les resultats sont 

diffuse au gestionnaire pour prendre les décisions. 

Bibliographie: 

Haussaire A., Pujol J., Organisation du systeme d’information comptable et de gestion, 

Editura Dunod, 2000 

Leclere D., Lesel P., Dubrulle L. (traducere in limba romana Prof. dr. Maria Niculescu, 

prof. dr. Ion Cucui), Control de gestiune, Editura Economica, 2000 

Enache Ghe , Bazele Contabilitatii, Ediura Stiintifica si Encicopedica, 1977 

Peaucelle J. , Systemes d’Information(Le point de vue des gestionnaires), Editura 

Economica, 1999 

Briciu S., Contabilitatea Manageriala, Editura Economica,2006 

Legea contabilităţii nr.82/1991


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LES POLITIQUES ÉCONOMIQUES EUROPÉENNES 

ŞIMON ADRIAN, conf.dr.ec. Universitatea « Petru Maior » Tîrgu-Mureş 

ABSTRACT 

LÚnion Européenne constitue un cadre économique et politique. Il semble important d′analyser, dans ce 

contexte, le rôle des pouvoirs publics, à travers les politiques économiques qu′ils mettent en œuvre. 

Ces politiques s′inscrivent sur le court terme (politiques conjoncturelles) et sur le long terme (politiques 

structurelles) avec des objectifs différents selon l′horizon temporel retenu. Avec l′arrivée de l′euro, le pouvoir 

monétaire sést déplacé à l´échelon communautaire avec la mise en place de la Banque centrale européenne. 

Parallèlement, les politiques budgétaires sont restées du ressort des autorités nationales. Champ d′application et 

centres de décisions sont différents selon que lón síntéresse aux deux dimensions essentielles des politiques 

conjoncturelles. 

Dúne façon générale, la politique économique a différentes dimensions, elle peut être à la 

fois conjoncturelle ou structurelle ce qui explique quíl est dúsage de parler des politiques 

économiques au pluriel. 

La question est plus complexe concernant lÚnion européenne. En effet, le champ 

dápplication diffère selon la nature des politiques économiques. Ainsi, pour réguler la 

conjoncture économique en Europe, une politique monétaire commune et des politiques 

budgétaires nationales peut être mises en œuvre conjointement. 

Cette coexistence rend nécessaire l´harmonisation des objectifs pour répondre aux 

différentes formes de déséquilibres qui peuvent apparaître dans certaines zones ou dans lÚnion 

européenne dans son ensemble. 

De plus, la stabilisation des économies impose une articulation entre les moyens mis en 

œuvre quíl soient de nature budgétaire ou monétaire. 

Même dans le cadre de politiques communes comme le sont les politiques commerciale, 

agricole ou de la concurrence, la définition « d´ une » politique européenne rencontre des 

obstacles liés aux différences de structures et díntérêts des économies européennes. 

On peut aller plus loin et considérer que l´hétérogénéité de léspace européen rend 

possible des stratégies nationales en matière de politique économique visant à tirer profit de la 

construction européenne au détriment des autres partenaires. 

Les différences constatées dans le domaine social ou fiscal ne seraient plus alors 

uniquement le fruit de traditions et de cultures locales mais le résultat dúne volonté des 

gouvernements de dégager un avantage concurrentiel. 

Si cette hypothèse se vérifiait, les orientations divergentes des politiques nationales ne 

permettraient pas, bien évidemment, l´émergence dún modèle de politique européenne.


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Traditionnel ment, il est dúsage de décomposer les politiques conjoncturelles en deux 

volets: la politique monétaire et la politique budgétaire. 

Dans le cadre de la zone euro, les décisions de politique monétaire sont prises dorénavant 

par la Banque centrale européenne. Láutorité monétaire se doit de définir ses objectifs, tant sur 

le plan interne que sur le plan externe, et les orientations envisagées pour les atteindre. 

Concernant la politique budgétaire, les décisions demeurent de la responsabilité des autorités 

nationales. 

Jeune institution, la Banque centrale européenne doit construire sa crédibilité, même si sa 

création vient après plusieurs années durant lesquelles les autorités monétaires des pays 

participant à léuro ont fait prévue dúne très grande discipline monétaire. 

Ainsi, au cours des deux premières années déxistence de léuro, les autorités monétaires 

européennes ont procédé à sept hausses de taux díntérêt en raison des risques de tensions 

inflationnistes engendrées par láccélération de la croissance dans la zone euro et par la 

remontée du prix du pétrole. 

Cette crédibilité doit être accompagnée dúne volonté de transparence de la part de 

línstitution monétaire. La Banque centrale européenne présente quatre fois par an un compte 

rendu de son activité devant le Parlement européen et elle rend publiques ses projections 

économiques en fin dánnée. 

Mais, cet objectif essential de lutte contre línflation ne doit pas pénaliser la croissance. Il 

est prévu, en effet, dans le traité de Maastricht que la Banque centrale européenne apporte son 

soutien aux politiques économiques des États membres et contribue aux objectifs généraux de 

lÚnion européenne. 

Cependant, la politique monétaire se doit d´être appréciée sur une longue période. La 

baisse des taux doit être envisagée sur le long terme en considérant quélle sera favorisée par le 

maintien dúne faible niveau dínflation. 

Le budget européen 

Étant donné les difficultés de mise en œuvre des politiques budgétaires nationales et des 

résultants incertains quélle pourraient obtenir, on peut sínterroger sur les possibilités quóffre 

le budget européen comme instrument de stabilisation. 

La politique budgétaire est un instrument essentiel de stabilisation qui ne peut plus être 

utilisé de façon isolée par un État membre dans le cadre de lÚnion européenne. En 

conséquence, la recherche dúne plus grande coordination sávère indispensable. Dans cet 

esprit, deux approches sont souvent présentées. 

La première se rapproche de lídée dún fédéralisme budgétaire. Lídée dún budget 

communautaire géré à l´échelle de lÚnion semble attrayante dans le sens où elle permettrait de 

disposer dúne vision globale des conséquences des finances publiques sur línflation et la 

croissance. De plus, cela néntraînerait pas obligatoirement un relèvement du budget européen. 

La deuxième approche qui correspond dáilleurs à la réalité européenne, est celle dúne 

coordination beaucoup plus informelle entre les États membres. Cette solution doit être envisagée 

en tenant compte des différents niveaux de coordination possibles. 

Les discussions, au sein de lÉuropéen, permettent actuellement aux autorités nationales 

de définir leurs politiques en disposant dúne meilleure connaissance de la situation des autres 

États. La dimension informelle de cette approche ne contribue pas, toutefois, à donner une 

lisibilité satisfaisante aux marchés financiers ce qui peut nuire en partie au cours de léuro.


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De plus, cette coordination demeure encore parfois difficile en raison des divergences 

díntérêt à court terme des différents États membres, notamment du fait de l´hétérogénéité de 

léspace européen. 

Lárticulation entre la politique monétaire et les politiques budgétaires 

Les relations entre la Banque centrale européenne et les différents gouvernements 

demeurent encore difficiles. On citera, notamment, les différents rappels à lórdre dont ont été 

lóbjet certains États membres de la part du gouverneur de la Banque centrale européenne 

concernant le relâchement de leurs efforts en matière de discipline budgétaire. Pourtant, il est 

indispensable de coordonner les politiques européennes au risque de rentrer dans un cercle 

vicieux. 

En effet, lábsence de discipline budgétaire conduirait les autorités monétaires à durcir 

leurs positions, ce qui pourrait inciter les gouvernements à un laxisme plus grand encore. De 

plus, lábsence même dúne coordination des politiques budgétaires se révèle être un obstacle à 

la bonne articulation entre les deux politiques économiques. 

En effet, líncohérence des choix politiques quúne telle situation entraînerait, 

contraindrait la Banque centrale européenne à la plus grande prudence. 

Enfin, le Pacte de stabilité et de croissance, dans un tel contexte, ferait de la politique 

monétaire le seul responsable des ajustements conjoncturels. 

La bonne coordination et la crédibilité des politiques budgétaires doivent permettre aux 

autorités monétaires de disposer dúne bonne visibilité et de mettre ainsi en place des politiques 

monétaires que lón pourrait qualifier dánticipatives. 

Lárticulation entre les deux politiques (le policy mix) sínspirerait de ce qui a été réalisé 

aux États-Unis, au cours des années quatre-vingt-dix, avec le maintien des taux díntérêt à de 

faibles niveaux dúne part et la recherche de l´équilibre budgétaire, dáutre part. 

Les problèmes de coordination surviennent également en matière de politique de change, 

puisque des divergences peuvent apparaître entre les gouvernements et la Banque centrale 

européenne. 

En effet, un euro faible peut être désire par les autorités nationales car il stimule la 

compétitivité européenne, alors que l ínstitution monétaire peut considérer, de son côté, qu íl 

constitue une menace inflationniste. 

L Únion européenne demeure un espace économique très hétérogène. 

Les politiques structurelles doivent, en conséquence, poursuivre sur le long terme l´ 

objectif dúne plus grande harmonisation. 

Toutefois, si les économistes émettent des avis, cést toujours en dernier ressort les 

hommes politiques qui prennent les décisions. 

Bibliographie 

1. Armand Colin Dictionnaire des sciences économiques 

Paris, 2007, 2-e édition 

ISBN 9-782-200-351809-9 

2. European Comision New funds, better rules


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Overview of new financial rules and funding opportunities 

2007 – 2013, 

Luxemburg, ISBN 978-92-79-0566-2 

3. European Comision Your right as a consumer 

How the European Union protects your interests 

Luxemburg, ISBN 92-79-03538-X 

4. Office for Official Publications 

of the European Communities, 2007 

MEANS OF EFFICIENT ADMINISTRATION OF NON-REFUNDABLE 

FUNDS 

ABSTRACT 

Văduva Liliana Marinela-drd 

UNIVERSITY OF CRAIOVA 

FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION 

DOCTORAL SCHOOL OF ECONOMICS 

Referring to the importance of non-refundable funds, we express our opinion according to which regional 

strategies and policies must respect longstanding and medium national economic strategies and policies and aim to 

the accomplishment of certain goals able to guarantee a certain interregional equity, the elimination of undesired 

development side effects, longstanding improvement of regional economic conditions in order to allow market 

policies to efficiently work. 

In my opinion, one of the opportunities created by economic policies is that of trying to identify out of the 

regional and national socio – economical analysis, the competitive and comparative advantages, and thus each 

instrument will lead to the use as much as profitable of these advantages. 

In the perspective of structural and cohesion funds granted to our country, it is necessary to have an unitary 

overview of the whole picture of social economic development of the country and in the same time we need to 

ameliorate the management of these funds by the means of a potential structural adjustment or a reprioritization of 

their allocation, when appropriate. 

1.POSIBILITIES OF EFFICIENT MANAGEMENT OF THE 

NON-REIMBURSABLE FUNDS


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1.1 POSSIBLE DISTRACTIONS THAT MAY DELAY THE ACCESS OF THE 

EUROPEAN FUNDS 

1.2ALLOTTING ACCORDING TO DEVELOPMENT LEVEL 

The non-reimbursable funds of the European Union are manager by the European 

Commission and have as main objective the financing of the measures of structural help at the 

communitarian level, in order to promote the regions with tardy development, the reconversion of 

the areas affected by the industrial decline, the fight against the long-term unemployment, the 

professional integration of the youth and the promotion of rural development. 

Lately, in media it was registered an increase of the number of articles which debated the 

non-reimbursable funds. This fact determines the increase of the public’s need for information, 

on the one hand, and the desire of the financers’ representatives to facilitate the access to 

information of the potential fund beneficiaries, on the other hand. Names of the European 

financing, such as PHARE, SAPARD or ISPA, have become familiar to any public authority, to 

the members of the non-governmental organizations and to the private enterprisers. Less known 

are the domains financed by these funds, the criteria the applicants must know and respect and 

the proposals they elaborate, the mechanism of accessing this non-reimbursable funds. 

The overall purpose of the grant of the non-reimbursable financings resides in the 

economical and social development by the rehabilitation/development of the infrastructure, the 

creation of new jobs, the increase of the competitiveness of the products and services, the 

improvement of the living standards, the support of the groups that are in difficulties, etc. Most of 

the funds address to the local public institutions and to non-governmental organizations in order 

to perform activities that would support the community: the protection of children, of the 

disabled persons, the assurance of the access to education, the fight against the discrimination and 

exclusion, the infrastructure, the environment protection, etc. Of equal importance there are the 

funds destined to the corporations for a variety of activities and investments, such as: production 

spaces, equipments, instruments, facilities, innovative technique, the participation in fairs and 

exhibitions, the implementation and certification of quality systems, the promotion of Internet 

sites, catalogues, leaflets, refreshment courses for the human resources. We must specify that the 

authorized natural persons have little chances of receiving financing (one of the explanations is 

that they cannot create new jobs, which is one of the implicit purposes, but essentially for the 

financing programs) or the new founded enterprises, with no experience in the management of 

such projects. 

Once it has been identified the idea for financing, it begins the search for the financer. It 

must be a ministry, a governmental agency, public authorities, foreign governments, public or 

foreign private institutions, non-governmental organizations. The most useful instrument in the 

search of the financer if the Internet, but these methods assumes more than a good connection, it 

implies availability in time and a certain knowledge and experience in the financing area. The 

activity of looking for the financing opportunities must be performed systematically, by an 

almost daily accessing of the potential financers’ sites. It is essential that the potential fund 

applicants knew the financing possibilities right from their occurrence, so that they had as much 

time as possible to elaborate the financing appliance, to establish partnerships where there is such 

a condition and to project the budget. 

A special attention must be given to the own contribution of the applicant from the total 

cost of the project. In the case of the public authorities and non-governmental organizations, the 

own contribution is normally 10-20% of the total cost of the project and some financers accept


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including a contribution in nature, by which it is understood salaries, materials, equipments, 

office infrastructure. The proper contribution of the economic agents may reach up to 60%, cash. 

Most often, the financers expect that, at the time of handing in the financing appliance, the 

availability of the contribution were proved by account excerpt, comfort letters from one bank, 

etc. In the Applicants’ Guide, they are also informed about the fact that the VAT, in case it is 

recoverable, cannot be included as part of the project’s budget. Furthermore, besides the cofinancing 

percentage, the potential beneficiaries must also take into account the payment of VAT 

for the entire amount of money, until its recovery. 

Another aspect, relevant for those interested in participating in non-reimbursable 

financing programs, is the method by which the financer grants the funds. Some of the financers 

reimburse the amounts afferent for the performance of the expenses suggested in the financing 

appliance, some grants a first share at the beginning of the project development, following that 

the rest would be given along the way. 

The non-reimbursable European funds that our country has the chance to invest represent 

one of the main and immediate advantages of the European integration. The top priority of the 

Govern is the achievement of a level of absorption of these funds and the consolidation of the 

managerial capacities for their administration. On the other hand, the National Reference 

Strategic framework facilities the projection of the budgetary projects on multi-annual basis, 

which means more predictability in the budgetary construction. Normally, it is necessary that by 

these money it could be possible to achieve the reduction of the differences that separate our 

country from the other European countries in terms of social and economical development. 

Moreover, in a very substantial manner, this money is used to reduce the internal discrepancies, 

which unfortunately characterizes different areas of the country. In order to really contribute to 

the development of our country, it is compulsory the strong involvement of the local authorities. 

The non-reimbursable funds must contribute to the acceleration of the economic 

development, to the reduction of the differences that apart we from the other European countries 

and to the reduction of the discrepancies on the intern level of the social and economical 

development. 

The main object of dispute during this period for the economical development of Romania 

and the real integration in the European Union is represented by the successful access and 

implementation of the European funds. The reality indicates the fact that the process is a very 

slow one and the partnerships for accessing and for the implementation of the European union’s 

funds are doomed to fail right from the very beginning in most of the cases. The reasons are 

numerous, such as: 

- the public mentality is dominated by the spectrum of the "the neighbour’s failure", even of the 

desire for "the other’s suffering", as the secrete source of private satisfaction; 

- right from the very beginning, the partner is assumed to have illicit/obscure intentions, if not 

entirely hostile to his own ideas/purposes; 

- it is not understood the different nature of the post-adhesion Funds, of the consensual type, with 

multiple social effects, durable of the projects of great value, which are preponderantly financed 

by the Structural Funds; 

- the lack of trust, demonstrated in the partnership cooperation, as well as the lack of solid and 

clear legislative support, for the accomplishment of projects in the public-private system; 

- the non-existence of a verified practice for the identification of the common interests, and even 

less, the openness for the negotiation of a reasonable compromise for more parties; 

- lack of real capacity, actually practiced for getting familiar with the motives and sources of 

opposition from the part of the competitors or of the solutions suggested for a certain project;


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- the scepticism or fatalism of the general life attitude dominates the perception and challenges 

the discouragement even before the approach of the potential partners and especially against the 

background of the poor/permanently fluctuant political and institutional reality of the present 

Romania; 

- the prior state and public administration have not invested and still do not invest anything in the 

information/education concerning the chances and advantages of the partnership compared to a 

fragmentary and monochord approach; 

- the applicants do not infer yet the financial, bureaucratic, procedural, etc. difficulties they are 

going to face in case they do not form powerful consortium for the implementation; 

- it is not understood the importance of the consultancy and training for the part of the projects of 

the direct beneficiaries (customers, citizens, reform patients) from the point of view of the future 

success of the projects; 

- it is not granted enough true attention and credit to the other elements but the autochthonous, 

selfish, uni-dimensional; 

- it is overreacted the importance of winning a financing and signing the contract, to the detriment 

of the accent on the implementation quality and of the commendation of the results of their 

evaluation; 

- it is generally ignored the opportunity of generating a promotion and more consistent 

visibilities of the projects by association in partnership for accessing the active and viable nongovernmental 

organizations as part of the civil society. 

1.1 POSSIBLE DISTRACTIONS THAT MAY DELAY THE ACCESS OF THE 

EUROPEAN FUNDS 

One the perspective of the real possibility to hand in projects for the European Funds come 

closer, such as the Program for the Human Resources Development, the potential beneficiaries, 

such as the consultancy agencies supporting them in the achievement of the technical files are 

waiting for concrete answers to concrete problems related to the different rigors to which the 

proper projection part/project management is subjected to (fezability studies, organization of the 

public acquisitions, narrative and financial monitoring and report, etc.), but especially referring to 

the complicated process of administrative aspect of the documents – from establishing the 

eligibility/opportunity and the framing as thematic priority, until the external evaluation/audit 

process. Eventually, they want to briefly highlight some of the distractions that scatter all this 

long way to the accomplishment of the viable projects for the community: 

1. The applicants must not wait for the appearance of the Applicant’s Guide to start elaborating 

the projects and obtain the approvals. The beneficiaries must begin the technical projects, the 

acquisition of the approvals, the performance of the fezability studies, due to the fact that the 

establishment of the eligibility is based on the previous presentation of these document which 

have just been brought to certain indicators and parameters established by the above mentioned 

guides; 

2. The applicants from the local authorities cannot write projects without knowing exactly the 

priorities certified by the local and regional development that is in the absence of a precise 

development micro-strategy. The establishment of the project objectives both public and private, 

must be precisely summed up to an already elaborated strategy of the same type; 

3. The applicants of the local authorities/small and medium companies have no possibilities that 

their intern team took care directly of the project management of their locality or zone without


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the help of the technical assistance and specialized management. Due to the complexity, multisubjects 

and to the large number of report and justification documents needed, the 

administrations are in the situation of the externalization of the proper implementation and 

technical assistance of certain specialized agencies or will be forced to join capable partners in 

order to assume this management; 

4. the potential beneficiaries must not resume to the information from the official sites of the 

ministries and to the instructions from the Applicant’s Guide. The guides, as well as the 

financing appliances include only administrative, financial and methodological information, but 

do not offer a theoretical and practical support for the selection and education for loyalty of the 

team, consultant, for the guiding concerning a performing management of the project, details and 

intern hints of the process of evaluation, inter-institutional communication art for imposing a 

rhythm of the development of the stages, the managerial performance indexes, the action plan by 

which it would prevent the litigations, conflicts and crisis, etc.; 

5. There are no ways by which the ministries or other central authorities would indicate with 

precision on what specific items should a locality, a school, a human resources agency, etc. make 

the project. Therefore it is not necessary the performance of the public consultancies, the 

evaluation of the needs or the market studies, etc, until the applicants were explained all these 

problems. The operational programs are an exercise of the democracy from bottom to top and 

nobody from the centre comes to evaluate the local needs, to give directions over the project 

objectives to be done or over the opportunities to choose certain partners or collaborators; 

6. The projects may anytime be handed in after the launch of a certain Tender Appeal, but their 

reception will be performed only in the order of the presentation of the complete files, including 

also the formula of co-financing and contribution of all the partners, and the development must 

not exceed the initial schedule established for the activities; 

7. As applicant, it is not enough to just announce the organization of the process of public 

acquisition, so that the desirable and interested sub-contractors came by themselves. Long before 

the beginning of a project, it must be studied the market of the possible subcontractors, it is 

necessary o elaborate the exhaustive specifications and in favour of the benefit of concrete needs 

or to lead to non-framing in the standards of the European Union and in the approved calendar of 

the developed project. 

1.2ALLOTTING ACCORDING TO DEVELOPMENT LEVEL 

The differences are explained by the fact that the funds a divided according to the level of 

development of the districts from the respective area and by the economical problems faced by 

each region. The money distribution has a powerful territorial and regional dimension, by which 

there are aimed, mainly, the areas left behind and less developed from the somehow more 

developed zones. It is looked for the revival of the development of those areas and the 

counteracting of the possible negative effects of the implementation of the other development 

programs, which may lead to the deepening of the discrepancies between the regions. The level 

of the allotting is inverse proportional with the one of the regional development. The funds for 

the regional development have as destination the public fields and consequently they will be 

developed by the local authorities. Thus, the 4,439 milliard euros that will enter our country 

during 2007-2013 will be accessed by the authorities that will be able to accomplish projects. 

Our country will receive the money and will have to spend them. Thus, our country 

beneficiates of a few days of structural funds of approx. 28-30 milliards euro from the European 

Union, starting this year and until 2013. By reporting the amount to the seven days of the week, it


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must be spent 8,5 millions euro every day. Still, this money has precise destinations. These funds 

must be efficiently administration and must reach where they are needed for; otherwise there is 

always the danger of loosing them. Even if the money is not attracted in projects within the 

country, each tax payer will subscribe for the sum with which Romania will contribute to the 

budget of the European Union. The structural funds of the Union are administrated by the 

European Union and are destined for the financing of the measures of structural help at the 

communitarian level, with the purpose of the promotion of the regions with tardy development, 

the reconversion of the areas affected by the industrial decline, the fight against the long-term 

unemployment, the professional insertion of the youth or the promotion of the rural development. 

There are four types of structural funds, each covering a well specified thematic field. The 

European Fund for Regional Development (FEDER) supports the creation of infrastructures, the 

investments destined to the occupation of the labour force, the projects for local development and 

the assistance of the small enterprises. The Social European Fund (FSE) is destined to promote 

the reintegration on the market of the labour force of the unemployed and of the disfavoured 

groups, especially by the financing of the training systems and of the employment assistance 

systems. The Financial Instrument for the Orientation of Fishing (IFOP) contributed to the 

adaptation and modernization of this sector. The section "Orientation" of the European Funds for 

the Agriculture Orientation and Warranty (FEOGA) finances the measures for the rural 

development and offers support to the peasants, especially in the regions left behind. From the 

total of the budget allotted to Romania, to the agriculture and rural development it is given over 

11 millions euros, to the structural instruments, 17 milliards euros. With regard to the 

departments that may attract the financing of the European Union, they are 14, as follows: 

technological research and development; information of the society; transport; energy; 

environmental protection and the prevention of the risk; tourism; culture; urban and rural 

regeneration; the support of the companies and contractors; the access to stable jobs; social 

inclusion of the disfavoured persons; human capital development; investments in social 

infrastructure, including the one for health and education; as well as the promotion of the 

partnership development. According to the estimation realized, our country may recover until 

2013 approx. 10 percentage points from the general difference compared to the European Union, 

getting up to 41 percents from the EU average. The global objective is laying on three specific 

objectives, that is, the increase of the long-term competitiveness of the Romanian economy, the 

development, on European standards, of the basic infrastructure, as well as the perfection and use 

of the efficiency of the native human capital. The coordinator of the management authorities that 

administrates the structural funds is the Ministry of the Public Finances and the operational 

programs have more management bodies. The first of them if the Ministry of Economics and 

Commerce, followed by the Ministry of Transport, Ministry of Environment, of Labour, Ministry 

of Agriculture, Ministry of European Integration, Ministry of Public, the Public Administration 

and Ministry for the European Integration. "Money for the projects and not projects for money" 

We remind that the structural money will not enter anybody’s pocket. The potential beneficiaries 

must not forget – we are looking for Money fro the projects and not projects for the money. The 

communitarian funds that our country will receive during 2007-2013 represent the opportunities 

for development but also risks. The opportunities are real for those that understand the 

destination of these funds and have an active behaviour in the identification of partners. The risks 

concern especially those that consider that a significant quota of the market or the company’s 

name may offer them sufficient advantages in the financing competition. 

CONCLUSIONS


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The reduced capacity of absorption of the European funds will continue to be the problem that 

our country will face. The main obstacles are reflected in the reduced ability to efficiently use the 

international funds, the lack of experiences for the elaboration of great ampleness projects at 

European standards, the deficit of transparency in the organization of the biddings, as well as the 

low understanding of the methods by which it can be accessed the non-reimbursable financing. 

BIBLIOGRAPHY 

1. Androniceanu .A– Management of the Projects with External Financing, Universitaria Printing 

House, Bucharest, 2004. 

2. Magazine “Financial Audit” 

3. Magazine “Bookkeeping, Expertise and Business Audit” 

4. Magazine “Economical Tribune” 

THE INSUFFICIENCY OF TRADITIONAL ACCOUNTING MODEL – 

THE HISTORICAL COST IN AGRICULTURE HOLDINGS 

Deaconu Sorin-Constantin 

8BDoctoral 

student 

36BUniversity 

„1 Decembrie 1918” Alba Iulia 

ABSTRACT 

En cet article soyez les aspects notionnels actuels au sujet des capitaux biologiques d'évaluation aux coûts 

ou à la valeur juste. Des capitaux biologiques devraient être mesurés sur l'identification initiale et aux dates de 

reportage suivantes à la valeur juste moins de coûts estimatifs de point de vente, à moins que la valeur juste ne puisse 

pas être sûrement mesurée. Le produit agricole devrait être mesuré à la valeur juste moins de coûts estimatifs de 

point de vente au moment ou la moisson. Puisque le produit moissonné est un produit commercialisable, il n'y a 

aucune exception 'de fiabilité de mesure 'pour le produit. Le changement de la valeur juste des capitaux biologiques 

est le changement physique de partie (croissance, etc...) et changement de prix unitaire de partie. La révélation 

séparée des deux composants est encouragée, pas exigés. La révélation d'une description mesurée de chaque groupe 

de capitaux biologiques, distinguant entre les consommables et les capitaux de porteur ou les capitaux mûrs et non 

mûrs, est encouragé mais pas exigée. 

A good financial information represent nowadays a necessity for the management of 

agriculture exploitations. 

In the practical activity it is used to evaluate the elements by the professional accountants 

at a considerable value, on a side of those, and in the same time verifiable, named historical cost. 

Besides even the European and international accounting standards (a part of those) has taken, as a 

fundamental principle of the elements evaluation, the historical cost.


ISSN: 1842-4856 

Regarding the objectivity of historical cost, the aspect is disputable because no evaluation 

base has the general use and it is not satisfactory in absolute and in consequence a problem of 

option stands in this way. The European and International Accounting standards are orientated 

towards the historical cost, without losing from a point of view to combine with other evaluation 

bases or using other alternativesF 

22 

F. 

Accounting in historical costs is orientated through past, which she describes it through 

the distinction of supplies flux: assets account, - statement of account. The continuity perspective 

of enterprise should not direct the enterprise to future even in evaluation matters? Not to limit 

exclusive to the past? Lately it became more actual the idea of accounting certain elements at the 

value estimated of the future fluxes of treasury, which those can bring to the enterprise in general 

and to the agriculture exploitations. Indeed to evaluate in historical cost means to keep the 

structures of the statement account at the entering value, which are in fact the historical values. 

Such a value is based on the assumption of monetary units established on the monetary 

nominalism, and event though the economic parameter does not stop to evaluate: the buying 

power, rate of profit, the profitability etc. Choosing a monetary unit as a measure creates an 

22 

Mihai Ristea, Accounting between fiscal and management, Publisher House Tribuna Ecomonică, Bucureşti, 1998, 

p. 31.


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unitary language, but it does not assume that all the events and the information especially the 

qualitative ones. The historical cost represents besides the others bases of evaluation a series of 

advantages and also limits, but not event the advantages nor the limits does not have to be 

generalized. 

Accounting does not have to limit by giving only retrospective information’s regarding 

the financial position and the performances of agricultural exploration, it should allow the exact 

wording of anticipation about the growing up of the enterprise. In a period of stability 

characterized by repeatable and absents of incertitude, where the future is anticipated in the 

present at least from a theoretical point of view the absents of future information can not fell the 

effects very badly, the accounting information can be judged as having a satisfactory and 

predicative character and focusing the accounting through past can not be considered an 

inconvenient, because it determines the future. 

And still the environment in which it takes action the agricultural entity is based on the 

irreversibility of time and incertitude the elapse is accompanied by the continue growing of in 

formations that reduce the incertitudeF 

23 

F. 

At present, the accounting profession is more and more aware by the potential impact of 

medium changes over the capacity of this to respond in the plan of financial information the 

needs of prediction but also the certitude of users of financial information. To respond the needs 

of the users, a financial report must: give more information on the projects, opportunities, risks 

and incertitude, to concentrate more on the factors that creates values on long terms, on the non- 

financial terms of value” processes, innovation, human resourceF 

To present from a value point an asset, it tends to account the future incomes than to the 

past expenses. Confronting to the traditional evaluation in historical costs, this inclination at least 

for the start has the mission to upset so much the accouter and the financial analyst of classic 

structure. 

To approach the problem of currency, comparative with the one of the physic measure, 

the French teachers Casimir, Caspar and Cozian were asked the next question “ it can imagine to 

25 

perform an operation, scientific coherent , if the length of meters is shorter from year to year?F 

F A 

similar question is considered to be asked in the field of accountancy, considering that the 

financial situations are expressed in a measure of which unit (buying power) oscillates from a 

financial exercises to another. With all these, the evaluation based on the historical cost offers an 

advantage, meaning: it assures the spacing compatibility of enterprises, which use the same 

26 

system of evaluationF 

F. The bad point appears in the temporary comparison cases, the accounting 

information gives an unreal imagine of the reality, which alternates badly the quality of the 

represented model of reality, with effects on the decisions of management and behaviour of the 

agriculture work. 

The distortions made by the historical cost on the accounting dates given by the accounts 

science have consequences to the macroeconomics level too, because there are deformed a series 

of indicators with the value of information big at the national economic level. 

23 

Phillipe Lorino, Methodes et practiques de la performance, le guide du pilotage, Les Editions Organisation, Paris, 

1997. 

24 

Special Committee of Insures services of AICPA – the professional organism of free American accounting. 

25 

J.P. Casimir, B. Caspar, M. Coyian, Comptabilite generale de lènterprise, Deuxime edition, Editor Litec, Paris, 

1990, p. 12. 

26 

Constantin Toma, The evaluation at the historical cost and the brand loyal imagine, the magazine Accounting, 

expertise and the audit of business, Publisher House CECCAR, Bucureşti, nr. 9/2003. 

24 

F.


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The fundamental truth of the historical cost is not found in the Romanian legislation, it is 

27 

only implicit. But OMFP nr.1752/2005 explains that on the time entering in patrimonyF 

F of an 

28 

entity, the landed property with free titles can be evaluated and registered at a good priceF 

F. So 

the good price is specified clear as a way of evaluation and record of the assets in the patrimony 

of entities. Is this provision a moment that indicates an evolution in the auditors rationalism? We 

consider that a part of the auditors from Romania will not separate very quickly from the 

evaluation to the historical cost and will agree very hard to practice for the assignation of real 

values and new patrimony elements. The opponents of the historical model had introduced 

possible methods of evaluation to applied, among those right value has a honorary place. 

The right value in the context of the IAS 41 Agriculture application 

The expression “right value” is formed from two concepts: 

- value – comes from the French valeur and represent the sum of the qualities that give 

the price of an object, creature and phenomenal. 

- Right – comes from the French juste and has many significations: concordant with the 

truth, right, and properF 

29 

F. 

In a general manner we can say that the right value represents the right price, of an object, 

creature, phenomenal etc. 

The expression right value is given in many accounting standards (IAS 16.17.18,41 ETC.) 

and it assumes an update of some sums which it will be receive in the future for the making 

evident the present value, or to evaluate some assets through specific accounting methodsF 

Through the paper we will make connection to the right value mentioned by IAS 41 that defines 

her similar with the international laws, for example IAS 16 Immobilizations of capital, or “ the 

sum for which an asset can be transaction willingly by the both parts, in a closing transaction in 

which the price is given by the targetF 

31 

F. 

From the definition given below we can conclude the next general ideas regarding the 

right value: 

- it represents an value equivalent, expressed mostly through a sum of money; 

- it is an estimated value, which can suffer changes in any time, (this idea is from an asset 

can be transfer); 

- it is compulsory the existence of a transaction at least between the tow parts that were 

informed; 

- the parts implicated in the transaction, namely the buyer and the seller, it is supposed 

that they were informed about the operation that will place through the determination of the right 

value in a contract each part follows to obtain economic benefits. Those economic benefits are 

bigger with every influence of the two partners when they can influence the report of requesting – 

offer. We can detach the idea that the right value is given by the demand and the active biological 

offer compared, agricultural products or additional biological actives. 

27 

The concept of patrimony is used in the same law namely at point 99 “investments made through…. Including the 

explorations expenses in a period of time decided by the administrative councilor or the manager of patrimony. This 

fact denotes that the Romanian accounting standards are trying the give up the patrimony, but we notice that the law 

persists to make us believe that the notion in case… at least from the point of view of accouters and theoretician. 

28 

OMFP nr.1752/2005. 

29 

Ibidem, p. 552. 

30 

Adela Deaconu, Market value- different opinions presented in the accounting standards and in the evaluation of 

the assets, Magazine accounting, expertise, and audit of affairs, Publisher House CECCAR, nr. 8/2001. 

31 

IAS 41 Agriculture, paragraph 8. 

30 

F.


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- it is mentioned the concept of price, were we have the idea that we can put the sign of 

equal between the expressions “right value” and “right price”. 

In accordance with the Romanian agricultural laws, right value is equal with the market 

price or the market value: “the price made under the conditions of open competition, in which 

none of the market agents can not influence or decide one-sided the level or the dynamic of this, 

made on the direct confrontation between the buyers and sellers”F 

In accordance with the evaluation standards, the market value is considered the sum 

estimated for an active at the time of the evaluation between a buyer and a seller decided in an 

equilibrated transaction and after a proper marketing, in which every one acts noticed, precaution 

and with no restraining. 

The right value of an asset is calculated depending on the place and situation of it. The 

most important element for the established of the right value of some actives is the existence of 

an active market for those. A market is consider to be active when: 

- the consumed goods are equal 

- the buyers and the sellers can be easily found in any moment 

- the prices are known by the public 

The determination of the right value can depend sometimes on the biological assets or on 

the agriculture products, depending on the significant attributes (such as quality and age) 

The right value is determined by the market price, when there is an asset market. If an 

agriculture work has access to more active markets, it will use the price from the most 

representative market for her. 

The agriculture situation can be in the situation in which she cannot accede to an active 

market, and in this case we can use the next element to determine the right value: 

- the most recent price in a transaction similar from the market, in the case in which 

there is no major economic changes between the transaction data and the financial situations data; 

- The market price for similar products, adapted to in order to reflect the differences 

(quality, age, weight etc.); 

- Specific criteria of the industrial field (the value of an animal expressed in lei/kilo). 

Further on we will speak about the problem of biological actives evaluation and the 

agricultural products from the point of view of IAS 41 Agriculture. 

The IAS 41 establish as a general rule, the evaluation of the biological assets and the 

33 

agriculture products at the right value minus the costsF 

F prices estimated at the point of sales (can 

be considered a base accounting treatment).In exceptional situations in which the right value or 

the alternative estimations of the right value are not right an biological asset can be evaluated 

only with the occasion of the initial recognition, at her lower price(and can be considered an 

alternative accounting treatment). 

We conclude that the international norms are providing separate evaluation of the 

biological assets of agriculture products. 

Below we present a parallel between the ways of evaluation of biological actives 

according with the intern and international laws. 

32 

The decree 45/2005 regarding the market organization of agriculture and agro alimentary products, Official 

Monitor nr. 754/2005. 

33 

IAS 41 uses the cost notion at the point of selling. We consider that we should use the expression “expression at 

the point of selling”, because the concept cost is used in case of obtaining from the own production an agriculture 

asset. 

32 

F.


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Ways of evaluation of biological assets according with 

34 

the intern and international lawsF 

Table 1 

The steps of 

evaluation 

At the beginning of 

35 

the patrimonyF 

F 

The elaboration of 

the financial 

situations 

OMFP nr. 

1752/2005 

Accounting value 

(entering value) 

Net accounting 

value 

IAS 41 Agriculture 

Bases accounting 

treatment 

Right value minus 

the costs from the 

beginning of the 

selling 




selling 

Alternative 

accounting 

treatment 

Cost minus 

repayment and 

devalue 

Cost minus 

repayment and 

devalue 

The exception from the rule presented, operates only in the case of biological assets at the 

initial knowing (IAS 41, paragraph 30). 

In accordance with paragraph 27, at the initial knowing of a biological asset can appear 

losses because the estimated costs at the point of sales are deduced when the right value is 

determinate. 

The agriculture products are evaluated at the initial knowing (the moment of crops) at the 

right value minus the costs estimated at the point of sales (IAS 41, paragraph 13). The crop marks 

the critical point the represents the transferring from the IAS 41 to IAS 2 or another standard. 

Such a transfer it is justified in the moment of crop, the agriculture activity stops and it starts the 

associate activities of the obtained products processF 

36 

F. The right value minus the costs estimated 

of the point of selling established at the crop, in accordance with IAS 41, for the products turns 

into cost by the time that IAS 2 is applied or another standard. 

Systemizing with the below table, the ways of evaluation of the agriculture products according 

with OMFP nr. 1752/ and IAS 41: 

34 The notion right value mentioned in the Fourth Directive of the Council from 25 Julie 1978, section 7a 

“Evaluation at right value”, tells that states members allow or demand to the others commercial societies or to some 

classes of society to evaluate the financial instruments, including the derived financial instruments to the right value. 

35 The international norm uses the syntagm “initial recognition”. 

36 The experts Corps of accounting and the Authorized Accountants from Romania, Guide for understanding and 

application of International Accounting Standard, nr.41 Agriculture, Publisher house CECCAR, Bucureşti, 2004, p. 

80.


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Ways of evaluation of the agriculture products according with the intern and 

international laws 

Table 2 

The 

moments of 

evaluation 

At the 

entering in 

the patrimony 

The 

elaboration of 

financial 

situations 

OMFP 

nr.1752/2005 

Accounting 

value (entering 

value) 

Net 

accounting 

value 


Accounting treatment 

(Crop) 

Right value minus the 

cost from the 

beginning 

selling 

of the 


cost from the 

beginning 

selling 

of the 

After the 

crop is 

done 

IAS 2 

Inventory 

Accounting 

treatment 

The right value 

becomes the 

cost 


becomes the 

cost 

For the farm products cropped it does not exits the alternative accounting treatment (the 

respective the costs minus the repayment accumulated and the losses from the devalues 

accumulated) like in the case of biological assets, considering that in this situation there is the 

possibility to estimate the right value with sufficient credibility. And with the initial 

acknowledgement of an agriculture product at the right value minus the estimated costs of the 

selling point it can be record an income or a loss which it will be included in the result of the 

financial exercise. 

Concluding, without entering in the polemic of the historical cost – right vale “comparing 

with the historical cost, the right value has more trump then this, so we can say that she is an 

imperfection and still she approaches to the perfection”F 

37 

F. And still the right value remains in its 

assents an hypothesis so a supposition based on a possibility and not a mathematical hypothesis 

in the meaning of the given element which it develops a demonstration. In consequence the right 

value must be known as one of the accounting estimations, not the only real and perfect, which 

38 

can be kept from the others bases of evaluationF 

F. 

52BBibliography 

1. Cenar, I., Todea, N., Bazele contabilităţii, Editura Aeternitas, Alba Iulia, 2003. 

2. Feleagă, N., Malciu, L,, Bunea, Ş., Bazele contabilităţii – o abordare europeană şi 

internaţională, Editura Economică, Bucureşti, 2002. 

3. Zahiu, L., ş.c., Structurile agrare şi viitorul politicilor agricole, Editura Economică, 

Bucureşti, 2003. 

4. Ordonanţa nr. 45/2005 privind organizarea pieţei produselor agricole şi agroalimentare, 

Monitorul Oficial nr. 754/2005. 

5. Ordinul 1752/2005 pentru aprobarea reglementărilor contabile conforme cu directivele 

europene, Monitorul Oficial nr. 1080 bis/2005. 

37 

Elena Mihaela Barbu, Qualities of the right value under the sign of question, in the magazine Accounting, 

expertise and audit of affairs, nr. 6/2002. 

38 

Mihai Ristea, Corina Dumitru, Affairs Accounting, Publisher House Economică, Bucureşti, 2006, p. 57.


ISSN: 1842-4856 

6. Legea contabilităţii republicată nr. 82/1991, Monitorul Oficial nr. 48/2005. 

NEW APPROACHES OF THE OPTIMUM CURRENCY 

AREAS THEORY 

Andreea-Maria Ciobanu, Assistant Professor, Ph. D Candidate, 

Faculty of Economics and Business Administration 


Abstract: This paper surveys the literature on the optimum currency area (OCA) theory. It makes 

systematic reference to the European economic and monetary union (EMU) to which the OCA theory has been most 

frequently applied. Even if all pioneering contributions are still relevant, some early weaknesses have to be amended 

now. Meanwhile, the balance of judgements has shifted in favour of currency unions, as they seem to generate fewer 

costs in terms of the loss of autonomy of domestic macroeconomic policies, and there is greater emphasis on the 

benefits. 

1. INTRODUCTION 

An optimum currency area (OCA) is defined here as the optimal geographic domain of a 

single currency, or of several currencies, whose exchange rates are irrevocably pegged and might 

be unified. The single currency, or the pegged currencies, can fluctuate only in unison against the 

rest of the world. The domain of an OCA is given by the sovereign countries choosing to adopt a 

single currency or to irrevocably peg their exchange rates. Optimality is defined in terms of 

several OCA properties, including the mobility of labour and other factors of production, price 

and wage flexibility, economic openness, diversification in production and consumption, 

similarity in inflation rates, fiscal integration and political integration. Sharing the above 

properties reduces the usefulness of nominal exchange rate adjustments within the currency area 

by fostering internal and external balance, reducing the impact of some types of shocks or 

facilitating the adjustment thereafter. Countries would form a currency area in expectation that 

current and future benefits exceed costs. 

The start of the OCA theory are the seminal contributions by Mundell (1961), McKinnon 

(1963), and Kenen (1969) although some insights were present already in Friedman (1953) and 

Meade (1957). The goal of this paper is to trace the evolution of the OCA theory. The European 

experience is, in some sense, providing a “laboratory” to assess each OCA property and how their 

interpretation has changed over time. At the same time, a variety of studies - such as on the 

similarity of shocks, the “endogeneity of OCA,” and the effects of monetary integration on 

specialisation - is making reference to the OCA theory. 

2. THE “PIONEERING PHASE:” FROM THE EARLY 1960S TO THE EARLY 1970S 

The early 1960s were characterised by the Bretton Wood exchange rate regime, capital


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controls in many countries, and the incipient process of European integration. The OCA theory 

emerged from the debate on the merits of fixed versus flexible exchange rate regimes, and the 

comparison of several features of the US and European economies. Various OCA properties – 

that are also called “prerequisites,” “characteristics,” or “criteria” for monetary integration by 

some authors - emerged from this debate. 

a. Price and wage flexibility. When nominal prices and wages are flexible between and 

within countries contemplating a single currency, the transition towards adjustment following a 

disturbance is less. 

The “OCA question” aims instead at defining the optimal geographic domain of a single 

currency: the set of countries in this domain is in principle unknown a priori. It will depend on 

the OCA properties. “The question of whether Europe is an optimum currency area is not one, 

unfortunately, which can be answered with a simple yes or no. The OCA literature does not 

provide a formal test through whose application the hypothesis can be accepted or rejected” 

according to Eichengreen (1990). In fact, frustration about the normative implications of the 

OCA theory has led some authors to define alternative notions such as “feasible currency area” 

(Corden (1972)), “advantageous monetary area” (Emerson et al (1992)), “viable currency area,” 

and other hybrid concepts likely to be associated with sustained unemployment in one country 

and/or inflation in another. This will in turn diminish the need for nominal exchange rate 

adjustments (Friedman (1953)). Alternatively, if nominal prices and wages are downward rigid 

some measure of real flexibility could be achieved by means of exchange rate adjustments. In this 

case the loss of direct control over the nominal exchange rate instrument represents a cost (Kawai 

(1987)). Price and wage flexibility are particularly important in the very short run to facilitate the 

adjustment process following a shock. Permanent shocks will in turn entail permanent changes in 

real prices and wages. 

b. Mobility of factors of production including labour. High factor market integration 

within a group of partner countries can reduce the need to alter real factor prices, and the nominal 

exchange rate, between countries in response to disturbances (Mundell (1961)). Trade theory has 

long established that the mobility of factors of production allows their reallocation across a freetrade 

zone, and is efficiency and welfare enhancing for the zone as a whole. Such mobility is 

likely to be modest in the very short run and could display its effect over time. The mobility of 

physical factors of production (i.e., “capital”) is limited by the pace at which direct investment 

can be generated by one country and absorbed by another. Labour mobility is likely to be low in 

the very short run, due to some costs, such as migration and retraining costs (that could be quite 

significant). It could possibly be higher in the medium and long-run, easing the adjustment to 

permanent shocks (Corden (1972)). 

c. Financial market integration. Ingram (1962) noted that financial integration can 

reduce the need for exchange rate adjustments. It permits, amongst others, to cushion temporary 

adverse disturbances through capital inflows --e.g. by borrowing from surplus areas or decumulating 

net foreign assets that can be reverted when the shock is over. Under a high degree of 

financial integration even modest changes in interest rates would elicit equilibrating capital 

movements across partner countries. This would reduce differences in long-term interest rates, 

easing the financing of external imbalances but also fostering an efficient allocation of resources. 

Financial integration is not a substitute for a permanent adjustment when necessary: in this case, 

it can only smoothen the long-term adjustment process. 

d. The degree of economic openness. The higher the degree of openness, the more 

changes in international prices of tradables are likely to be transmitted to the domestic cost of 

living. This would in turn reduce the potential for money and/or exchange rate illusion by wage


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earners (McKinnon (1963)): the higher is openness the more changes in international prices 

would directly and indirectly impact on domestic prices. Also a devaluation would be more 

rapidly transmitted to the price of tradables and the cost of living, negating its intended effects. 

Hence, the nominal exchange rate would be less useful as an adjustment instrument. Economic 

openness has various dimensions including the degree of trade integration (i.e., the ratio of 

reciprocal exports plus imports over GDP) with the partner countries, the share of tradables 

versus non-tradable goods and services in production and consumption; the marginal propensity 

to import; and international capital mobility. These concepts overlap but are not necessarily 

synonymous. An economy could display a high share of tradables but have low imports and 

exports (and exhibit a low foreign trade multiplier). 

e. The diversification in production and consumption. A high diversification in 

production and consumption, i.e., in the “portfolio of jobs”, and correspondingly in imports and 

exports, dilutes the possible impact of shocks specific to any particular sector. Therefore 

diversification reduces the need for changes in the terms of trade via the nominal exchange rate 

and provides “insulation” against a variety of disturbances (Kenen (1969)). More diversified 

partner countries are more likely to endure small costs from forsaking nominal exchange rate 

changes amongst them and find a single currency beneficial. 

f. Similarities of inflation rates. External imbalances can arise from persistent 

differences in national inflation rates resulting, inter alia, from: disparities in structural 

developments, diversities in labour market institutions, differences in economic policies, and 

diverse social preferences (such as inflation aversion). Fleming (1971) notes that when inflation 

rates between countries are [low and] similar over time, terms of trade will also remain fairly 

stable. This will in turn foster more equilibrated current account transactions and trade, and 

reduce the need for nominal exchange rate adjustments. On the other hand, not all inflation 

differentials are necessarily problematic. Some “catching up” process by less developed countries 

could lead to “Balassa-Samuelson” types of effects until the process is completed. Some authors 

propose instead that it is the terms of trade (i.e., the real exchange rate) that should exhibit narrow 

fluctuations between countries (Eichengreen (1990)). 

g. Fiscal integration. Countries sharing a supra-national fiscal transfer system that would 

allow them to redistribute funds to a member country affected by an adverse asymmetric shock 

would also be facilitated in the adjustment to such shocks and might require less nominal 

exchange rate adjustments (Kenen (1969)). However, such a property would require an advanced 

degree of political integration and willingness to undertake such risk sharing. 

h. Political integration. The political will to integrate is regarded by some as the single 

most important condition for adopting a common currency (Mintz (1970)). Political will fosters, 

amongst others, compliance with joint commitments, sustains co-operation on various economic 

policies, and encourages more institutional linkages. Haberler (1970) stresses that similarity of 

policy attitudes among partner countries is relevant in turning a group of countries into a 

successful currency area. Tower and Willett (1976) add that a successful currency area needs a 

reasonable degree of compatibility in preferences toward growth, inflation, and unemployment 

and significant ability by policy-makers in trading-off between objectives. 

3. THE “RECONCILIATION PHASE:” THE 1970S 

The debate on the OCA properties and the benefits and costs received an impetus from a 

second wave of contributions including Corden (1972), Mundell (1973), Ishiyama (1975), and 

Tower and Willet (1976). The merit of these authors was to jointly interpret the diverse


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properties. This reconciliation strengthened the interpretation of some properties and led to 

diverse new insights such as the role of similarity in shocks. 

Corden (1972) points out that forming a currency area with a group of partner countries 

entails a loss of direct control over the national monetary policy and the exchange rate. This 

entails forsaking national expenditure switching policies implying a cost to the extent that 

nominal prices and wages are downward rigid. In a currency area, a country facing an adverse 

demand shock to its exports will need to resort instead to expenditure absorption policies - such 

as a fiscal tightening or expansion - to restore its external balance. At the same time, it would also 

need to rely on changes in its real exchange rate. Flexibility in nominal prices and wages can 

bring about real exchange rate flexibility in the wake of some shocks or in the presence of some 

imbalances. This could in turn reduce the amount of absorption policy that is needed. In fact, 

there is a trade-off between real exchange rate flexibility, that is market-based and could operate 

quite rapidly, and the amount of expenditure absorption policy, which is less rapid. 

Ishiyama (1975) recognises the limitations of defining OCAs based on a single property 

and postulates that each country should evaluate the costs and benefits of participating in a 

currency area from the point of view of its own self-interest and welfare (“…if the pros outweigh 

the cons….”). Ishiyama also points out that differences in inflation rates and wage increase 

resulting from different social preferences, and conflicting national demand management policies 

overwhelm in importance several other OCA properties (including differences in exposure to 

micro-shocks most of which are likely to be temporary). 

Tower and Willett (1976) illustrate with a graphical apparatus the diverse OCA-properties 

and the trade-offs they entail vis-à-vis alternative exchange rate regimes. They show, amongst 

others, that joining a currency area enhances the usefulness of money the more open a country is, 

but it constrains the use of discretionary macroeconomic policies to achieve internal balance due 

to the external constraint for the area as a whole. The total cost of adjustment hinges upon the 

sources, type and strength of external disturbances. Such costs are a decreasing function of 

openness. In the end, they argue, that there is no general agreement on the quantitative 

importance of any OCA property, and highlight the need for more empirical research. However, 

the OCA theory has thus far been a catalyser for new research on alternative exchange rate 

regimes leading to valuable new insights. 

4. THE “REASSESSMENT PHASE:” THE 1980S AND EARLY 1990S 

A period in which “the subject [i.e., the OCA theory] was for years consigned to 

intellectual limbo” (Tavlas (1993)) followed the above contributions. The analytical framework 

behind the OCA theory thus far started to weaken. Some authors noted that this pause is also 

explained by the loss of momentum toward monetary integration. When interest in European 

monetary integration re-emerged in the mid 1980s, both economists and policy-makers looked 

back at the OCA theory, but could not find clear answers to the question whether Europe should 

proceed toward complete monetary integration. 

The “One Market, One Money” Report by Emerson et al. (1992) point out that “there is 

no ready-to-use theory for assessing the costs and benefits of economic and monetary union 

(EMU).” The optimum currency area theory has, in their view, provided important early insights 

but provides only a narrow and outdated analytical framework to define the optimum economic 

and monetary competencies of a given geographic domain (i.e., a “region” such as the EU). The 

latter EMU question is, possibly, more complex than the OCA question.


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5. EMPIRICAL STUDIES OF OCA: FROM THE 1980S TO TODAY 

This section reviews several recent empirical studies on the diverse OCA properties. The 

flourishing of these studies is due to the theoretical innovations discussed in the previous 

sections, the advancements in econometric techniques, and foremost, the renovated interest 

toward European economic and monetary integration. These empirical studies seek to assess why 

specific groups of countries may form an optimum currency area by analysing and comparing a 

variety of OCA properties and applying several econometric techniques. Thus they aim to 

operationalize the OCA theory. The focus of this section is on Europe. The main reason for this 

choice is that the European process of integration started already in the 1950s. Europe is in some 

sense, providing a “laboratory” to assess each OCA property and monitor the effects of 

deepening economic, financial and monetary integration. 

a. Price and wage flexibility. There is broad agreement that price flexibility is low across 

European countries. OECD (1999) and EU Commission (1999) find that price flexibility is 

hampered, albeit by different degrees across the euro area, by the slow implementation of the 

Single Market Programme (SMP), a slow dismantling of some non-tariff internal and external 

trade barriers, and continuing state aid to several sectors. For example, there is relatively low 

market competition and monopolistic tendencies in sectors with a high concentration of state 

owned enterprises or of previous state monopolies. 

Low wage flexibility is also an important factor behind the lack of price flexibility. 

Despite significant progresses in recent years, real wages are still quite rigid across most 

European countries, albeit with notable differences (see also Calmfors and Driffil (1988), 

Calmfors (2001) and Boeri, Börsch-Supan and Tabellini (2001)). There is also a significantly 

slower speed of adjustment of real wages to economic shocks in continental Europe (OECD 

(1994)). Unemployment does eventually put some downward pressure on real wages in Europe, 

but a large share of the adjustment is borne by employment (OECD (1994)). But Cadiou, 

Guichard and Maurel (2001) find significant labour market asymmetries across EU countries and 

that overall the responsiveness of wages to unemployment rose in the 1990s. Several labour 

market institutions contribute to explain low wage flexibility including: wage bargaining 

arrangements, employment protection, unemployment insurance systems, and minimum wage 

provisions (see Blanchard (1999), Blanchard and Wolfers (2000)), EU Commission (1999), and 

IMF (1999)). Several studies find a wide heterogeneity of European labour market institutions 

(Nickell (1997), Layard and Nickell (1998), and OECD (1999)). 

Several recent studies establish a significant link between product and wage markets: 

countries with more stringent product market regulations tend to have more restrictive 

employment protection legislation (OECD (2000)). Therefore, product market reforms can be a 

catalyst for easing restrictive employment protection legislation. Such structural reforms would 

enhance competition, strengthening the links between wage and price flexibility allowing prices 

to adjust more rapidly in the wake of shocks. Hence, the drive to continue implementing the 

Single Market Programme will enhance both price and wage flexibility. 

b. Labour market integration. Labour mobility could contribute to the adjustment in 

case of permanent shocks and when real wages are downward rigid. Several factors help to 

explain low labour mobility in most EU countries. Bertola (2000) observes that quantity and 

price dimensions of labour market rigidity are inter-related and that lack of employment 

flexibility with wage rigidity reinforce each other. But there are also some specific social, 

cultural, and administrative determinants behind the low geographic mobility in Europe. 

Braunerhjelm, Faini, Norman, Ruane, and Seabright (2000), noted inefficiencies in the inter-


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regional job matching process as well as high mobility costs. Blanchard questions whether the 

cultural and language barriers can ever disappear. Also, there are significant barriers in the 

housing markets across the EU. A panel of experts set up by the EU Commission in 1996 partly 

attributes low labour mobility to a combination of institutional and administrative factors 

including: limited cross border portability of social protection and supplementary pension rights; 

administrative difficulties and the high costs of gaining legal resident status; lack of 

comparability and reciprocal recognition of professional qualifications; and restrictions on public 

sector employment. 

c. Factor market integration. Several studies show that cross-country foreign direct 

investments have become more relevant in the euro area. OECD (1999) shows that both inward 

and outward foreign direct investments (FDI) from other euro area countries have risen in almost 

all countries over the last years. Also in the medium run FDI seem quite responsive to changes in 

regional economic conditions. Public procurement markets are still operating on a largely 

national basis. The EU Commission (1999) estimates that significant barriers to market access 

still remain in several sectors accounting for about half of EU GDP. In summary, foreign direct 

investment flows - that are likely to be underestimated but are still modest in comparison with 

trade and other financial flows - are on the rise and add up over time leading to an increase in the 

share of foreign owned assets and portfolio diversification fostering risk sharing. 

d. Financial market integration. The extent by which European countries are financially 

integrated is evaluated from diverse complementary angles including the intensity of cross-border 

financial flows (quantity test), the law of one price (arbitrage test), and also the similarity in 

financial institutions and markets. The common view is that financial integration is lower among 

European countries than among US States (but that it is raising fast in several areas). Concerning 

the quantity test, there are several, mostly indirect, measures. Backus, Kehoe and Kydland 

(1992) find evidence of a low level of risk sharing by comparing cross-country GDP and 

consumption correlations. Sørensen and Yosha (2000) and Arreaza (1998) carry out crosscountry 

variance decompositions of shocks to GDP and point to negligible risk sharing through 

cross-country ownership of assets. Tesar and Werner (1995) document a “home bias” in portfolio 

holdings (see also Obstfeld and Rogoff (2000)), and a host of authors have found evidence of low 

financial market integration in terms of cross-country ownership of assets. Bordo, Eichengreen 

and Kim (1998) show that the ratio of the current account balance over GDP, averaged across a 

number of countries, has increased somewhat since the mid-1960s but still remains below the 

levels seen from the mid-1870s to 1914. However, in volume terms gross financial flows are 

larger today than in the period before 1914. Encouragingly, Gaspar and Mongelli (2001) find that 

the relation between current account balances and GDP per capita has risen in recent years across 

European countries indicating an increased importance of net financial flows (for some 

qualifications see Alesina, Angeloni and Etro (2001)). Liebermann (1998) finds evidence of 

higher cross-country insurance via capital markets during the period 1992-97, which indicates 

that capital markets in Europe are integrating. 

e. The degree of economic openness. Openness as measured by the ratio of export plus 

import of goods and services to GDP is quite high across all European countries: it averages 

around 40 percent of GDP. Due to the process of price liberalisation, spurred also by the 

implementation of the Single Market programme, and the deepening of industry trade (that is 

discussed below) prices of tradables are becoming progressively more aligned across the EU (see 

Beck and Weber (2001)). The issue of currency union and trade (and the causality between the 

two) is addressed also by the “endogeneity of OCA” literature. 

f. The diversification in production and consumption. The diversification in


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production is high in most EU member countries. Bini-Smaghi and Vori (1992) find that “...in 

MTM studies investigate and compare financial structures and the relative impact of monetary 

policies. They provide some indirect insights also for the OCA question as differences in 

monetary transmission might have a bearing on the costs from sharing a single currency e.g., by 

engendering cyclical divergences (Clements, Kontolemis and Levy (2001)). However, Clements, 

Kontolemis and Levi (2001) find significant differences in transmission across euro area 

countries even after correcting for differences in monetary policy reaction functions prior to 

EMU. ECB (2000) finds a lack of statistically significant cross-country differences in the 

transmission mechanisms. Kieler and Saarenheimo (1998) note that very different results can be 

obtained for the same country using different methodologies. These differences are often larger 

than the differences that emerge using a given methodology across countries. In any case these 

studies are still fraught with several difficulties (Guiso, Kashyap, Panetta and Terlizzese (2000)). 

g. Similarities of inflation rates. Inflation rates have declined in all industrialised 

countries over the past 15-20 years, albeit at different paces. In the run up to EMU inflation 

differentials have narrowed down within narrow margins among all EU countries, and in 

particular euro area countries (EMI (1998)). However, inflation rates have since shown some 

national variations owing to three types of factors: statistical and erratic factors (noise); some 

deeper economic forces that are at work including the completion of the single market and the 

increase in cross-border transparency that is contributing to reducing differences in prices of 

traded goods, and also the Balassa-Samuelson effect; and differences in cyclical conditions and 

demand policies (ECB (1999)). OECD (1999) argues that sustained, but not large, differences in 

inflation rates are acceptable provided that they reflect a “catching-up” process. 

h. Fiscal integration. Fiscal integration can be looked at from several complementary 

angles. From the standpoint of fiscal convergence, one very evident achievement is that all euro 

area countries have satisfied the fiscal criteria of the Maastricht Treaty (EMI (1998)) and are now 

complying with the Stability and Growth Pact (SGP). There is also some evidence of a deeper 

level of fiscal convergence. Fiscal positions are coming closer together due to economic 

integration that is fostering harmonisation in several areas of taxation, spending and fiscal 

legislation. De Bandt and Mongelli (2000) find evidence that for euro area countries crosscorrelation 

has increased steadily over the 1970-98 period, while fiscal dispersion has been 

declining at a sustained pace among all countries in the sample. They also find a common euro 

area fiscal cycle for net lending across the euro area. However, idiosyncratic national components 

still contribute to a significant share of the variability of individual countries. These preliminary 

findings need to be qualified by the still significant differences in levels of public indebtedness 

and fiscal structures. 

Concerning fiscal stabilization, the national budgets of euro area countries would be able 

to withstand even severe disturbances affecting economic activity and employment once they 

have complied with the medium-term targets of the Stability and Growth Pact (SGP) (Artis and 

Buti (2000)). These targets entail a balanced budget, or even a fiscal surplus, in order to satisfy 

the SGP “in good times and bad times” (Eichengreen and Wyplosz (1998) and Buti, Franco and 

Ongena (1998)). If national fiscal stabilisers work in the wake of adverse shocks, the need for 

other types of adjustments --such as supranational transfers, international risk sharing through the 

financial system, changes in prices and wages, and/or changes in real exchange rates -- are 

somewhat reduced. 

A third dimension of fiscal integration is the public risk sharing facility that might be 

provided by a supranational -- example given, federal -- budget. This entity can reduce its 

receipts from and/or increase its transfers to a region or state hit, for example, by an adverse


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shock and thereby absorbing a share of the “regional” shock (see Sachs and Sala-i-Martin (1991), 

Von Hagen (1991), Atkeson and Bayoumi (1993), and OECD (1999)). Whatever the effective 

magnitude of public risk sharing, such a facility takes in any case away part of the burden of 

counter-cyclical policies from the US State fiscal authorities. The latter is a non-negligible aspect 

given that most US States are subject to even tighter fiscal constraints than euro area countries 

(Von Hagen (1991)). The euro area is proceeding without a public risk sharing facility. Bini- 

Smaghi and Vori (1992) find that some smaller and more homogeneous monetary unions, such as 

Switzerland, Belgium, and Luxembourg, have been able to function proficiently with a very 

limited federal budget. 

j. Similarity of shocks. The similarity of shocks, and policy responses to shocks, is 

almost a “catch all” OCA property, or “meta” property, capturing the interaction between several 

properties (see also Masson and Taylor (1993)). The intuition is that if the incidence of supply 

and demand shocks and the speed with which the economy adjusts - taking into consideration 

also the policy responses to shocks - are similar across partner countries, then the need for policy 

autonomy is reduced and the net benefits from adopting a single currency might be higher. In the 

late 1980s and early 1990s, these studies acquired more prominence due to advancements in 

econometric techniques. 

6. CONCLUSIONS 

Have all the theoretical and empirical advancements of the last 20 years rendered the 

OCA theory any simpler? Yes and no. There is still no simple OCA-test with a clear-cut scoring 

card although several authors have “operationalised” several OCA properties. On the one hand, 

we are in a better position now than ever before in many respects. All OCA properties can now 

be discussed in much greater detail. Studies of OCA properties have become very comprehensive 

and articulated. This permits to tell to what extent, and why, certain properties are shared, or not 

shared, by partner countries. On the other hand, we are in a somewhat harder position now 

because the response of agents to economic changes and the policy regime - and EMU is a major 

change in regime - is conditioned in a complex way by the environment in which they operate. 

We can gain some important insights by studying the OCA properties in great detail. But it is 

still difficult to weigh and reconcile all OCA properties: i.e., we might still face a problem of 

inconclusiveness or of inconsistency. 

The European experience with integration started in the 1950s and shows that all OCA 

properties play a role as they interact. Removing “borders” and embracing deeper forms of 

monetary co-ordination --that has now culminated with EMU -- has led, and is continuing to lead, 

to deeper economic and financial integration. For the group of countries now forming the euro 

area this has brought considerable benefits but has also required a long period, although some 

countries that joined the process later than the others caught up very rapidly with the rest. The 

progress did not always seem linear and several stages of European integration were often the 

“crowning” of previous stages. The euro area is now a good currency area by many accounts. 

However, this has required some time as the European experience shows that the heterogeneity 

of, amongst others, policy preferences, institutions and economic structures diminish only 

gradually. 

REFERENCES 

1. Angeloni I., A., Kashyap, B.,Mojon, and D. Terlizzese (2001) “Monetary Transmission in


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the Euro Area: where do we stand?” ECB working paper no. 114; 

2. Artis, M. J. (1991), “One Market, One Money: An Evaluation of the Potential Benefits 

and Costs of Forming an Economic and Monetary Union”, Open Economies Review 2; 

3. Bayomi, T. and Barry Eichengreen (1997), “Ever Closer to Heaven? An Optimum- 

Currency-Area Index for European Countries”, European Economic Review 41; 

4. De Grauwe, Paul (2000),“Economics of Monetary Union”, Oxford University Press, 

Fourth Edition; 

5. Eichengreen, Barry (1990a), "One Money for Europe? Lessons from The U. S. Currency 

Union," Economic Policy: a European Forum, Vol. 5, No. 1; 

6. Emerson, M., D. Gros, A. Italianer, J. Pisani-Ferry and H. Reichenbach (1992), One 

Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an 

Economic and Monetary Union, Oxford; 

7. Frankel, J. A. (August 1999), “No Single Currency Regime is Right for All Countries or 

at All Times”, Essays in International Finance, Princeton University; 

8. Krugman, P. (1991), "Increasing Returns and Economic Geography." Journal of Political 

Economy, Vol. 99, No. 3; 

9. McKinnon, Ronald I. (September 1963), "Optimum Currency Areas." American 

Economic Review, Vol. 52; 

10. Padoa-Schioppa, Tommaso (1990), "Financial and Monetary Integration in Europe: 

1990, 1992 and Beyond," Occasional Paper, No. 28. Washington, D.C.: Group of Thirty; 

11. Rose Andrew (2000) "One Money, One Market: Estimating the Effect of Common 

Currencies on Trade," Economic Policy, vol. 30; 

12. Tavlas, G. S. (1993), “The ‘New’ Theory of Optimum Currency Areas”, The World 

Economy.


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PERSPECTIVES ON TRANSNATIONAL COMPANIES 

George Ciobanu, Lecturer, Ph. D 

Faculty of Economics and Business Administration, 

University of Craiova, Romania 

ABSTRACT: The largest source of external funds to developing countries is not development assistance — 

whether bilateral, multilateral, loans, grants, official or other. It is foreign direct investment (FDI). FDI represents an 

enormous supply of financial resources, technology and jobs and is of great potential benefit to emerging economies. 

FDI comes from the private sector, from large companies willing to invest anywhere. These companies, called 

“trans-national companies (TNCs), are important but accidental participants in the development process. Their role 

and importance are described in this paper. 

Trans-National Corporations (TNCs) sometimes referred to as multinational companies, 

are enterprises that control economic assets in other countries — generally this means controlling 

at least a 10% share of such an asset. These companies command enormous financial resources, 

possess vast technical resources and have extensive global reach. In 2002, the most recent year 

for which full data are available, FDI made throughout the world totaled some $651bn. While 

most FDI goes to developed countries; for developing countries it is by far the largest source of 

external finance. In 2002 $162bn in FDI went to developing countries. By comparison, official 

development assistance (ODA) amounts to some $58bn annually and remittances, another 

significant source of funds for poor countries, totaled $93bn in 2003. 

Despite their impact in developing economies, however, TNCs are not development 

agencies. They are profit-seeking organizations. These dual roles of funding source and profit 

seeker — unrelated roles that are neither conflicting nor complementary — have made TNCs 

object of great controversy. Do they help or hinder? Do they give or take? Are their benign or 

malign? Are they stakeholders or exploiters? Can they be persuaded to be good world citizens or 

are they indifferent to their impact? 

Throughout the world, there are some 64,000 TNCs controling 870,000 foreign affiliates. 

Globalization, particularly the dismantling of trade barriers, has allowed companies to spread 

widely in search of cost efficiency and to implement integrated production strategies across 

regions and even continents. Unquestionably, they bring resources of great potential benefit to 

developing countries.


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• TNCs, and the FDI they bring, have the potential to “generate employment, raise 

productivity, transfer skills and technology, enhance exports and contribute to the longterm 

economic development of developing countries.” 

• They infuse money into an economy where it can supplement or free-up government 

revenues and/or development assistance funds. 

• TNCs also bolster the private sectors of the countries where they operate, a process 

deemed important to overall economic growth and economic health. 

Despite this positive potential, the TNC phenomenon also carries some negative potential. 

A number of objections to their behavior in developing countries have been raised:


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1. For both real and ideological reasons, some stakeholders distrust the impact of 

TNCs on vulnerable economies. It has been reported that “Twenty-nine of the world’s 100 

biggest economic entitles are multinational companies.” That degree of economic strength 

wielded within a weak economy by an powerful organization required by fiduciary 

responsibility to give top priority to shareholder return cannot be counted on to respect the 

best interests of the host country. 

2. Specific instances of serious problems with TNC practices — frequently 

related to environmental despoilment — have created civil unrest and a backlash against the 

presence of multinational companies, especially large and politically well-connected ones. 

Shell Oil Company in Nigeria, Bechtel in Bolivia, Union Carbide in India, Chevron Texaco in 

Ecuador are cases of major TNC presence that has generated major problems. 

3. While TNCs can come, bringing jobs, money and technology to areas that need 

them; they can also leave, possibly taking some of those benefits away with them. Sony 

Corporation left West Java, Indonesia due to a poor business climate. Anglo-American, a 

mining company, withdrew copper investments from Zambia as part of a restructuring. 

Emerging market Asian countries worry that China will attract investment that had been 

coming to them. 

4. TNCs, for their part, may be discouraged by obstacles facing them in host 

countries: opaque legal/regulatory systems, corruption, inadequate infrastructure, political 

uncertainty and other elements of an unfavorable investment climate. Nationalization or 

expropriation may also be a concern to them. 

5. Developing country governments sometimes fear that powerful TNCs will 

“crowd out” domestic industry or damage “infant industries” that they hope to nurture. 

Against these objections, a reasonable case can be made that TNCs are as much, if not 

more, dependent on a well-functioning global economic system than is any other stakeholder 

— including governments and citizens of poor countries. And, while it can be in their 

financial interest to shift FDI from locale to locale, the stability and predictability that comes 

from longer-term commitment is better. For such reasons as these, TNCs can function 

effectively as good global citizens. It is notable, for example, that they are active in promoting 

control of greenhouse gases because they see it as being in their interests. Prevention and 

treatment of HIV/AIDS is another area of mutual interest to TNCs and to local residents. 

Coca Cola, for one example, plans to spend as much as $5m per year on treatment for the 

employees of its bottlers in Africa and Microsoft’s Bill Gates is giving $100m from the Bill 

and Melinda Gates Foundation to fight AIDS in India. Recognizing the potential for good and 

bad from powerful multinational companies, several programs have been initiated to make the 

TNC/development interface more harmonious and effective. One program called, “Equator 

Principles,” applies specifically to banks and their lending criteria. It requires that they follow 

social and environmental guidelines of the World Bank’s private sector lending arm, the 

International Finance While CSR receives much attention as a concept for bringing 

companies into the development paradigm, there is some dispute over its applicability. 

Corporate social responsibility is an established business principle encoded in many national 

laws. Technically it applies to the responsibility of a company to its shareholders; whether 

such responsibility is expandable to other stakeholders is not entirely clear. This lack of 

clarity is one reason why the alternative term, CR, was devised. Some of the confusion about 

the CSR concept relates to its position somewhere between philanthropy — what a company 

does because it wants to — and law — what a company does because it has to. Philanthropy 

carries no obligation, and may be a shield to obscure wrong-doing, while law denotes 

minimally required behavior for which there is no choice. The debate about CSR is how much 

of an obligation is an ethical obligation. There is a spectrum of thinking on this question: the 

TNC/development interface is the Caux Roundable, which promotes “moral capitalism.”


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Some attempts are even underway to go a step further and incorporate TNCs into 

development efforts by persuading them to be actively rather than passively involved in 

development strategies. The main vehicle for this is corporate social responsibility (CSR), 

sometimes referred to simply as corporate responsibility (CR). In March 2004, a conference 

was organized in Stockholm, Sweden to “explore how bilateral and multilateral donors can 

support business activity that contributes to sustainable development, particularly in 

developing countries.” 

In a similar vein, the United Nations Global Compact requested a study by 

Sustainability, a specialized business consultancy, of options for enhancing the role of TNCs. 

The Global Compact is the foremost program to encourage acceptance by TNCs of globally. 

The Compact website currently indicates 1698 participants, though not all are businesses — 

NGOs and other relevant parties are also included. 

• A member of a libertarian think tank, the Hoover Institute in Menlo Park, California, 

has written that “businesses do not have social responsibilities; only people do.” 

• Civil groups and NGOs insist that TNCs have an ethical obligation to incorporate 

human rights and values into their activities and that a legal framework for 

enforcement should be created. 

• Some NGO analytic and advocacy groups want CSR to encompass strategic support of 

“sustainable development.” 

As for the companies, themselves, paradoxically it seems that these organizations 

which exist to pursue their own interest realize that in an increasingly globalized world it is 

increasingly in their interest to be good international corporate citizens. As the Chairman of 

the International Chamber of Commerce has recently said: “As business people, it is our 

responsibility to stand up for the global economy. As the creators of wealth, we must show by 

example how the benefits of an integrated world economy can be harnessed for the good of 

companies and people and local economies everywhere”. 

The international agency which serves as the focal point for most of the elements 

included in this complex issue — TNCs, FDI, least developed countries and the 

trade/development nexus — is the United Nations Conference on Trade and Development 

(UNCTAD). UNCTAD is working to include aspects of CSR (which it sometimes refers to as 

“good corporate citizenship”) in international investment agreements (IIAs), the agreements 

which define the relationship between TNC home and host country governments. 

Binding agreements such as these mean that the developing countries who host TNCs 

need not take statements of good intentions as promises, nor rely entirely on the voluntary 

commitments of the Global Compact. Agreements allow them to manage TNC presence by 

pursuing a dual approach, in keeping with the dual role of the companies: On the one hand, 

governments can encourage FDI inflows that bring jobs, technology and money. On the other 

hand, they can be careful to preserving their “national policy space,” which is embodied in the 

right to regulate that is well-recognized in international trade law. 

References: 

Bhagwati, J., In defense of Globalization, Oxford University Press, 2005. 

Fox, T., Prescott, D., Exploring the role of development cooperation agencies in corporate 

responsibility, International Institute for Environment and Development, 2004. 

Ruggie, J., “Managing corporate social responsibility,” Financial Times, 2006


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THE IMPROVEMENT WAYS OF CIVIL RESPONSIBILITY 

INSURANCE 

Ciotei Alin Eugen, lect. univ. drd., 

Universitatea Spiru Haret 

ABSTRACT 

The Romanian insurances market is in a continous process of changing and adaptability to the E.U. 

taskes referring to the insurance domain. 

An outstanding part of the insurances market is given by the civil responsibility insurances. Beginning 

with the January 1 st 2007, the insurances firms in Romania which practice this kind of insurance try to adopt to 

the required communitar acquis by introducing new criteria and methods of calculation of the insurance bonus. 

In this work I try to make a criteria’s analyse which is calculate the insurance bonus and I give some 

ideas to improve the activity in this domain. 

The EU Accession had a great impact in the insurance market in our country. If we 

don’t know surely about how and when the assets insurance becomes compulsory, in the 

insurance of auto civil responsibilities everything is very clear. 

Wishing to align the civil responsibility insurance with the EU ones, the Romanian 

insurance companies begin to increase their value, for the first time with a low percent since 

half of 2006. After it had been analysed a random insurance company, I could notice that the 

insurance of auto civil responsibilities increase constantly in the last six months with 5% - 

10%. 

Since the 1 st of November, 2006, compulsory, the most insurance companies have 

included the Green Card payment in the auto insurance. When Green Card was included in 

the insurance of auto civil responsibilities, the prices had huge increasing. Practically, the 

insurance doubled on November beside October. More, the values of insurance at the end of 

2005 comparatively with the beginning of this month increased with more than 125%. Of 

course, the most important role in this increasing was Green Card. 

This type of insurance mustn’t be paid by the people, who travel in the EU space. If 

the auto passes over the border of UE space its owner must pay this insurance. 

The decision to introduce unique insurance money for the insurance of auto civil 

responsibilities and for Green Card is favourable for the economical agents which have the 

activity objective the extern transport. So that, they needn’t to pay Green Card every time 

when the vehicle do the extern transports of goods or persons. I explain a theoretical situation 

in a practical mode. I suppose, as a rule, that a goods transport vehicle do 15 transport courses 

instead of 24. The transport company must pay Green Card for each extern transport course 

for a minimum period between 15 days and 3 years. As a rule, the firms for extern 

transporting do the Green Card insurance for a month. For other 12 months of activity, a firm 

which has vehicles with maximum gross weight over 7.5 tones is obliged to pay 2000 dollars 

annual (this sum is paid after some offers made by insurance societies for more insurance 

like: Green Card, extern CASCO, CMR – known with named “bunch”) for every vehicle. If


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we add the two kinds of insurance, the economical agent will pay annually 1.200 dollars, the 

auto being assurance both for the intern routes and the extern ones, too. 

Included the both insurance are also favourable for physical persons who pass the 

border for personal or work services. 

Some persons who are against to this decision ask some questions. Why must the firm 

with only intern transport pay Green Card? Why must the persons who don’t want to travel 

outside the border pay Green Card? 

A frequently question is “why are the insurance money like in EU if the Romanian 

wages and pensions are smaller? Of course, this question is good for all the Romanian 

economy, not only for insurance. 

Nowadays, in Romania the insurance money paid by the auto owners is different on 

the criteria: 

- the type of vehicle (in Romania they are classified in cars, auto vehicles for 

transporting persons, motorcycles with side car or solo, tractors, utility cars, 

commercial vans, auto trucks, special autos); 

- the period of insurance (it could be for a month for the vehicle temporary registered, 6 

month or a year); 

- the cylindrical capacity of the motor cars; 

- the power of the motor for the tractors; 

- number of the seats for the transporting persons vehicles; 

- the gross weight authorized for the utility cars and auto trunks, etc. 

- The status of the person who pay the insurance money (physical person or artificial 

person); 

Almost all the specialists in this field say that these criteria are insufficiently for the 

equitable insurance money. 

For assessing equitable insurance money it could be view more criteria. 

Since the 1 st November, 2006, more insurance societies calculate the insurance money 

in concordance with other criteria above mentioned. These criteria are different from a society 

to other. 

An important element which is taken in calculation for the insurance money is the 

behaviour of the insurants through the last insurance year. If in the last year the insurant 

wasn’t guilty in an auto happening and didn’t use any insurance policy he could pay an 

insurance money smaller with 10% a year. When the insurant is involved in an auto 

happening like guilty he should pay insurance money like the anterior one paid, and if it is 

involved in the second auto event it should pay more with 10% for the next period. 

Another way for differencing the insurance money it could be done in concordance 

with the geographical zone of the insurant. So that, for the cities (Bucharest where the number 

of cars is over 2 million, Constanta, Timisoara, Iasi, Brasov), where the traffic is rushed and 

the risk of accidents are more the insurance money must be higher and for the zones where the 

traffic is easier they must be lower. The “BT Asigurari” an insurance company introduced a 

criteria for the insurance money after the geographical zone having 3 zones: the first one – 

Bucharest, Arad, Cluj Napoca, Constanta, Galati, Sibiu, Timisoara; the second zone – the 

district cities, the third zone – other localities including Ilfov - the agriculture sector. 

Other criteria using for insurance money could be the age of the insurant. In 

concordance with the statistics almost all the accidents are committed by the young people, 

generally under the 30 years old who don’t have an experience in driving but they drive very 

fast and aggressive. It was demonstrated that persons after 30 years old drive calmly, 

attentively. They travel with their family, with their children, driving more securely on the 

public roads. 

So that, a classification of the insurance money after the age can have two criteria: 

1. for the cars owners under the 30 years old the insurance money to be higher;


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2. for the cars owners over the 30 years old the insurance money to be lower; 

Also, for the calculated the insurance money could be introduced any adjustments for 

some categories of persons like retiring (before, this kind of adjustment was compulsory 

applied and has a value of 20%, and for the persons with the deficiency was by 50%. 

The insurance of auto civil responsibilities can be calculated after the sex of cars 

owners, because it is known that the women drive slowly and more attentively. 

The insurance money can be calculated in concordance with the type and model car. 

For example, here, we can take Germany where Opel Corsa, a car the most sold on the intern 

market and driven by the youth, with a cylindrical capacity of 1700 cm 3 , had insurance money 

higher than other types of cars with a bigger cylindrical capacity. 

The improvement ways of the insurance societies can be realised with a civilized 

system of cashing insurance money. In different public places are located caravans which 

advertised al insurance companies, what isn’t so respectable for a society from XXI century. 

Also, it must be considered quality and the professionalism of the insurance agents. Many 

times there are ambulant agents who are ready to make an insurance of auto civil 

responsibility only for cashing the commission. Considering the compulsory of this type of 

insurance it must be introduced some deontological rules for behaviour of insurance agents in 

relation with their clients and colleagues. 

There were signed in when the insurance agents disputed in a more or less civilisation 

with his/her colleagues for a client. Living in a democratic country which develop a 

economical activity after the market economy criteria, where demanding and offering are 

primordial elements, the supremacy must be shown through education, behaviour, knowledge 

in the field and arguments. 

Bibliography: 

1. Bistriceanu Gh., The Insurance System from Romania, Ecomomycs Publishing, 2002 

2. Ciurel Violeta, Insurances and Re-insurances, All-Beck Publishing, Bucharest, 2000 

3. Vacarel I, Bercea F., Insurances and Re-insurances, Expert Publishing, Bucharest, 

2000 

4. ISC Annual Report for 2006


ISSN: 1842-4856 

ROMANIAN INSURANCE MARKET 



ABSTRACT 

The activity of insurance market is complex, it offers a large kind of products to its clients in obligatory 

insurance market domain and optional insurance market, too. 

In the latest period, the optional insurances are a very important domain on the insurance market. 

In this work, I describe the most important kind of optional insurances and their evolution. 

Goods insurances are an analysed domain in the latest two years because of the acts of God which have 

deflected above Romania. 

Life insurances are an attraction for Romanian people because these kind of insurance that covered a 

risk to which the people are exposed and also this kind of insurance is considered to be an effective way of 

saving. 

Beginning with the narrow concept that market means all the transactions made into a 

specific field, we can define the insurance market as being all insurance operations achieved 

by the insurance companies. 

Nowadays,in Romania the activity of authorised insurances follows the Law no. 

32/2000, with further changes and addings and the given rules for its aplication. The 

Authorise Direction coordonates this activity within the Insurance Supervising Commision. 

In 2004, the law framework for authorise insurance companies and brokers was 

completed and changed, through: 

- the Law no. 172/2004 for changing and completing of the law no. 136/1995, as 

concerning insurances and reinsurances in Romania; 

- the Law no. 403/2004 for changing and completing of the Law no. 32/2000, as 

concerning the insurances companies and insurances observation; 

- the Order no. 3110/2004 for applying the rules about the pieces of information and the 

required acts for authorising insurance broker. 

Durring 2006, authorisations of function for 6 insurance companies were withdrawn. 

One of them was further reauthorised, due to the fact of fulfilment of the required 

conditions. For other 4 companies, the licences for life insurances were withdrawn. 

Taking into account the market improvement and the existent insurable potential, there 

were, also, in 2006, entances for new three insurances: two for life insurance market and 

one for general insurance. 

Finally, on the 31 st of December 2006, forty one insurance company wre authorised to 

function. 

During the year 2006, three hundred and thirteen brokerage companies were 

authorised to function. These had as the value of assets 235.521.586 lei (69/645/914 euro), 

increasing, in real terms with 44.23% as comparing with 2005. 

In conformity with the pieces of formation from the Insurance Supervising Comission 

(ISC), during the year 2007, the total value of the subscribe capital of the forty-one 

authorised companies was on the 31 st December 2006 of 1.406.287.079 lei (415.852.110 

euro), increasingly as compared to 2005 with 50.94%. 

As structure, the subscribed social capital was formede by cash in the value of 

1.255.772.986 lei (371.343.699 euro), representing 89.3% from the whole and capital in 

nature, in sum 150.514.093 lei (44.508.411 euro), reprensenting 10.7% from the whole.


ISSN: 1842-4856 

This increase of the foreign investors participation was influenced by both the 

authority of new 3 companies with a majority of foreign shareholders KD Life Insuraces 

(Sloven), CLAL Romania (Netherland), Cardif Insurances (France) and by the change in 

shareholding of 4 existent companies, through share-buying by foreign shareholders. 

Taking into account of rules of ISC about the calculation of the solvency weight, 

index of liquidity, shares that cover the technique reserves and technique reserves, beginning 

st 

with the 1U 

UJanuary 2007, it is said the firms leadership will take any necessary measure in 

order to increase the social capitals, to improve the portfolio, fusions or transfers in portfolios, 

for the companies to act safety financial. 

st 

From the information offered by the insurance companies, we see that on the 31U U 

December 2006 there were 14.008.597 valid insurance contracts, with 2.378.770 more than at 

the end of 2005. 

The number of valid insurance contracts reported by the insurance companies that 

practiced general insurance were, at the same date of 7.487.777, representing 53,5%, from all 

valid contracts, increasing with 1.441.015 as compared to 2005. 

st 

Speaking about the number of employees with work agreement on the 31U U of 

December 2006 there were 17.282 persons, increasing with 2.872 persons as compared to 

2005. This increasing was due to both authorising new insurance companies and developing 

of the existents companies activity. 

Insurance brokers reported 1,362 persons with work agreement, more with 222 

persons than in 2005. 

Referring to the co-worker agents, the insurers spoke about 28 180 (in diminution with 

670 persons, as compared to 2005), but brokers about 3.700 persons (increasing with 2.628 

persons as compared to 2005). 

For the whole subscribed gross bonuses of general insurances (4.591.002.641 lei) 

contributed both bonuses for direct insurances, in sum of 4.512.656.591 lei (1.334.434.335 €) 

increasing with 28,57% as compared to 2005, and bonuses for reinsuring, reported by eleven 

(11) companies, in sum of 78.346.050 lei (23.167.652 €), increasing with 132,21% as 

compared with the prior year. 

The significant increasing of the reinsurance reception volume is a consequence of the 

high price of the re-insurance internationally speaking and of the strict rules imposed by the 

external re-insurers too; they want to yield some risks on the external re-insurance market. 

The reception of the re-insurance represents 1,7% from the whole volume of the subscribed 

gross bonuses during the year 2006. 

The subscribed gross bonuses from the general insurance contracts recorded a real 

increase with 29,55%, a superior weight to the subscribed Bonuses in both categories of 

insurance (23,68%), fact that made their weight increase up to 80,1%. 

Figure/ Table no 1: The dynamic of the subscribed gross bonuses of general 

insurances between 2003 – 2006 

Year Subscribed gross bonuses 

of general insurances (lei) 

Nominal annual 

increasing (%) 

Inflation 

weight (%) 

2003 2.053.884.178 14,1 

2004 2.730.518.766 32,94 9,3 21,63 

2005 3.379.170.106 23,76 8,6 13,96 

2006 4.591.002.641 35,87 4,87 29,55 

Source: ISC Annual Report for 2006 

Real annual 

increasing 

(%)


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The index “Udegree of insurance penetrationU” seen as report between the subscribed 

gross bonuses and the Internal Gross Product was 1,67% in 2006, increasing as compared to 

2005, when this report was 1,54%. 

Reporting the volume of the subscribed gross bonuses to the Internal Gross Product 

we see as degree of the penetration of 1,34%, increasing with 0,16 points percent, as 

comparing with 2005. For life insurance this indicator was 0,33% in diminution as compared 

with 2005 with 0,03 points percent. 

UThe insurance densityU, the indicator which reports the volume of the subscribed 

st 

gross bonuses to the number of population (which, on the 31U U of December 2006 was of about 

21.565.119 persons as the National Institute of Statistics estimates) was of about 266 lei/ 

inhabitant, the equivalent of about 79 €/ inhabitant, in a real increase with 23,94%as the 

previous year. The density of the general insurance was of 213 lei/ inhabitant, the density of 

life insurance was of 53 lei/ inhabitant. 

9 

Figure/ Table no 2: The evolution of the degree of insurance penetration and the 

density insurance in Romania during 2003 – 2006 

BIndicator 2003 2004 2005 2006 

The degree of insurance 1,41 1,46 1,54 1,67 

penetration (%) 

The insurance density (lei per 

inhabitant) 

123 160 204 266 


37B 

The 

dynamic of the general insurances was sustained by the car insurances which, 

due to the majority weight (over 65%) imposed the market rhythm. The classes of general 

insurances with the biggest increases in 2004 were the insurances for the means of railway 

transport, health, general civil responsibility, crediting and guarantees, but their weight is still 

low, up to 10%. 

The develop of car insurances took place on the background of the selling new cars; 

this fact increased, as the Car Producers & Importers Association says with over 30% (double 

as the initial foreseeing) and due to leasing market (where over 90% of the contracts have, as 

an object, the cars) which is estimated to raise up with 30%. 

The medium term forecasts show a maintaining of the increasing trend of 

macroeconomic, social indices, and, of course, of the insurance market. 

Bibliography: 




2000 



ISSN: 1842-4856 

THE ROLE OF INTERNAL AUDIT IN THE MANAGEMENT OF 

QUALITY IN ACADEMIC 

AND SCIENTIFIC RESEARCH ACTIVITIES 

Professor Ph.D Lucian-Ion Medar, 

University Constantin Brancusi of Tg-Jiu 

The most important factor of production, the human capital whose competences are 

formed in a great measure by the educational system is under attention from all audit 

missions. 

Economic success of European States will depend on the quality of learning systems 

and in this framework, the evolution of science, new technologies of information and 

communication influence directly the development of educational purveyor. 

The appearance of new European labour markets, of corporations and multinational 

societies as well as the fact that the training of labour market cannot be realized without the 

participation of local communities in acts collateral to education, the evaluation of quality in 

didactic and research activities is prioritary. 

The role of internal audit in the management of quality of didactic and scientific 

research activities is determined by the objectives of higher education institutions. 

These can be conceived and grouped in one of the three dimensions, these being: 

International, which refers itself to the integration of universities in the European 

space of higher education and concerns the alignment to standards and practices of 

prestigious universities in the European Union 

National, which concerns the growth of the educational system’s contribution to the 

economic and social development of the country through the supply of graduates with 

high competences. 

Institutional, which involves performance indicators specific to the development of 

an institutional culture of quality, orientation towards performance and the rapid 

insertion of graduates inside the qualified work resource market. 

Seen through the eyes of mechanisms of control and auditing the quality of didactic 

and research activities which takes place in a higher education institution can be evaluated 

taking into consideration the characteristics of didactic personnel, alongside the quality of 

economic and administrative services in the university.


ISSN: 1842-4856 

Internal auditing of the quality in the learning process of a university can be achieved 

only if a system off quality management is implemented and a standardized documentation is 

elaborated, concerning the institutional capacity and the educational efficacity. 

In the programmed missions, internal audit has as a main focus, mainly, the rules 

approved by the university senate and especially work procedures after which the entire 

didactic and research activity is taking place. 

Basic activities of the system for the insurance of quality are planning the control and 

the insurance of quality aimed towards, especially, the permanent removal of unconformities 

which might appear in the learning process. 

The periodical internal academic evaluation, a component of the internal audit, is 

materialized in a series of documents which constitute the target of the external evaluation 

demanded by the educational purveyor. 

Internal auditing of the quality in the process of higher education has at least three 

directions, that is: 

- student activity or the process of learning/teaching 

- research activity or the process of creation; 

- the university’s relation with the local community. 

The relationship between the academic community and the local society has at least 

two forms. On one side, the local community offers the academic community its potential 

clients, and on the other side the academic community offers society the businessmen (with 

their assimilated competences) and specialists for the different fields which contribute to the 

economic and social development of the local community. 

For the realization of internal auditing of the quality of the higher education process a 

methodology and a guide for its application have been devised, which contribute in the same 

time to the development of a culture of quality. 

Methodological guides of evaluation in the quality of university study programmes 

and of higher education learning institution must express clearly and in a real manner the 

stages that must be undergone by the purveyors of higher education, on the basis of external 

evaluation methodology, of standards, reference standards and of the list with performance 

indicators established for: 

- provisional authorization of a study program or of a purveyor of higher education 

services; 

- the accreditation of a studies program (program accreditation) or of a purveyor of 

higher education services (institutional accreditation) 

- periodical certification of academic quality of learning and research services in 

an accredited university; 

Auditing of university study programs is realized on the basis of documentation sent 

by the internal and external evaluation organisms, by the university components (faculties and 

departments). 

Self evaluation reports of quality are solicited to the university components for all 

programs of graduate university study programs and for post-graduate programs. 

The auditory corpus, after studying these reports according to the mission received 

records how the criteria have been realized (and at what level), as well as the standards and 

performance indexes for the quality evaluation domains. In this sense internal auditors 

evaluate study programs, taking into account: 

o Institutional capacity 

The mission, objectives and academic integrity will be audited, as well as the founding 

documents, leadership system, strategic management (strategic and operational plan) and 

material basis; 

o Educational efficacy


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A special accent will be placed on the student admission according to work procedures, on 

the structure of study programs (general and specific objectives), on the structure of the 

learning plan, of thematic programs or of disciplinary slips included in the learning plan. 

Results of the learning/discipline will be analyzed, the manner of examination and 

evaluation of each discipline, the manner of organization and the contents of the final study 

exam, the compatibility with the national framework for the qualification and with similar 

study programs and plans, form the EU states and from other states of the world, expression 

in ECTS credits of the percent of disciplines; 

The manner of realization of the annual collegial analysis of the activity of knowledge 

transfer and assimilation from the students will be highlighted, as well as the analysis of 

changes produced in the profiles of qualifications and in the impact of these on the 

organization of the study program.; 

The situation of collaboration conventions, contracts or other documents, signed with 

units, practice basis, for the development of internships will be mentioned in the auditing 

report of each study program. 

o Learning results 

From this perspective, the following will be audited: 

- the percentage situation of employment with a legal work contract on positions 

suiting the specialization obtained at graduation, 

- the situation regarding graduates of the last two promotions admitted in 

postgraduate courses, irrespective of the domain, and for master courses of those 

involved in scientific research or continuing their university studies with doctoral 

programs, 

- the result of the poll concerning the appreciation by students of the learning/ 

development environment offered by the university components, 

- the manner of achieving a partnership between student and professor, 

- the modality of student-centered methods of learning and their orientation in the 

professional career, 

- the situation of didactic personnel which use resources of new technologies and of 

good European practices, 

- the situation concerning career orientation of students (the situation of academic 

year tutors, study program coordinators-specialization and hour graphic of 

permanence for the guidance and assurance of student feedback). 

o Scientific research activity 

- research programming (the faculty and chair research plan; the long term strategy 

and middle and short term programs concerning research), 

- realization of research (the manner of development of scientific research) 

- the situation of financial, logistic and human resources for the realization of 

objectives proposed in research, 

- the valuing of research (situation of publications for didactic purposes, of 

publications for scientific purposes etc.) 

- the situation of scientific research (scientific sessions, symposiums, conferences, 

round tables etc.) and of publishing the communications in scientific bulletins with 

ISBN, ISSN codes or in magazines dedicated to organized activities, 

- the situation concerning the research centre of the components (the name of the 

centre, accomplished objectives-resources attracted through research programs: 

organization contracts, grants, international projects, proposed objectives), 

- the situation of existing laboratories at the level of components destined for 

scientific research; 

- list of scientific research topics of the personnel that activates at the master study 

program.


ISSN: 1842-4856 

o Quality management 

1. Strategies and procedures for the assurance of quality as for example: 

- the organization of the system for the insurance of quality (the structure of the 

commissions and the modality for the development of these activities in study 

programs); 

- policies and strategies for the insuring of quality. 

2. The manner of the application of procedures regarding the initiation, monitoring 

and periodical revision of programs and activities undergone: 

- of regulations concerning the initiation, approval, monitoring and periodical 

evaluation of study programs (the rules exist and are applied); 

- of procedures concerning the correspondence between diplomas and 

qualifications. 

3. The application modality for objective and transparent procedures for the 

evaluation of learning results: 

- of rules concerning the examination and grading of students (the rules exist and 

are applicable) 

- modality of integration of examination in the projecting of teaching and learning 

on courses and study programs. 

4. The manner of application for procedures of periodical evaluation of the quality of 

the didactic personnel: 

- the report between didactic personnel and students; 

- the manner of realization of collegial evaluation; 

- the manner of realization of the evaluation of didactic personnel by students; 

- the manner of realization of didactic personnel evaluation by the university 

management. 

5. Accessibility of resources adequate for learning: 

- the situation of learning resources existent in the libraries on classical or electronic 

format (handbooks, treaties, anthologies, subscriptions to the main specialized 

magazines etc.) for disciplines in the learning plan corresponding to the study 

program. Each library, of each component, must make the proof of disposing of a 

program and procurement resources for books and magazines; 

- the situation concerning actualized teaching strategies, that each didactic personnel 

disposes of, for each course, according to professional preparation of didactic 

personnel. 

After the achievement of the mission of internal auditing of didactic activities and of 

scientific research, the achievement (or non-achievement) of performance indicators is 

established, at least at the minimum compulsory level to be achieved. 

Audit can evidence that in certain domains there are criteria for which high standards of 

reference can be attained, defining an optimal level of excellence realization in the quality of 

the higher education process. 

Through the SWAT analysis even negative aspects can be evidenced, which 

constitutes itself in weak points of the respective domains, which can be remedied by being 

part of a plan of measures with terms and precise responsibilities. 

All the significant aspects which have constituted themselves in weak points and 

strong points of the educational and research activity must be part of the auditing files, which 

are an integral part of the internal self-evaluation report and which are debated, objectively,


ISSN: 1842-4856 

on each standard and performance indicator both with the study program responsibles as well 

as with the quality assurance responsibles in the university structures. 

Bibliography: 

- Quality Procedures in European Higher Education, An ENQUA Survey, ENQA 

Occasional Papers5, The Danish Evaluation Institute, Helsinki, 2003. 

- The Bologna Declaration of the Education Ministers, 19 th June 1999 as well as 

following declarations in the Prague, Berlin and Bergen summits; 

- The ARACIS external evaluation methodology (H.G. 1418/2006); HUwww.aracis.roU 

- The strategy for scientific research development in Romania (HUwww.cncsis.roUH)


ISSN: 1842-4856 

ECONOMIC GROWTH AND REAL CONVERGENCE 

IN THE NEW MEMBER STATES OF THE EUROPEAN UNION 

Kardos Mihaela 

Asist. Univ. Drd. 

Universitatea “Petru Maior” Târgu Mures 

Facultatea de Ştiinţe Economice, Juridice şi Administrative 

ABSTRACT 

This paper aims to present and overview regarding the economic growth in EU New Member States 

(NMS) and to asses its impact on the process of real convergence. Thus, the GDP dynamic upward trend in NMS 

shows strong economic growth, which has surpassed the UE-15 rhythm, being supported by the economic, 

financial and social climate favourable for intensifying commercial flows, attractive for investments, with the 

rapid growth of internal demand, fuelled by private consume. The prognoses for the next period present a 

moderation of the exceptional growth immediately before and after accession, although, on long term, the 

rhythm of economic growth in NMS will continue to surpass the one in EU-15. 

But, the translation of economic performances into improved living conditions remains the great 

challenge for the NMS, while GDP/capita in these countries is well below the European average, reflecting the 

development gap. Even on a very long term, NMS will not be able to reach the European level, highlighting that 

the real convergence process is very slow and must be carefully administrated, through prudent and supported 

macroeconomic policies, to stimulate the continuation of the reforms, to minimize the risks associated with this 

process. 

1. Economic growth in the New Member States 

In Central and Eastern Europe, revolutionary changes from 1989 and 1990 were 

followed by economic crises. For most of the countries, the crises lasted until 1994, and then 

were recorded positive rhythms of economic growth in all candidate countries, until the end 

of the ‘90 (except the years 1997-98, under the influence of the Asian and Russian crises). 

The year 2000 was an inflection point, marking a new phase of accelerated 

development for central-eastern economies. Practically, GDP growth in NMS doubled in 

2000 in comparison with the previous year, reaching an average of 4.9%, with the highest 

values in Estonia (6.9%), Lithuania (6.6%) and Hungary (5.2%). In 2001, economic growth 

had an average of 4.5%, with maximum values in the Baltic countries and minimum values in 

Poland (1.1%). 

Two years before enlargement, in 2002, there was an unfavourable conjuncture for the 

European economies, when GDP recorded a real growth of only 1.1% in EU-15, and, in these 

conditions, GDP growth also slowed down in the other NMS. Even if Estonia and Lithuania 

recorded for the second consecutive year the highest rhythms of economic growth in 

comparison with the other analysed countries, they could not compensate the lowest GDP 

growth rhythms in Czech Republic, Hungary and Latvia. 

The year 2003 marked again the acceleration of the economic growth in NMS, GDP 

having an average of 5.2%, in spite of the economic recession in EU-15 for the second 

consecutive year. The Baltic States recorded the most important economic growth (6.7-9.7 %) 

among all European states.


ISSN: 1842-4856 

Graph 1. GDP growth rate (%) in NMS and EU-15, 2000-2008 

8 

7 

6 

5 

4 

3 

2 

1 

0 

2000 2001 2002 2003 2004 2005 2006 2007 2008 

NMS EU-15 

Source: Eurostat 

The year 2004 brought record rhythms of economic growth (an average of 6%). 

Experts from the European Commission, the UNO Economic Commission and from EBRD, 

in their latest analyses, show the fact that one of the main factors for the relaunch of the 

economic growth in 2004 compared with 2003 was the positive impact of the integration in 

the European Union. Therefore, UE enlargement is considered „a real success”, having as 

main positive economic consequences on the NMS a real economic boom. 

The economic development of these countries in the accession year was influenced by 

the growth of net exports, by the FDI intensification, by the increase in employment and in 

labour productivity. The significant increase in foreign trade volume was due to the 

elimination of the last commercial barriers and the strong relaunching of the investment 

activity was also due to the decrease of taxation in many of these countries. Another factor for 

GDP growth was the rapid expansion of the internal demand, fuelled by strong investment 

and private consume. 

Table 1. GDP growth rates (%) in NMS, 2003-2008 

2003 2004 2005 2006 2007 2008 

Czech 

Republic 

3,6 4,6 6,5 6,1 4,9 4,9 

Estonia 7,1 8,1 10,5 11,4 8,7 8,2 

Latvia 7,2 8,7 10,6 11,9 9,6 7,9 

Lithuania 10,3 7,3 7,6 7,5 7,3 6,3 

Hungary 4,2 4,8 4,1 3,9 2,4 2,6 

Poland 3,9 5,3 3,6 6,1 6,1 5,5 

Slovenia 2,7 4,4 4,0 5,2 4,3 4,0 

Slovakia 4,2 5,4 6,0 8,3 8,5 6,5 

NMS 5,4 6 6,6 7,5 6,5 5,7 

EU-15 1,2 2,3 1,6 2,8 2,7 2,5 

Source: Eurostat 

In the NMS, economic growth remained dynamic in 2005-2006; even if in some of the 

countries its rhythms were slower than in 2004. This favourable evolution of the economic 

situation was based more on the internal demand and less on the external one, taking into 

consideration a slowdown, especially in 2005, in the rhythms of economic growth, both in 

UE-15 and in the world. 

The main driver for strong economic growth in 2005-2006 is represented, the same as 

in 2004, by the productive investment, stimulated by an adequate economic, financial and


ISSN: 1842-4856 

social climate. If we add to these the increased FDI flows, especially from the old member 

states, we can appreciate that the conditions for high rhythms of economic growth are 

fulfilled. The sectors with significant growth were the automotive one (Czech Republic, 

Slovakia), the constructions (Estonia, Latvia, Slovenia), the banking system (Estonia), 

transportation (Latvia, Hungary), communication (Latvia), optical and electric equipments 

(Hungary). 

The private consume increased, having the support of the increase in employment, in 

real wages, in the households’ incomes and of the extension in the consume credit, and also a 

decrease in taxation. Mortgage loans increased rapidly due to low interest rates. 

Prognoses for 2007-2008 show the fact that the exceptional growth will be moderate, 

due to the constraints of supply factors, especially the labour supply and because huge 

investments were made especially in the real estate system, which passed over the maximum 

point. The private consume will not decline notably, due to the high levels of credits, 

determining disposable incomes for the households, coming from a decrease in the taxation 

for the private incomes and from the welfare effects due to high prices on the real estate 

market. But the private consume will lose its momentum, due to the fact that, in households, 

the debt level reaches critical limits, and some countries give up subsidizing the prices 

(Hungary). 

Before enlargement, many sceptical voices showed their concern regarding the 

consequences of the process. But the reality, expressed by the figures officially made public, 

contradicted the pessimistic expectations. Therefore, at least from the economic growth point 

of view, enlargement does not seem to have produced any negative effects, on the contrary, it 

was followed by better results than the prognoses. 

If we analyse economic growth from the perspective of its components, we notice that 

the key contributors to its formation were capital accumulation and technical progress (TPF – 

total productivity factor), while labour had a negative contribution. [1] 

64 

65 

Table 2. Potential growth and its components (1998-2000 vs. 2001-2005) 

BPeriod Potential Labour Capital TPF (technical 

growth 

(%) 

rate (%) (%) progress) (%) 

BNMS 1998- 

2000 

3,6 - 0,8 2,3 2,2 

2001- 

2005 

3,5 - 0,4 1,8 2,1 

EU- 1998- 2,3 0,3 0,8 1,3 

15 2000 

2001- 

2005 

2 0,4 0,6 1 

Source: European Commission 

In present, the relation capital-labour and the productivity level in the NMS are still 

lower in comparison with EU-15. The negative contribution of labour to the potential growth 

is a reflection of the low rates in labour force participation and of a persistent structural 

unemployment. In spite of the extremely weak performance of the labour market, on the 

whole, the potential growth rates were maintained high due to the fact that, the increase in 

labour productivity was amplified by both the capital accumulation and the technical progress. 

The contribution of capital accumulation to the potential growth towards the end of the ’90 

was impressive, of 1.8% during 2001 and 2005, 3 times higher than in UE-15. The increase of 

the TPF in the same period was twice higher than in EU-15.


ISSN: 1842-4856 

As the integration continues, growth rates in NMS will probably remain higher than in 

EU-15. The Euro adoption may also create a focal point for large structural reforms and for 

macroeconomic and fiscal sustainable discipline. In some domains, such as, the restructuring 

of the pension system, some of the NMS are already experiencing such reforms. However, the 

process will not be without risks, as the structural reforms will increase the capital 

profitability and will influence the expectations regarding higher incomes, what may induce 

instability through additional capital flows and the credit increase. That is why an efficient 

macroeconomic and fiscal management is necessary to make sure that the process of reducing 

gaps in comparison with the rest of Europe is without interruptions. 

On long term, growth rates remain higher in NMS than in EU-15, reflecting an 

expected process of reducing gaps. However, GDP growth rates in EU-25 are closer to the 

one in EU-15, as these represent more than 90% of the total. [2] 

Table 3. The projection of the potential growth rates (%), 2004-2050 

2004- 2011- 2021- 2031- 2041- 2004- 

2010 2020 2030 2040 2050 2050 

EU- 

25 

2,4 2,2 1,5 1,2 1,2 1,7 

EU- 

15 

2,2, 2,1 1,4 1,2 1,3 1,6 

NMS 4,7 3,5 2,5 1,2 0,6 2,4 

Source: European Commission, Long-term labour productivity and GDP projections 

for the EU25 Member States: a production function framework, No. 253 June 2006, pp 

37 

2. Real convergence in New Member States 

The complete participation of the NMS to the internal market and their accession to 

the Euro zone will have positive effects not only for their economies, but for EU as a whole. 

The Euro adoption will eliminate currency exchange risks, will decrease the transactioning 

costs and will increase the prices’ transparency, promoting continuous economic integration. 

Based on the progress of the internal liberalization, on stronger relations in trade, on FDI and 

other intensified capital flows, on labour force mobility, the competition on the market will 

increase, leading to a more efficient allocation of resources and to specialization models in 

EU. 

Thus, NMS have made considerable progress regarding economic development, but 

the real income is still below the one in EU-15. The analysis of the GDP/capita shows 

profound gaps in comparison with EU-15, meaning that the prosperity in EU, measured in 

GDP/capita, is more dispersed than ever. At the beginning of the years 2000, the 8 candidate 

countries recorded low levels of GDP/capita (between 32.17% - Latvia and 66.25% - 

Slovenia), in comparison with the average in EU-15. 

74BTable 

4. The evolution of GDP/capita in NMS (% of the EU-25 average) 

1999 2000 2001 2002 2003 2004 2005 2006 2007* 2008* 

Czech 

66,5 65,5 67,3 67,7 70,7 73,1 74,2 76,6 80,8 84,3 

Republic 

Estonia 39,7 42,7 44,2 47,9 51,2 53,5 59,6 64,7 71,4 77,0 

Latvia 34,5 35,1 37,1 39,6 41,7 43,7 48,3 53,8 59,2 63,8 

Lithuania 37,1 37,6 39,7 42,3 47,1 49,1 51,6 55,7 59,5 63,0 

Hungary 51,2 53,6 56,4 59,0 60,9 61,4 62,3 63,0 66,2 67,7


ISSN: 1842-4856 

66 

67 

Poland 46,5 46,2 45,6 46,4 47,1 48,8 49,0 51,0 55,2 58,0 

Slovenia 75,1 74,1 74,0 76,4 77,6 80,0 81,4 83,6 87,7 90,5 

Slovakia 48,7 48,1 50,2 52,1 52,9 54,4 57,5 60,5 65,8 69,6 

BNMS 49,9 50,3 51,8 53,9 56,1 58 60,4 61,7 68,2 71,73 

BEU-15 109,9 109,8 109,6 109,3 108,9 108,6 108,3 107,8 107,6 107,4 

* Prognosis 

Source: calculated on basis of Eurostat data 

The target of the candidate countries was for the accession moment to reach 70% of 

the average GDP/capita in EU. In 2003, on the basis of a slow upward general trend, the 

countries preparing for accession did not reach their target, having between 37.84% - Latvia 

and 71.02% - Slovenia. 

GDP/capita increased in 2004, but the average level represented only 58% of the EU- 

25 level (56.1 % in 2003). It is important to notice that all NMS have recorded an increase in 

the GDP/capita, showing their development level. For 2007-2008, it is expected a 

continuation of the upward trend for this indicator, which could reach about 70% of the EU- 

25 level. 

Graph 2. GDP/capita in NMS (% of EU-25 average), 2006 

110 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

CZ 

UE-15 

EE 

LV LT 

HU 

PL 

SL 

SI 

Source: AMECO database 

EU enlargement has been a dynamic process, and its effects will become visible on 

long term. Preparing for enlargement lasted more years and, in the accession moment, NMS 

have transformed their economies, from the centrally planned ones to the market ones. 

Fulfilling the Copenhagen criteria served as a strong catalyst for change and the convergence 

and catching-up processes started to function. 

In spite all these, in the conditions in which growth rate in NMS will be double 

compared to the one in EU-15, the income/capita in these countries could reach the EU-15 

levels in about 35 years. But the prognoses show that the GDP/capita will increase with at 

least an average of 1.5% in all member states. As a consequence to the fact that GDP/capita in 

NMS increases faster than in the rest of Europe, and, in spite of a severe aging of the 

population in NMS, income /capita will increase from about 50% in 2004 (of the EU-15 

average) to about 78% in 2050. [3] 

Even if taking into consideration all macroeconomic evolutions, the time for a correct 

evaluation of the catching–up process has been too short, and it will continue a long time after 

accession. The development process does not prevent the risk of some interrupted evolutions, 

of “stop-and-go” type. 

RO 

UE-25


ISSN: 1842-4856 

Without doubts, EU accession has stimulated the reforms in NMS. But the prognoses 

and the experience, even if a limited one, show that the process of real convergence is slow 

and must be carefully administrated. Even in the conditions of some strong economic growth, 

many decades will be necessary to reach EU level. Prudent and supported macroeconomic 

policies and the way in which rapid growth is used for stimulating reforms and for 

restructuring the economy are essential for assuring real convergence and for minimizing the 

inevitable risks associated to this way, which will surely prove to be a „long road”. [4] 


Although a complete analysis of the 2004 enlargement can not be made immediately 

as it would be premature to set some clear signs regarding the enlargement effects, however, 

the trends in the economic and social evolution prove the fact that accession has not produced 

major perturbations, on the contrary the evolutions are positive and NMS have started to catch 

up the gaps, even if the development process still has a long and sometimes difficult way to 

go. 

Thus, the dynamic upward trend of the GDP in NMS shows a substantially economic 

growth, which has overpassed the rhythm of EU-15, being stimulated by the economic, 

financial and social climate, favourable for the intensification of the commercial flows, 

attractive for investments, with the rapid expansion of the internal demand, fuelled by the 

private consume. Prognoses for the following period show a moderation of the exceptional 

growth in the first years after accession, but, on long and very long term, the growth rhythm 

in NMS will continue to overpass the one in EU-15. 

But, translating economic performances into improved living conditions remains the 

great challenge for NMS, in the conditions in which GDP/capita in these countries is still 

below the European average, reflecting the gap in development and the fact that NMS are 

poorer. Even on very long term, NMS will not reach the European level, which shows that the 

real convergence process is slow and must be carefully administrated, through prudent and 

supported macroeconomic policies, to stimulate the continuation of the reforms and of the 

restructuring. 

Bibliography 

[1] European Commission, Enlargement, two years after: an economic evaluation, 

Occasional Paper, Nr. 24, DG EC FIN, May 2006, 

HUhttp://ec.europa.eu/economy_finance/index_en.htmU 

[2] European Commission, Long-term labour productivity and GDP projections for 

the EU25 Member States: a production function framework, Nr. 253 June 2006, 

HUhttp://europa.eu.int/comm/economy_financeU 

[3] European Commission, Long-term labour productivity and GDP projections for 

the EU25 Member States: a production function framework, Nr. 253 June 2006, 

HUhttp://europa.eu.int/comm/economy_financeU 

[4] Justice G., Paliu A.; Perspective ale convergenţei reale, HUwww.fmi.roU


ISSN: 1842-4856 

10BRETAIL 

COMMERCE, A HEAVEN FOR RETAILERS AND 

ROMANIAN CUSTOMERS ALIKE? 

assist. univ. drd. POPA DANIELA 

Universitatea Româno- Germană Sibiu 

Abstract: Not only after EU integration, but also two or three years before, Romanians had a great appetite for 

shopping. In the first two months after 2007, retailers had record growth of sales. So the major distribution 

companies have made massive investments in business development in the last years. After accession new 

players from EU member states are likely to enter the Romanian market of FMCG, which is an opportunity for 

the market and for the economy as a whole. The future for the small investors will be dark, due to the number of 

big retailers will invade the market. Still, small district stores will continue to exist, because consumers do not go 

to a supermarket or a hypermarket to buy a product they are in urgent need of. And the small distributors will 

survive in the future because this type of stores. EU integration will bring the advantage of more competitive 

prices for imported products, which will thus become more affordable to a higher number of buyers. 

The first few years after EU integration will witness rising food consumer goods consumption 

and increasing distribution business as new brands and store networks will enter the market 

and living standards will improve. And why is that? Romanians consume more than ever. In 

the fist two months of 2007, retailers had had record growth of sales. The revenues for retail 

39 

companies have grown in February 2007 over 27% in comparison with February 2006F 

F. 

Same time, the industrial production growth was 2,9%, less that ten times the consumption. 

The growth of commercial businesses has begun in 2006, with big incomes and growing 

rhythm as the best period in retail sales (last months of the year). The consumer’s pocket had 

40 

not emptied in December. Only in February 2006 total sales of FMCGF 

F companies have 

grown with 34% for the food sector, and only 22% for the non-food sector, in comparison to 

February 2005. In 2006 the medium rhythm of total sales on whole retail sector was over 26% 

(see table 1). 

The fuel for these growing numbers is credit, which have grown the liquidities of the 

population. Another explication is unique tax of 16% over the salaries and other incomes of 

the population and the growth of the salaries. All these leave more money to spend. Starting 1 

41 

January 2005, when the new regulations over taxes has applied,F 

F produced more total sales in 

retail with over 25% as in February 2004. The following months bring the same growth in 

companies businesses over 20%, as in best sales month – April and December-. Like growing 

liquidities, the credit has grown monthly. For now, credit took place the salaries incomes and 

39 

National Statistics Institute – Monthly Report, 2006 

40 

FMCG is an abbreviation for “fast moving consumer goods” 

41 

Legea 571/2003 privind Codul Fiscal, cu modificările uletrioare, publicată în Monitorul Oficial al României 

nr. 927/ 23.12.2003


ISSN: 1842-4856 

continues to insure the high rhythms for the consumer demand. In spite of the National Bank 

of Romania’ s efforts to limit the consumer credit, the growth of the credit will continue in 

2007, due to the new modalities and instruments of credit. 

The retail had in 2006 the best year of growth after 1990. Because of population’s growing 

income and the development of the big chains of retailers, the rhythm of growing in 2006 was 

the biggest since 1990. In comparison with 2005, retail was grown in real terms, with 26%. 

The retail businesses had grown with 20% in the last month of 2006 in comparison with the 

same month in 2005, and with 50% as November 2006. The new forms of modern retail (big 

sales surfaces for each store) were growing last year. The big international retail chains – 

supermarket, hypermarket and cash and carry forms- increase their employs number with over 

40% as in 2005 and increase the number of units to 263. On food, manufacturing, consumer 

goods (FMCG) market, big retailers cover the last part of Romania, Neamt County, and will 

continue to develop in small cities and not so developed zones of Romania. 

30,00 

25,00 

20,00 

15,00 

10,00 

5,00 

0,00 

1,90 

7,90 

11,20 

17,60 17,60 

26,40 

2001 2002 2003 2004 2005 2006 

42 

Table 1 Annual rhythm of growing of total sales for retail companiesF 

F 

Carrefour, a big French retailer, will invest 20 millions euros in opening a new store of 15.500 

square meters in Iasi, project developed by the French company Soconac, a part of Vinci 

Construction Grands Projets. The commercial store with a surface of 26.000 mps will hold a 

Media Galaxy store along with a commercial gallery. The two French companies have 

worked together on many projects as Bucharest’s Feeria, with a cost o f 40 millions euros. 

The store was entirely rented before the construction finished last spring. Carrefour Romania, 

the biggest retail hypermarket chain after total sales, has last year seven locations. The last 

unit was opened in October in Constanta. The company’s total sales in 2006 was 608,9 

millions euros. And the company planned three opening in 2007, one in Cluj and two in Iasi. 

The retailer plans to open in the next years 30 to 40 units in all Romanian cities with over 

150.000 inhabitants in the near future. At the end of 2010, the company plans to have one 

billion euros in sales. 

After 2007, new players from EU member states are likely to enter Romanian market. Will 

small players survive over the following years? It can be foresee that some small distribution 

firms will vanish from the market, as the market becomes more demanding. We already saw 

that happening with the company that owned Univers’ All. Small distributors will find it 

difficult to switch to nationwide distribution since this is a high cost activity. On the other 

hand, small stores are growing reliant on small distributors only, which tend to focus on 

42 HUwww.ins.roUH, accesat la data de 21.10.2007


ISSN: 1842-4856 

traditional channels. Shops at the corner of the street will always be there, because consumers 

do not go to a supermarket or a hypermarket to buy a product they are in urgent need of. And 

the small distributors will survive in the future because of these types of stores. 

After 2007, there will be tougher competition in terms of distributed products as well, and in 

terms of brands on the FMCG market. EU integration will bring the advantage of more 

competitive prices for imported products, which will thus become more affordable to a higher 

number of buyers. National brands that will not adjust to the EU standards will lose 

significant market share to international brands. One example is the “Carpati” and “Snagov” 

cigarettes, which had six years ago, a considerable market share, at the moment the company 

producing the can not compete with all three big players on the tobacco market: Philip Morris, 

British American Tobacco and JTI. 

Retail will play the biggest role in development of distribution. As retail is modernizing, 

increasingly higher volumes of freight are distributed to networks of large stores. The weight 

of small stores in the value of the overall FMCG market has stayed at around 56% over the 

last five years, but the next four or five years will bring a considerable change. Small stores 

will come to account for 41% of the FMCG market around 2010 F 

43 

F. Overall, traditional trade 

will have the same weight as the modern one, of 50%, in the domestic trade. Once Romania 

joints the EU, large store chains, mostly global players, will see speedier growth. 

To adapt to various trade forms and to sustain the strong growth of the FMCG market, the 

major distribution companies have made massive investments over recent years. These 

companies invest in new techniques, machinery and personnel. The evolution of human 

resources for the first 10 companies on distribution market in the last five years is seen on 

table 2. 

The expansion of large supermarket and hypermarket chains will be impressive, and will be 

done in spite of small forms of traditional commerce, which will lose more of the market. One 

of the main objectives of the companies is to invest and apply new methods in doing business. 

The competition between modern and traditional is growing more and more at the level of 

small shops, over the retail and distribution. The distribution companies will fight for larger 

pieces of the market and for acquiring new clients and will keep the multichanels operating 

strategy. All the categories for the market will try to coexist more or less complementary then 

in concurrencies terms. In this competition, the winner will be, as always, the consumer 

4210 

4900 

5710 

6330 

6710 

7540 

2000 2001 2002 2003 2004 2005 

43 GFK Institute of market studies – Annual report, 2006


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44 

Table 2 Evolution of human resources for the first 10 companies on distribution marketF 

Modern commerce is based on large volumes of distributed goods, but the profit margins will 

diminished. The big retailers strategy is based on small prices and big discounts in order to 

gain clients in a very competitive market. Another model of business is that of the 

discounters, and it excludes the possibility of intermediary, in order to lower the costs. This 

model is based on the existence of logistic center where the goods are collected from the 

suppliers and then distributed to the shops. In order to adapt to the various forms of commerce 

and for sustaining the growing of the market, big distribution companies have invested largely 

in the last years. The FMCG market had grown last year with 25% as the year before, with a 

double rhythm. 

The FMCG will continue to grow in the following years, but not as quickly as now. In the 

following years, there will be a stabilization of the distribution channels, the modern 

commerce will grow, especially on urban areas, and probably will be at 45%, and traditional 

commerce will be 20% of the total. A big development will be seen in the hotels, restaurants 

and catering market, and will attain about 25% of the FMCG market. 

To face the rapid changes of the retail market, the companies will implement new structures 

in customer channels marketing organization, in order to create a strong bond between 

marketing departments and sales. The marketing department will have a greater role in sales 

efficiency thought adequate promotion on each channel of distribution. More and more 

companies will try to reorganize, in two or more profit centers. Another mean of adapting is 

to gain a better flexibility to modern market. On logistic sector, it will be organized more 

storerooms wit bigger and bigger spaces. Even the investments in assets will be done in the 

logistics, because the growing needs for rented or not spaces for storage. In order to adapt to 

the challenging market, distributors will have to evolve in logistic companies. 

But now, new opportunities emerge from the foreign markets. One example is Aquila, a 

company with 100% Romanian capital that entered the foreign market in 2001, when 

established in Moldova the company Trigor AVD. Then followed by Aquila Bulgaria and 

Standard AVD in Serbia. On the long run, the company wants to gain a big role as leader in 

distribution in the Balkans. But this company is not alone: Elgeka Ferfelis is another company 

that wants to enter Bulgaria, by acquiring a Bulgarian distribution company. The initial 

investment is 3 million euros. All distributors are trying to develop business even in another 

sector: Elgeka imports automotive parts, gardening and export wood and ceramics. Whiteland 

is another company that expands in the production market, establishing last year a new brand 

“Don Gustosso”, and will try to sell this brand in hypermarkets and supermarkets. Almost 40 

% of his2006 sales are done through these kinds of shops. 

For the big players, the next four or five years will represent a period of consolidation of the 

businesses. The main goal will be the organic growth, linked with the development of the 

partners, and the acquiring of the new suppliers. For instance, Top Brand Distribution, a big 

name in distributors industry, wills double the number of employee to 750 until 2010. 

Another means of development could be the expand of territorial channels of distribution for 

the goods and to expand the portfolio of FMCG suppliers, along with growing staff (see Table 

2) or training the existing ones. The distribution sector is linked with the producers. The 

motor of development is, for the distribution companies the product they are sell. The 

diminishing of sales for some products will affect not only the producer, but also the 

distributor, in lowering profitability. The old problems in face of the distribution companies, 

as the bad shape of the infrastructure, or the lack of safety in the traffic or the problems in 

good quality of the cars will remain. Most of the distributors fight for exclusivity, but will be 

situations in which the producers will distribute them selves the products and will try to 

develop their own distribution systems. This has been happened before, in 2001, JTI decides 

44 www.mfinante .ro


ISSN: 1842-4856 

to end the contract with TDG and to distribute with his own. That brings lowering sales with 

60% for the next year for the TDG. JTI decides in 2002 that the best solution for distribution 

is to create his own distribution chain, and to cut the costs and to maximize the cash flow. The 

creation his own distribution chain have increased a big financial effort for JTI, but on the 

long run this effort could be justified. 

Even when entered the Romanian market, at the beginning of 1990, Quadrant Amroq 

Beverages, producer of the Pepsi Cola for eastern and central Europe wanted his own 

distribution chain. In time, the number of the cars for distribution has been grown to 115 

trucks, and in 2006 QAB invested in a new storeroom in Bucharest. Still, specialized 

companies, because of the costs, distribute 30% of the production. The producer of Coca Cola 

had another strategy: specialized companies insure his distribution, and so the company had 

been focused on production, sales and marketing.F 

Romanian retail and distribution has growing steadily and will continue to grow in the 

following years. The difference in strategy or prices will bring success or failure. Faced with 

the new big retailers and distributors, the Romanian companies have no choice of survival 

except that of evolving from small firms to big ones. To adapt to various trade forms and to 

sustain the strong growth of the FMCG market the major distribution companies will have to 

made strong investments over the next years. 

Selected bibliography 

38 

Ana, Gheorghe I. Finanţele şi politicile financiare ale întreprinderilor 

Editura Economică, Bucureşti, 2001; 

Andronic, Bogdan Ct. Performanţa firmei. Abordare trandisciplinară în 

analiza microeconomică, Editura Polirom, Iaşi, 2000; 

Bărbulescu, Constantin Pilotajul performant al întreprinderii 

Editura Economică, Bucureşti, 2000; 

BBogdan, Ioan Management financiar 

Editura Universitară, Bucureşti, 2004; 

Finnerty, D. John Corporate Financial Management 

68BEmery, 

R. Douglas Prentice Hall, Upper Saddle River, NJ, 1997; 

Simionescu,A. (coordonator) Manual de inginerie economicã 

Editura Dacia, Cluj-Napoca, 2002 

45 Ziarul Financiar nr. 1911/ 26.06.2006 

45


ISSN: 1842-4856 

ROMANIAN INSURANCE MARKET 



ABSTRACT 

The activity of insurance market is complex, it offers a large kind of products to its clients in obligatory 

insurance market domain and optional insurance market, too. 

In the latest period, the optional insurances are a very important domain on the insurance market. 

In this work, I describe the most important kind of optional insurances and their evolution. 

Goods insurances are an analysed domain in the latest two years because of the acts of God which have 

deflected above Romania. 

Life insurances are an attraction for Romanian people because these kind of insurance that covered a 

risk to which the people are exposed and also this kind of insurance is considered to be an effective way of 

saving. 

Beginning with the narrow concept that market means all the transactions made into a 

specific field, we can define the insurance market as being all insurance operations achieved 

by the insurance companies. 

Nowadays,in Romania the activity of authorised insurances follows the Law no. 

32/2000, with further changes and addings and the given rules for its aplication. The 

Authorise Direction coordonates this activity within the Insurance Supervising Commision. 

In 2004, the law framework for authorise insurance companies and brokers was 

completed and changed, through: 

- the Law no. 172/2004 for changing and completing of the law no. 136/1995, as 

concerning insurances and reinsurances in Romania; 

- the Law no. 403/2004 for changing and completing of the Law no. 32/2000, as 

concerning the insurances companies and insurances observation; 

- the Order no. 3110/2004 for applying the rules about the pieces of information and the 

required acts for authorising insurance broker. 

Durring 2006, authorisations of function for 6 insurance companies were withdrawn. 

One of them was further reauthorised, due to the fact of fulfilment of the required 

conditions. For other 4 companies, the licences for life insurances were withdrawn. 

Taking into account the market improvement and the existent insurable potential, there 

were, also, in 2006, entances for new three insurances: two for life insurance market and 

one for general insurance. 

Finally, on the 31 st of December 2006, forty one insurance company wre authorised to 

function.


ISSN: 1842-4856 

During the year 2006, three hundred and thirteen brokerage companies were 

authorised to function. These had as the value of assets 235.521.586 lei (69/645/914 euro), 

increasing, in real terms with 44.23% as comparing with 2005. 

In conformity with the pieces of formation from the Insurance Supervising Comission 

(ISC), during the year 2007, the total value of the subscribe capital of the forty-one 

authorised companies was on the 31 st December 2006 of 1.406.287.079 lei (415.852.110 

euro), increasingly as compared to 2005 with 50.94%. 

As structure, the subscribed social capital was formede by cash in the value of 

1.255.772.986 lei (371.343.699 euro), representing 89.3% from the whole and capital in 

nature, in sum 150.514.093 lei (44.508.411 euro), reprensenting 10.7% from the whole. 

This increase of the foreign investors participation was influenced by both the 

authority of new 3 companies with a majority of foreign shareholders KD Life Insuraces 

(Sloven), CLAL Romania (Netherland), Cardif Insurances (France) and by the change in 

shareholding of 4 existent companies, through share-buying by foreign shareholders. 

Taking into account of rules of ISC about the calculation of the solvency weight, 

index of liquidity, shares that cover the technique reserves and technique reserves, beginning 

st 

with the 1U 

UJanuary 2007, it is said the firms leadership will take any necessary measure in 

order to increase the social capitals, to improve the portfolio, fusions or transfers in portfolios, 

for the companies to act safety financial. 

st 

From the information offered by the insurance companies, we see that on the 31U U 

December 2006 there were 14.008.597 valid insurance contracts, with 2.378.770 more than at 

the end of 2005. 

The number of valid insurance contracts reported by the insurance companies that 

practiced general insurance were, at the same date of 7.487.777, representing 53,5%, from all 

valid contracts, increasing with 1.441.015 as compared to 2005. 

st 

Speaking about the number of employees with work agreement on the 31U U of 

December 2006 there were 17.282 persons, increasing with 2.872 persons as compared to 

2005. This increasing was due to both authorising new insurance companies and developing 

of the existents companies activity. 

Insurance brokers reported 1,362 persons with work agreement, more with 222 

persons than in 2005. 

Referring to the co-worker agents, the insurers spoke about 28 180 (in diminution with 

670 persons, as compared to 2005), but brokers about 3.700 persons (increasing with 2.628 

persons as compared to 2005). 

For the whole subscribed gross bonuses of general insurances (4.591.002.641 lei) 

contributed both bonuses for direct insurances, in sum of 4.512.656.591 lei (1.334.434.335 €) 

increasing with 28,57% as compared to 2005, and bonuses for reinsuring, reported by eleven 

(11) companies, in sum of 78.346.050 lei (23.167.652 €), increasing with 132,21% as 

compared with the prior year. 

The significant increasing of the reinsurance reception volume is a consequence of the 

high price of the re-insurance internationally speaking and of the strict rules imposed by the 

external re-insurers too; they want to yield some risks on the external re-insurance market. 

The reception of the re-insurance represents 1,7% from the whole volume of the subscribed 

gross bonuses during the year 2006. 

The subscribed gross bonuses from the general insurance contracts recorded a real 

increase with 29,55%, a superior weight to the subscribed Bonuses in both categories of 

insurance (23,68%), fact that made their weight increase up to 80,1%. 

Figure/ Table no 1: The dynamic of the subscribed gross bonuses of general 

insurances between 2003 – 2006


ISSN: 1842-4856 

Year Subscribed gross bonuses 

of general insurances (lei) 

Nominal annual 

increasing (%) 

Inflation 

weight (%) 

Real annual 

increasing 

(%) 

2003 2.053.884.178 14,1 

2004 2.730.518.766 32,94 9,3 21,63 

2005 3.379.170.106 23,76 8,6 13,96 

2006 4.591.002.641 35,87 4,87 29,55 


The index “Udegree of insurance penetrationU” seen as report between the subscribed 

gross bonuses and the Internal Gross Product was 1,67% in 2006, increasing as compared to 

2005, when this report was 1,54%. 

Reporting the volume of the subscribed gross bonuses to the Internal Gross Product 

we see as degree of the penetration of 1,34%, increasing with 0,16 points percent, as 

comparing with 2005. For life insurance this indicator was 0,33% in diminution as compared 

with 2005 with 0,03 points percent. 

UThe insurance densityU, the indicator which reports the volume of the subscribed 

st 

gross bonuses to the number of population (which, on the 31U U of December 2006 was of about 

21.565.119 persons as the National Institute of Statistics estimates) was of about 266 lei/ 

inhabitant, the equivalent of about 79 €/ inhabitant, in a real increase with 23,94%as the 

previous year. The density of the general insurance was of 213 lei/ inhabitant, the density of 

life insurance was of 53 lei/ inhabitant. 

11 

Figure/ Table no 2: The evolution of the degree of insurance penetration and the 

density insurance in Romania during 2003 – 2006 

BIndicator 2003 2004 2005 2006 

The degree of insurance 1,41 1,46 1,54 1,67 

penetration (%) 

The insurance density (lei per 

inhabitant) 

123 160 204 266 


39B 

The 

dynamic of the general insurances was sustained by the car insurances which, due 

to the majority weight (over 65%) imposed the market rhythm. The classes of general 

insurances with the biggest increases in 2004 were the insurances for the means of railway 

transport, health, general civil responsibility, crediting and guarantees, but their weight is still 

low, up to 10%. 

The develop of car insurances took place on the background of the selling new cars; 

this fact increased, as the Car Producers & Importers Association says with over 30% (double 

as the initial foreseeing) and due to leasing market (where over 90% of the contracts have, as 

an object, the cars) which is estimated to raise up with 30%. 

The medium term forecasts show a maintaining of the increasing trend of 

macroeconomic, social indices, and, of course, of the insurance market. 

Bibliography: 




2000 



ISSN: 1842-4856 

SOME ASPECTS REGARDING LONG TERM FINANCING 

assist. univ. drd. DANIELA POPA 

Universitatea Româno Germană Sibiu 

Abstract: What does it take to develop long-term lending capabilities? Where does long-term 

finance fit in? For decades, contributors to the development literature as well as practitioners 

assumed that long-term financing was not in adequate supply in developing countries, that 

this shortage mattered, and that it was therefore important to stimulate the supply of long-term 

credit. Only in the last couple of years have there been attempts to verify such assumptions. 

The findings of some studies in the United States, which include a lot of data on individual 

firms, support the hypothesis that short-term markets pay a more important role than longterm 

markets. These studies found that many of the firms they looked at -mostly in the 

manufacturing sector- were primarily financed with short-term debt, which was rolled over 

and extended by their bankers. Bankers liked these arrangements as it kept borrowers on a 

very short leash. The evidence suggests that long-term finance matters, but that it is important 

to work with short-term markets first before moving too fast to develop long-term markets. It 

is also important is to encourage long-term finance indirectly. To the extent that it is done 

directly, attention must be paid to certain principles namely, keeping the schemes and the 

subsidies limited, which ensures that borrowers graduate from them. 

Many countries are trying to formulate a strategy for reform of their financial sectors. The 

question that is usually posed is: "What sequence of steps needs to be taken to reform 

financial markets?" Instead, we think it is better to approach this issue in terms of an overall 

strategy. There is no unique way to reform financial systems. We have learned many lessons 

from countries that have taken similar and different routes to reform. If we were to construct a 

simple strategy, which could be applied to many different countries, it would begin by 

focusing on the banking sector. The empirical regularity is that in most countries’ financial 

systems the banks hold the majority of the assets. In other words, my strategy would start by 

addressing problems in the banking sectors.


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Second, early in the reform process attention must be paid to the changes governments 

undertake to enable parts of the financial system to grow. Therefore, I would put emphasis on 

the basic infrastructure needs of the financial system, such as accounting and auditing, and on 

a functioning legal system, as better infrastructure helps all parts of the financial system to 

grow. Since, in addition to information systems, finance is primarily about contracts for the 

future, the ability to enforce contracts is essential to a good financial system. In fact, countries 

that improve the functioning of both their banking and non-banking sectors — such as equity 

markets — show a huge jump in their growth rates. But even countries that have developed 

only part of their financial sector grow much faster than those that do not develop any part of 

it. 

Third, focus must be placed on the incentives that owners and managers of financial 

intermediaries face. If they are given incentives to behave prudently, that is what they will do. 

If they are given incentives to set up pyramid schemes, that is what will happen. In Romania, 

we had Caritas, Mondoprosper and FNI. 

Fourth, focus on developing short-term markets in the beginning of the reform process. If 

there are no short-term markets, it will be hard to develop long-term markets. And as part of 

the development of long-term markets, there must be significant secondary market activity. 

Trading long-term instruments — such as government bonds–can be very risky because they 

are more sensitive to changes in interest rates than short-term bonds — such as treasury bills. 

Traders must learn, therefore, to manage the risks associated with short-term instruments 

before they feel comfortable with long-term instruments. 

In summary, the strategy is to begin with short-term markets, which includes developing 

banks and money markets. Then, to move on to intermediate instruments, which can be 

viewed as either a short-or long-term instrument. (Traders issuing equities look at them as 

long-term instruments; holders consider them short-term instruments; equities are also easier 

to trade if good secondary markets exist.) In later stages of reform, long-term bond markets 

finally begin to develop. 

What does it take to develop long-term lending capabilities? For decades, contributors to the 

development literature as well as practitioners assumed that long-term financing was not in 

adequate supply in developing countries, that this shortage mattered, and that it was therefore 

important to stimulate the supply of long-term credit. Healthy firms also viewed this as a way 

to identify themselves in that they were willing to stand up to the risk that they might not get 

financing: For a manager who is really convinced of future growth opportunities, one way to 

identify himself is to take on more short-term debt. In a number of studies, it was found that 

firms, which are funded mostly with short-term debt adjust faster; whenever some type of 

short-term shock hit them, they would adjust much faster than those companies that had been 

funded through long-term debt. These companies with mostly long-term debt had less 

pressure to rapidly adjust. However, it turns out that rapid adjustment was much better for the 

firms. Those firms that adjusted rapidly were the ones that survived and ended up with a 

higher profitability rate. 

Some of these results were overturned in a recent World Bank study, which consisted of two 

data sets. The first set included 30 developing countries where firms were listed on stock 

exchanges; in many of these countries, only a few hundred firms were listed. The second set 

included some developing countries — such as Colombia, Ecuador and India — and three 

industrialized countries where 2000 or 3000 firms were listed on stock exchanges. The results 

of this study showed that there was a shortage of long-term finance in developing countries, 

after controlling for differences in the macroeconomic factors, in the adequacy of legal 

systems, and in the characteristics of different firms. For example, if a large firm was taken 

out of the developing country and put into the US capital market — everything else being 

equal — that firm would get more long-term credit. This was especially true for small firms 

which, in many developing countries, have severe limits.


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In addition, our study found that this shortage really did matter. Having more long-term credit 

led to a jump in the productivity of firms, except when it was subsidized. In this latter case, 

long-term credit went to the wrong firms — that is, the ones with lower productivity and 

profitability levels. 

These results suggest that governments should intervene to increase the supply of long-term 

credit, but that it must be done carefully. First, any attempt to create a long-term market will 

not work in a volatile macro-environment; therefore, governments must address macroinstability. 

Second, they must build a sound legal and other systems, which minimizes 

distortions and thus contributes to the growth of long-term financing. Third, the role of a 

better information system cannot be overemphasized. In this connection, the question that I 

would like to pose is, "Which country has the best developed banking industry?" (banking 

industry is defined here as a financial intermediary that neither charges nor pays fixed interest, 

but rather pays a variable return to deposits based on the performance of its investment.) The 

answer is: the United States, though the financial institutions there are not called banks; they 

are called mutual funds. These funds, which account for a large part of the US financial 

markets, take an equity stake in equity of their "depositors." Why then does the US have 

mutual funds when they are not used in countries where there is a demand for mutual funds? 

One factor is the lack and accuracy of information in many countries, which want to develop 

mutual funds. In addition, most mutual funds are not engaged in any fixed interest 

transactions. By improving the quality and quantity of information, developing accounting 

and auditing systems, and improving disclosures, long-term markets and mutual funds would 

naturally develop. 

Another approach, which increases the supply of long-term credit with minimal distortions is 

the promotion of increased use of pension funds. A great deal of attention has been devoted to 

this issue. In Chile, for example, there was a dramatic increase in the rate of savings after 

moving to fully funded pension schemes. Although many economists agree that pension funds 

do not affect long-term savings rates, the evidence suggests that moving from an unfunded 

pension system to a funded one, forces people to save and that, as a result, the savings rate 

increases in the short term. Once pension systems are fully funded, there should be no 

difference between the resulting long-term savings rate and the one that would have otherwise 

prevailed. But there is evidence that when fully funded pension schemes are in place, these 

are in effect intermediaries with very long-term liabilities which will tend to take on longterm 

assets to match their positions. These pension funds will foster the development of longterm 

markets very rapidly. 

Finally, subsidies must be kept small. In mostly directed-credit programs, the schemes that 

worked better were those in which subsidies were small or nonexistent. The Japanese case is 

the best-known example: After World War II, the Japan Development Bank (JDB) was 

established to encourage long-term industrial development. The Japanese economy had one 

advantage: it was large and it could stimulate any one industry through more than just one 

borrowing firm. The average JDB borrower received an eight-year loan with a subsidized 

interest rate of about 200-300 basis points over the cost of the bank’s funds. After the loan 

period, borrowers were forced to graduate to borrowing funds from commercial banks or the 

market. So there was a subsidy, but it was small relative to some other countries’ directed 

credit programs, where the interest rate was considerably negative in real terms and the 

subsidy could be large. In contrast, when governments in some developing countries decide to 

create a steel or automobile industry, because the market is so small, there is only going to be 

one firm in the industry. In effect, the government is telling the banks to lend to one borrower. 

Consequently, the banks do not invest routinely in collecting borrower information or in 

monitoring this credit, as they view government as the ultimate risk holder. 

Lastly, going back to the Japanese example, while many think that the government intervenes 

heavily in the financial sector, the reality is that its policy loans account for only about 10% of


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total credit. This compares with other East Asian countries, where the share is 15 to 20 

percent of total credit. Moreover, in some East Asian countries, the subsidized schemes were 

kept so broad-based that they were not a constraint on the banks. For instance, the Malaysia 

program had preferred loans for all native Malays, which did not significantly limit the banks. 

Indeed banks were consistently overshooting this target, meaning that it did not constitute a 

real constraint. 

In summary, the evidence suggests that long-term finance matters, but that it is important to 

work with short-term markets first before moving too fast to develop long-term markets. It is 

also important is to encourage long-term finance indirectly. To the extent that it is done 

directly, attention must be paid to certain principles — namely, keeping the schemes and the 

subsidies limited, which ensures that borrowers graduate from them. 

SELECTED BIBLIOGRAPHY 

[1] Bran, Paul Finanţele întreprinderii-gestionarea fenomenului microfinanciar-Editura 

Economică, Bucureşti, 1997 

[2] Bogdan, Ioan, Management financiar, Editura Universitară, Bucureşti, 2004 

[3] Cooper Kerry, Fraser Donald, The financial market place,Addison-Wesley Publishing 

Co., Reading, 1992 

[4] Drăgoescu, Elena, Relaţii valutare, financiare şi de credit internaţionale 

Editura Dimitrie Cantemir, Târgu-Mureş, 2004 

[5] Dufloux, Claude, Pieţe financiare, traducere, Editura Economică, Bucureşti, 2000 

[6] Stancu, Ion, Finanţe. Teoria pieţelor financiare. finanţele întreprinderilor. Analiza şi 

gestiunea financiară, Editura Economică, Bucureşti, 2002


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THE ACCOUNTING AND FISCALITY OF PROFIT REPARTITION 

Bengescu Marcela, conf. univ. dr. 

Drila Gherghina, lecturer univ. dr. 


ABSTRACT: Cette étude se propose de réaliser une synthèse des dispositions législatives concernant la 

répartition du profit. La problématique abordée vise deux objectifs principaux : 1. les distributions provenant du 

profit brut ; 2. la répartition du profit net. Les aspects théoriques et méthodologiques ont été adaptés à la forme 

juridique d’organisation des entités économiques : 1. les sociétés nationales, les compagnies nationales et les 

sociétés commerciales d’État à capital intégral ou majoritaire, les régies autonomes ; les sociétés commerciales à 

capital majoritaire privé. 

L’étude veut souligner certains éléments de détail, tels que : la distinction entre la perte comptable et la 

perte fiscale ; les destinations du profit par rapport à la forme juridique d’organisation de l’entité économique, le 

traitement comptable et fiscal des répartitions provenant du profit. 

General Overview 

The result represents the indicator for evaluating the financial performance of the 

company, and is determined by subtracting the expenditure from the income of the ending 

year. Although it is presented as a global indicator in financial statements, it is determined 

monthly. 

Methodologically speaking, in order to calculate the result, the income and 

expenditure accounts have to be closed out. 

The image of the analyzed indicator is constructed from elements that comprise the 

results account, and also from those that refer to the changes of internal or external 

circumstances concerning the company. 

Companies have the tendency of modifying accounting practices and estimations in 

order to adapt to economic circumstances or in order to improve their image. 

Sometimes, retroactive modification of financial results questions the trust of the 

public interested in the company’s performance. IAS 8 states how annual accounts must be 

treated in order for the company to present its results on a coherent and permanent basis. 

All income and expenditure noticed in the financial year must be taken into 

consideration upon the calculation of the net result of the respective year, apart from the 

situation in which another international accounting regulation authorizes a different 

procession. 

Extraordinary elements and the effects of change in accounting estimations are part of 

the elements included in the net result. 

In certain circumstances, some elements can be excluded from the net result of the 

current period. IAS 8 mentions two of these circumstances: the correction of fundamental 

errors and the effect of changing the accounting methods 1 .


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In accordance with those presented above, the Romanian accounting legislation states that: 

“In case of correcting errors that generate reported accounting loss, this must be covered 

before distributing profit. In the notes to the financial statements additional information must 

be provided regarding the errors that were noticed” 2 . 

Legal Provisions regarding Profit Distribution 

The dividends that are distributed to shareholders, proposed or declared after the 31 st 

of December, as well as other similar distributions made from the profit mass, must not be 

acknowledged as debt at the conclusion of the financial year. 

The distribution of the profit is recorded in accounting based on destinations, after the 

approval of annual financial statements. Profit distribution is performed in accordance with 

valid legal provisions. 

Amounts that represent reserves established out of the profit of the current financial 

year, based on some legal provisions, is recorded through the use of accounting article 

129=106. The accounting profit that is left subsequent to this distribution, are transferred to 

account 117, from where it is going to be distributed to its other legal destinations. 

The reported accounting loss is covered by the profit of the current financial year and 

the reported profit, by reserves and by the equity, according to the decision of the 

shareholders’ or associates’ general assembly, with the observance of legal provisions. 

Distributing the Gross Profit 

As regards the distribution of the gross profit, we take into consideration the following 

situations: setting up the legal reserve , covering the fiscal loss of the previous years and setting up 

other reserves equal to the amounts generated by the fiscal facilities stipulated by the norms regarding 

profit imposition. 

Regarding the legal reserves, the Fiscal Code, in art. 22, states dispositions regarding 

the limits of fiscal deductibility: „the legal reserve is deductible within a limit of 5% applied 

to the accounting profit, before determining the profit tax, out of which the non-taxable 

income is subtracted and the expenditure corresponding to this income is added, until this 

reaches the fifth part of the subscribed and submitted equity or of the patrimony, as the case 

may be, according to the laws of organization and functioning”. 

Observation: According to these regulations, the legal reserve is established at a 

different level than that listed in the Law Regarding Commercial Companies no. 31/1990, 

republished. Also, there is a necessity to simultaneously meet two requirements: 

Requirement No. 1: Legal reserve = 5% (profit before taxation – non-taxable income + 

expenditure corresponding to non-taxable income). 

Requirement No. 2: Legal reserve ≤ 1/5 x subscribed and submitted equity. 

According to the methodological norms the reserve is calculated cumulatively from 

the beginning of the year and is deductible upon the calculation of the monthly or trimonthly, 

as the case may be. Also, revenue mentioned by art. 20 of the Fiscal Code is included in the 

category of non-taxable income that is subtracted in the formula for the calculation of the 

reserve, with the exception of those stated at letter e) of the same article. The reserves set up 

in that way are appended or diminished based on the level of the accounting profit within the 

period of calculation.


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Conclusion: The formula can be performed monthly or trimonthly. 

The amount set up at the level required by the Fiscal Code is subtracted from the taxable 

income mass. 

The profit of the current financial year is included among the sources for covering the 

accounting losses of previous years, within the limits established by decision of the 

shareholders’ or associates’ general assembly. 

Part of the gross profit is used only to compensate fiscal losses, at each deadline for 

profit tax payment 2 . 

In this case, distributing the profit represents a technical requirement in determining 

the fiscal result. An exception is represented by companies that have recovered fiscal losses 

out of legal reserves. According to current legislation, the re-establishment of the legal reserve 

will not be deducted from the taxable income mass 3 . 

Consequently, the legal reserve is re-established from the net profit subject to 

distribution. 

129 ”Profit Distribution” = % UGross profit 

1061 „Legal 

Reserves” 

1171 ”The reported 


undistributed profit or 


1068 ”Other 

reserves” 

distributionsU 

5% x regulated base 

Fiscal loss 



After deducting the aforementioned amounts, the net profit is distributed by observing 

the path established by the law, for state enterprises, or by the shareholders’ or associates’ 

general assembly, for public companies. 

Accounting Records Performed At the Balance Sheet Date 

In observance of legal regulations the order of profit distribution is followed by the 

respective destinations, as follows 3 : 

c. Covering accounting losses of previous years: 

129 ”Profit Distribution” = 1171 ”The reported 


undistributed profit 

or uncovered loss” 

Accounting loss minus 

fiscal loss 

We assume that companies envisaged by the respective dispositions should deduct 

their fiscal losses from the taxable profit obtained in the next consecutive 5 years. For this 

reason, in the accounting formula above we could indicate an amount equivalent to the part 

exceeding the fiscal loss 4 . Under the assumption that the proposed evaluation is against legal


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provisions, the tax payer would owe the state budget a profit tax corresponding to the 

unreported fiscal losses. The consequences of such an approach have negative side effects 

over the financial stability of the company. 

d. Establishing other reserves, representing fiscal facilities granted by the law: 

129 ”Profit Distribution” = 1068 ”Other 

reserves” 



c. A particular case is represented by the distribution of the amounts destined for the 

participation of employees in the profits. In case of economic agents with state owned equity, 

employees are granted amounts representing 10% of the net profit, without exceeding, for 

each employee, the level of an average monthly base salary for the company, in the respective 

financial year 

In this case, the new legal dispositions state the rule according to which „the employee 

participation is reflected in accounting by setting up a provision for risks and expenses equal 

to the estimated amounts representing the gross amounts to which the employees are entitled, 

as follows” 5 : 

6812 “Operational expenditure 

regarding provisions” 

= 1518 "Other 

Provisions” 

10% x Net Profit 

d. After deducting the amounts corresponding to the destinations mentioned, the net 

profit that is obtained is recorded as follows: 

129 ”Profit Distribution” = 1171 ”The 

reported result 

representing 

undistributed 

profit or 



distribution in the balance 

sheet approval meeting 

Accounting records performed after the approval of the balance sheet 

a. The net profit obtained by the state venture „The National Lottery” from the sports 

bets activity will be transferred to the Ministry of Youth and Sports for financing athletic 

activities, including the Romanian Olympic Committee and the Romanian Football 

Federation 6 : 




b. Employee participation in the profits: 

= 447 ”Special 

funds – 

assimilated fees 

and transfers” 

Net profit from sports bets


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b.1 In case of private equity economic agents: 




= 424 ”Premiums 

representing 

employee 

participation in 

the profit” 

≤ 10% net profit subjected 


b.2 In case of economic agents with state owned equity: 

Liabilities towards employees corresponding to their participation in the profit will be 

recorded in accounting based on salary expenditure in the year following that in question and, 

at the same time, the provision that was set up will be recorded under income 5 . 

c. a minimum 50% of transfers to the state budget or to the local budget: 




= 446 ”Other 

assimilated taxes, 

fees and 

transfers” 



d. a minimum of 50% dividends in case of national companies and commercial 

companies with partially or entirely state owned equity: 




= 457 ”Payable 

dividends” 



e. the rate of manager participation in the profit, established proportionately with the 

degree of fulfilment of the objectives agreed upon in the management contract 7 . 




= 462 ”Various 

creditors” 

Amount established 

proportionately with the 

degree of fulfilment of the 

objectives agreed upon in 

the management contract 

Note: Out of the manger’s participation rate in the company’s profit, 75% will be 

represented by distributed shares, for cash generated by this rate. 

f. the net profit remaining after establishing the amounts for the aforementioned 

destinations is distributed for the setting up of own financing sources: 



= 1068 «Other 

reserves» 


actual distribution


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uncovered loss” (dividends + employee 

participation in the profit) 

An actual case regulated by national legislation refers to setting up own sources of 

financing for projects that are cofinanced through external loans, as well as for setting up the 

sources necessary to reimburse the equity instalments, to pay the interest rates, the fees and 

other costs corresponding to these external loans. In the spirit of these regulations, own 

financing sources for foreign loan projects include the contribution of the Romanian party to 

the completion of the project, as well as the amounts necessary to pay taxes and fees within 

the country and the value of other local costs, which cannot be paid for from external loans. 

We assume that this disposition is meant to ensure that net benefits obtained from such 

contributions remain intangible until the end of the year, thus ensuring an efficient 

management of economic resources. 

Legal and fiscal aspects regarding dividend distribution 

Regardless of ownership structure, dividends are distributed in relation to subscribed 

shares, if the constitutive act does not specify otherwise. They are paid at the date established 

by the shareholders’ or associates’ general assembly or, if so be the case, established by 

special laws, but no later than 6 months of the approval of the annual financial statement of 

the concluded financial year. Otherwise, the company will pay penalties for the delay, equal 

to the legal interest rate, if the constitutive act or the decision of the shareholders’ general 

assembly which approved the financial statement corresponding to the concluded financial 

year did not establish a higher interest. 8 

Dividends are taxable with a rate of 16%. Income payers under the regime of payment 

at the source have the obligation to file form 205 ”Informative declaration regarding tax 

withheld for income under the regime of withholding at the source, on income beneficiary 

structure”, code 14.13.01.13/l. In case of dividend tax, declaration 205 should be filed until 

the 30th of June of the current year, for income paid in the previous financial year. 

. 

BIBLIOGRAPHY 

9. van Greuning H., International Financial Reporting Standards– A Practical Guide, 

IRECSON Publishing House, Bucharest 2005 

10. Ministry of Public Finance Order No. 1,752 of November 17 205 for the approval of 

accounting regulations compliant with European directives (M.O. no. 1,080 bis/11.30. 

2005). 

11. Law no. 571 of December 2003 regarding the Fiscal Code with all the modifications 

brought by Law no. 343 of July 17 2006 for the modification and completion of Law 

no. 571/2003 regarding the Fiscal Code (M.O. no. 662/08.01. 2006). 

12. Bengescu, M., Studiu comparat al normelor contabile privind cheltuielile şi veniturile 

întreprinderii, Agir Publishing House, Bucharest, 2006.


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13. Ministry of Public Finance Order No. 418/ 4.06.2005 regarding certain accounting 

observations applicable to economic agents, published in Romania’s Official Monitor, 

Part I, no. 310 of April 13 2005. 

14. Government Urgent Order regarding the distribution of the profit of the 

”Administration of the State Protocol Patrimony” state enterprise no.91, published in 

Romania’s Official Monitor, Part I, no. 277 of June 17 1999, art. 2. 

15. Government Urgent Order No. 39 of July 10 1997 regarding the modification and 

completion of the Law of the management contract no. 66/1993 (M.O. no. 151/07.11. 

1997. 

16. Law no. 441 of November 27 2006 for the modification and completion of Law no. 

31/1190 regarding commercial companies, republished and of Law no.26/1990 

regarding the registry of commerce, republished (M.O. no. 955/11.28.2006).


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THE ACCOUNTING IMPLEMENTATION 

OF PUBLIC PRE-ESTABLISHED ALIMONIES 

Iuliana Cenar Lect. PhD 

“1 Decembrie 1918” University Alba Iulia 

ABSTRACT. Par l’ouvrage „Comptabilité des prestations sociales de retraites” nous voulons evidentier 

le manière de quel est applique „la comptabilité des engagements” dans le cadre de l’institutions qui gestionnent 

le régime publique des retraites du Roumanie. Dans ce sens nous avons consideré relevante le traitement du 

problématique suivante: la délimitation teoretique des prestations sociales des retraites, la prestations 

monographique du manière de comptabilisation des celles, l’exécution des précisions en liaison avec la 

comptabilité de l’engagement, la rédaction des conclusions a la suite de l’interrelation des aspects antérieures. 

Theoretical delimitations regarding the alimonies 

In a general way the human being always has been concern to conserve a part of his 

material resources with the purpose to overrun certain social risks (illness, old ages, work 

accidents, unemployment, maternity etc.). It existed and it still is the negligence domination, 

the lack of education and the improvidence that generates the impossibility of free insurance 

to make the risk dispersion, because of an insufficient number of insured people. 

In this context necessary becomes the insurances compulsoriness against the 

mentioned risks, as far as to the unexpected as to the persons that the personal interest comes 

first. 

Making out the economy measurement through certain organizational structures that 

belong to the group that involves the existence of some social relations, generates the money 

support system called social insurances. This is made of a group of compulsory standards 

regarding the material insurance of old age, illness or accident of the persons that are the 

subjects in a juridical work report or in others categories of persons provided by the law, as to 

their descendents. 

As part of the social insurance system a special place it has the public pre-established 

alimonies. Through it, is followed the insurance at a reasonable level of the replaced income 

for the persons of which age or health represents privations of work. 

The alimony represents a monetary quantify right obtain through the insurances, in the 

conditions of not being able to work, caused by some unwanted events (invalidity, illness, 

death) but also by the passing of time- old age, the form of social and personal responsibility 

in order to insure an existential income. 

46 

The point of view of the Europe CouncilF 

F is that the alimonies are works that should 

maintain and ameliorate the capacity of the income, payments made with the title of 

repayment contributions. 

46 

Europe Council, Human rights – The European Convention of Social Security, Publisher House Themis, 

1994,p. 152.


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In connection with concept alimony is the one of the pensioner, which nominates the 

person (insured etc.) of which the income comes from the investigations made over the years


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of work, as payments for social insurances and from the disposable income from the 

47 

individual account of alimony, for the time before retirement and after thatF 

F. 

The acceptations presented allow us to make at least the next conclusions with general 

character, regarding the social insurances of alimonies: 

- they are substantiated by law and have as a purpose the material insurance of 

persons with different social risks; 

- the risks they cover have a social character, the community is the one that has to 

make the social insurance object; 

- they have a bilateral character because involves both parts, namely the payment 

made by the insure person and the alimony by the institution that manages the public system 

of alimonies. Complementary to the obligations are the rights of the parts mentioned previous, 

to get/ claim the alimony namely the payments made to the social insurances. 

We can speak about the existence of several fluctuations that puts the public 

component of the Romanian alimonies system into a crucial moment for his existence, mostly 

the one regarding the financial support on a long time. Between those fluctuations we 

mention: internationalization, affirmation of the computer society, time, the dynamic of the 

people structure, family (the individual accent) the medical techniques progress (leads to an 

inversely proportional report between the personal resources and the medical services costs), 

the society progress (involves the high standard of life and his resources to get it) etc. 

The essential role for the multiple transformation issue to which the alimony system 

has been put, comes to the accounting, the last one being in major challenges of nowadays. 

The accounting implementation of public alimonies 

The accounting tends to become a complex field confronted with several challenges 

and opportunities. The Romanian accounting, including the segment found in the alimonies 

system is strong put in relation with the European Accounting Laws in order to create a 

common/convergent accounting language at international level 17. 

The accounting from the public alimonies scheme can be define as an instrument 

through which are produced information, it is checked and corrected the decisions taken for a 

better protection of the people interests the way they give information for the financial 

operations made 19. 

The accounting from the public system of alimonies has grown gradual with the 

society development following the initial flow of money, namely those flows between the 

accouters and the state budget of social insurances (that presumes the obliged drawing parts of 

the resources of the tax payer for the financed alimonies expenses), between the state budget 

of social insurances and the principal chief account of credits, namely national House of 

Alimonies and Other Rights of Social Insurances (under the form of some financed expenses 

by open budgetary credits) as between the chief account and the one subordinated by the 

budgetary credits – Local Houses of Alimonies (flows that are related to the financed 

alimonies expenses). Flow of money related with the state budget that is determined by the 

receiving of governmental subsidies in order to respect the obligation for the alimonies IOVR 

payment, of the agriculture alimonies. 

The limited character of the public financial resources, involves the State Treasury in 

48 

the entirety institutional generator of flows of money. According to the legalF 

F way to cover 

the deficit of the social state insurances budget, is made in motivated situations with sums 

(transfers) from the general account of the state treasury, following that the surpluses from the 

47 

G. Lacrita, “Social and Tax Equity in order to establish the limit of age”, Tribuna Economică, no.27, July 

2002. 

48 

Law nr.19 from 17.03.2000 with ulterior modifications and supplements


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budget execution of the social state insurances from the next period of time is settlement with 

state budget in the limit of the received transfers. 

Further on we will present the way in which the application of the arrangement 

accounting has been understood by the public institutions that manage the public scheme of 

alimonies. 

- pointing out the expenses with the alimonies: 

676.57.01.03 

Social Insurances 

= 4221 

Civilian Pensioners - Due 

alimonies 

15.912 

The codification 676.57.01.03 means: 

676. – the symbol of the synthetic account of Social Insurances 

57 the title of the expenses from the economic classification entitled Social assistances 

57.01 the budgetary article Social Insurances 

03 – the cod for the state social insurances budget 

- the payment through bank transfer and pay office of the alimonies labour conscription: 

4221 


alimonies 

= % 

7703.57.01.03 

Finances from the state 

budget of social insurances 

5311/ analytic 

House in lei 

- registering the alimonies deductions (part payment etc.): 

676.57.01.03 


4221 


alimonies 

= 4221 


alimonies 

= 4272 

Alimonies deductions debt to the 

third person 

- the payment through bank transfer of the alimonies deductions: 

4272 

Alimonies deductions debt to 

the third person 

= 7703.57.01.03 

Finances from the state budget 

of social insurances 

U15.912 

14.807 

1.105 

65.000 

65.000 

65.000 

- pointing out the expenses representing the debit alimonies ant the deductions from the 

alimonies 

676.57.01.03 


= 4221 


alimonies 

28.000


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4221 


alimonies 

= 461 

Debtors 

28.000 

- registering the incomes regarding the - alimonies tax income and the payment of this by 

bank transfer 

676.57.01.03 


4221 


alimonies 

444.2 

Income tax from salaries and 

other rights 

= 4221 


alimonies 

= 444.2 

Income tax from salaries and 

other rights 

= 7703.57.01.03 



49 

- the accounting of the alimonies put in orderF 

F and unused for the due rights: 

7703.57.01.03 



- the payment of the reorder alimonies: 

426/analytic 

Personal rights unused 

= 426/analytic 

Personal rights unused 

= 7703.57.01.03 



- the registration of the alimonies decreed and unused for the rights 

7703.57.01.03 



676.57.01.03 


- the debts accounted from the alimonies. 

461 analytic 

Debts 

= 4221 


alimonies 

= 4221 


alimonies 

= 714 analytic 

Incomes from the active 

12.000 

12.000 

12.000 

9.000 

9.000 

1.000 

(1.000) 

2.000 

49 

The law of the budgetary expenses assumes the confirmation of certain payment obligations, of the exigibility 

and the amount of this


ISSN: 1842-4856 

- regaining the debts by the pay office: 

5311 

House in lei 

reclaims and different debts 


Debts 

- the bank transfer in the available account by financing the previous years 

525.30.03.03 

Available of the social state 

budget of alimonies. Returning 

the founds from the budgetary 

financed of the previous years. 

= 5311 

House in lei 

2.000 

1.500 

30.03 budgetary chapter Estate incomes 

30.03.03 – subchapter Returning the founds from the budgetary financed of the previous 

years. 

- deduction from the deceased debts 

654 

Loses from the debts and 

different debts 


Debts 

The succession of the accounting registrations presented by the call to the technical 

instrument of accounting has the role to identify the suggestive answer to the question: Can 

we speak about an arrangement accounting in the public system of alimonies? 

Identification and registering in accounting the expenses is made by the time of the 

employment, the consumption and resources payments. According to the official channels 

presented the expenses regarding the past obligations are recognized in the present, aspect 

which we do not meet in the accounting literature. The expenses with the alimonies, 

according with arrangement accounting must be recognized in the moment of becoming 

employed so in the moment of the obligation to pay or those are pointed out for an obligation 

of payment already existent, obligation that is not reflected in the initial patrimony situation. 

The accounting based on the cash has the capacity to gain the flow of budgetary 

allowances expended but present as a principal disadvantage the absence, the ignorance of the 

information about the debts on long term, that generates negative effects on the possibility to 

honor in the future the obligations to the ex tax payers. Also the financial sustainers (tax 

payers) do not have the informational elements to anticipate the dimensions of the future 

payment effort, necessary to maintain the public system of alimonies on the water line, vital 

because the minim level of existence must remain in the hands of the public authorities. 

Reflecting the obligations to the actual pensioner improves the accounting information 

by including in the situation regarding the financial position and the accounting acknowledge 

the dimensions of the due obligations for the period in which it has been recognized but we 

ask in the same time: Which is the generated fact of this obligation and when is produced? 

Coincides with the moment of the accounting recognition? 

We appreciate that in order to give a faithful imagine of the financial position of the 

institution especially on the structured elements of the resources of alimonies is necessary to 

assume the obligations that are generated from the tax of the social insurances payments, 

obligations that will generate future outflows. 

500


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In this meaning we conclude to analyze and consider the next aspects: 

- the recognition of the obligation generated by the payment to the social insurance 

paid by the insured person; 

- the accounting taking of the obligations below the present pensioners; 

- resolving the problems related to the moment of the recognition of social insurance 

expenses, which must be related and synchronized with the incomes and reported at the 

moment of the initial obligation; 

- another aspect that must be considered refers to the fact that alimonies become 

50 

legal, are investedF 

F only after a dues stage of 15 years. In this case the payments from the 

payers that did not realized the minimum stage of payments will determine the obligation to 

become an income. 

We consider this actual generating obligation in the future of cash incomes that has to 

be strictly accounted in order to reflect the reality – an inferior sum in proportion with the 

carrying out, the recognition of an obligation and an detailed arrangement which will take part 

to the prevision of the next flows of payment but also to the necessity to identify the covered 

sources of those payments. 

- in the possibility in which the obligation quantify “alimonies founds” below the 

actual pensioners taking in account the age and the hope of life of those persons is necessary 

to point this out in accounting, relying the reported result. 

Acting in this way we can estimate the evolution of the budgetary deficit from the 

public alimonies system, the progressive increasing of this that threats the financially support, 

finding solutions in order to insure the financial resources necessary to the payment of the 

pensioners’ rights. 

Arrangement accounting offers the possibility to identify the present obligations and 

the potential ones aspect that contributes to the knowing and to the schedule in order to pay 

all the known obligations, obtaining information’s regarding the impact of the existent 

obligations against the future sources, to evaluate the possibility to give the alimonies to the 

addressee etc. 

The informational elements that regard the found obligations to the future pensioners 

can be estimated by centralizing the facts that are at the base of the certificate regarding the 

payment period and the year outline made in the public system of alimonies and other social 

insurances rights. 

By the implementation of some arrangement account it is necessary to see more 

clearly the objectives and the ways necessary to evaluate the performances the responsibility 

well defined for the best manner of accounting resources, the access to informations and 

teaching by the experts necessary in order that the responsibilities to be made in an efficient 

way. 

Conclusions 

The reorganization of the budgetary accounting by compensating the cash flow of 

accounting with the obligation accounting that is triangular. The superposition of both events 

in report with a single accounting period is far to the arrangement accounting representing 

also the reflection of the transfer cash base but by through the accounts that reflects the 

payment obligation. 

Showing the succinct nebula reform translates a different form with the same found 

for the public accounting, and for the public system of alimonies, or after the affirmation of 

50 Gives the benefits to the employer that does not depend on the future hiring.


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51 

the teacher C.M. DrăganF 

F arrangement accounting as a fundamental principle of organization 

and political accounting is annulated, with all his consequences becoming what ours know 

better: tax incomes and paid expenses. 

The arrangements accounting in the system of public alimonies is triangular the 

recognition of an obligation is not translated in relevance and much less in the arrangements 

for the alimonies system accounting. The superposition of both events in report with a single 

accounting period is far to the arrangements accounting principles representing also the 

reflection of the based transaction of cash but calls to the accounts through which the formal 

obligation payment is reflected. 

The reconstruction of the public accounting does not consist in a solution for the 

reformatory process but also does not the formal old process. 

The modernization of the accounting public system of alimonies need certain details 

of accounting needs that can be obtained by certain requests of the users, establishing some 

accounting rules and a concrete way of application. The accounting is a rational theoretical 

system based on a real base that leads to the knowing of every field of activity by using and 

precaution. To foresee that consists in the exploration of the past in order to anticipate the 

future becomes an intense way of manifestation with the purpose of modernize the 

accounting. 

In order to succeed the accounting reform in this field is necessary to consider three 

52 

componentsF 

F : reaction (the capacity of the insured institutions for alimonies to perceive and 

react fast to the changes of the environment), flexibility (the possibility to adapt in time to the 

modifications), and creativity (identifying new solutions and the possibility to apply them). 

Bibliography 

Cenar I., The insurances accounting in the Romanian system of alimonies, Publisher 

House Casa Cărţii de Stiinţă, Cluj-Napoca, 2006. 

Comănescu M., European management, Publisher House Economică, Bucureşti, 1999. 

Drăgan C.M. The accounting of the public institutions – 2005 harmonized with the 

international standards, Publisher the European Association of Study and consultancy, 

Bucuresti, 2005. 

Feleagă N., I. Ionaşcu, Financial accounting convention, vol. II, Publisher House 

Economică, Bucureşti, 1998. 

Lacriţa G., Fiscal and Social Impartiality in the settlement of alimonies for age limit, 

Tribuna economică, July 2002. 

Economic Dictionary, Publisher House Economică, Bucuresti, 2001. 

Official Monitor no 140 from 01.04.2000, Law 19 from 17.03.2000 regarding the 

public pension system and other social insurance rights. 

51 C.M. Drăgan, “The accounting of the public institutions – 2005 harmonized with the international standards”, 

Publisher the European Association of Study and consultancy, Bucureşti, 2005, p.12. 

52 Made after M. Comanescu, European management, Publisher House Economica, Bucuresti, 1999, p. 108.


ISSN: 1842-4856 

THE ACCOUNTING TREATMENT FOR CHANGES 

IN ACCOUNTING POLICIES 

Firescu Victoria, Associated professor, 

University of Pitesti 

ABSTRACT : Accounting policies are the specific principles, bases, conventions, rules and practices 

adopted by an enterprise in preparing and presenting financial statements. They are applied consistently from 

period to period. Regarding the changes in accounting policies, disclosure must reflect: reasons for change, 

amount adjusted in current and previous periods, tax effect, reason that comparatives are or not being restated. A 

change in accounting policy is allowable only this one will result in a more appropriate presentation. 

1. The accounting treatment of changes in accounting policies 

Accounting policies, – specific practices applied by an entity in preparing financial 

statements – are subject to change only if: 

- Such a change is required by law or by the adoption of an accounting standard; 

- It results in a more relevant presentation. 

The accounting treatment of accounting policies is applied retrospectively as follows: 

- An adjustment to comparative amounts shall be made; 

- The opening balance of retained earnings shall be adjusted. 

When readjusting the period (periods) prior to a change in accounting policies is not 

possible, the entity applies the policy prospectively. 

1.1. Example regarding the change in accounting policies (prospective method) 

●Information regarding the change in accounting policies in period N: 

- The management decides to change the depreciation method used for tangible assets 

by opting for a component approach; 

- Moreover, they decide to adopt a new system of evaluating capital assets at their fair 

value; 

- A study on the matter concludes that a retrospective restatement of component 

depreciation cannot be applied as there is not enough detail regarding the cost of 

components being registered individually. 

●Information regarding the financial period N-1: 

- historical cost of capital assets 150.000 

- capital assets depreciation 90.000 

- net book value 60.000 

●Information provided in the study:


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- - fair value of capital assets 80.000 

- - residual value 10.000


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- - the remaining useful life 5 years 

- capital assets depreciation expenses in N-1 10.200 

- capital assets depreciation expenses in N = (80.000-10000):5=12.000 

Information provided in notes to the financial statements: 

- the change of policy has been applied prospectively because the effects of a 

retrospective restatement cannot be quantified; 

- the application of the new policy has no effect over the period prior to the 

change in policy; 

- the effects on the current period are: 

o an increase of 20.000 (80.000- 60.000) of capital assets value at the beginning 

of period N 

o an increase of the income tax to: 20.000 x 16%(income tax quota)= 3200 

o a revaluation reserve of 20.000- 3200=16.800 in the beginning of period N 

o an increase in depreciation expenses of 1800 (12000-10.200) 

o a reduction of income tax expenses to 1800 x 16%=288 

1.2. Example regarding the change in accounting policies (retrospective method) 

● Information regarding the change in accounting policies in period N: 

- There is a change in the accounting treatment of loan expenses; 

- The cost of loans has been capitalized in previous periods; 

- Currently, interest expenses are recorded as expenses; 

- The management believes the new policy will generate greater transparency on 

financing costs and will increase the comparability of financial statements with those 

of other entities; 

- The change of accounting policy shall be applied retrospectively using period N-1 as 

comparison point. 

● Information regarding the N-1 and previous financial periods: 

- N-1 capitalized interests of 15000; N-1 and N-1 prior periods cumulated capitalized 

interests of 32.500. 

- The building is no longer submitted to depreciation as it has been commissioned. 

- The registered capital of the entity is of 45.000 (we assume that there are no other 

components of equity except registered capital and retained earnings) 

- The income tax quota is 16% 

- The retained earnings equal 80.000 and 107.401 in the beginning of exercise N-1 and 

in the end of it respectively 

- The accounting income before taxes and interest deduction equals 47.620 

● Information regarding the financial period N 

- The accounting income before taxes and interest deduction equals 75.000. 

- Interest expenses equal 12.000 in the current period.


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Table1 ● Information regarding the period N income statement compared to the income 

statement of the adjusted N-1 period 

Denomination N N-1(adjusted) 

The accounting income before taxes and interest deduction 75.000 47.620 

Interest expenses 12000 15000 

Accounting income before taxes 63.000 32.620 

Income tax expenses 10.080 5219 

Net income 52.920 27.401 

Table 2 ● Information regarding the changes in adjusted shareholder’s equity 

Denomination 

N-1 opening balance of 

shareholder’s equity 

The effect of change in accounting 

policy 

32.500- 32.500 x 16%=27.300 

N-1 readjusted opening balance of 

shareholder’s equity 

Shareholder’s 

equity 

Retained 

earnings 

Total 

45.000 80.000 125.000 

- 27.300 -27.300 

45.000 52.700 97.700 

N-1 readjusted result 27.401 27.401 

N-1 closing balance of shareholder’s 

equity 

45.000 80.101 125.101 

Period N result 52.920 52.920 

N closing balance of shareholder’s 

equity 

45.000 133.021 178.021 

●Information to be disclosed in the notes to the financial statements 

Table 3 ● The effect of change in policy over the N-1 period 

Denomination Amount 

Increase in interest expenses 15.000 

Decrease in income tax expenses 2.400 

Decrease in period result 12.600 

Table 4 ● The effect of change in policy over the periods prior to N-1 

Denomination Amount 

Decrease in period result of 32.500- 32.50 

26.800 

x16% 

Decrease in fixed assets and retained 

earnings as of 31.12. N-1 of: (32.500 7.600


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+15.000) x 84% 

When a clear distinction between changes in accounting policies and changes in 

estimates cannot be made, changes in estimates shall be taken into consideration. 

2. The accounting treatment of changes in accounting estimates 

Accounting estimates are connected to uncertainties inherent in business activities 

making certain elements difficult to measure with precision, but allowing estimations. 

Accounting estimates involve judgements based on the latest available, reliable information. 

For example, estimates can be required of: doubtful debts, the useful life of assets, and 

the expected pattern of consumption of future economic benefits embodied in depreciable 

assets. In fact, the entire range of aspects regarding depreciation, provisions and asset 

depreciation in general are the subject of judgements regarding accounting estimates. 

A change in accounting estimates shall not be identified with the correction of an 

error, as it occurs based on new information or on developments which impose an adjustment 

of the assets, debt, of future economic benefits and obligations linked to them. 

According to the accounting treatment prescribed by IAS 8 “Accounting policies, 

changes in accounting estimates and errors”, the changes in accounting estimates shall be 

applied prospectively, including the effect of the change in the income statement of the 

current period and of all the following periods based on the impact of this change. 

The notes to the financial statements shall include information regarding the nature, 

size and expected effect of changes in estimates. 

Example and solution for changes in accounting estimates 

An entity purchased a software application in period N for an acquisition cost of 

500.000. It is estimated that the useful life of this software is 5 years and the residual values is 

50.000. In the beginning of period N+1, on the background of technical progress in the IT 

field, the management estimates that the most adequate useful life is 3 years. Illustrate the 

effect of the change in accounting estimates having in mind that the residual value is 

unchanged. 

Solution: 

- The global depreciation of period N is (500.000-50.000): 5=90.000 

- The remaining net book value of ( 500.000- 90.000- 50.000) shall be recuperated in 3 

years; 

- In periods N+1, N+2, N+3, depreciation expenses of (500.000- 90.000- 50.000): 3= 

120.000 will be recorded; 

- The effect of changes in accounting estimates is visible in the net result of period 

N+1 and of the following periods. 

The effect of a change in accounting estimates shall be recorded using the same item 

of the income statement that has been previously used for the same estimation. 

3. The accounting treatment of errors according to IAS 8 “Accounting policies, 

changes in accounting estimates and errors” 

Errors are re omissions from, and misstatements in, an entity's financial statements for 

one or more prior periods arising from a failure to use, or misuse of, reliable information that 

was:


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- - available when the financial statements of the previous period have been authorised 

for issue 

- - could reasonably be expected to have been obtained and taken into account in 

preparing those statements. 

Such errors result from mathematical mistakes, mistakes in applying accounting 

policies, oversights or misinterpretations of facts, and fraud. They must be corrected 

retrospectively in the first set of financial statements authorised for issue after their discovery. 

Prior period financial statements are restated as if the error never existed. 

The prospective restatement shall be applied only after all rational efforts have been 

made to determine the impracticability of the retrospective restatement. 

The accounting treatment of errors includes: 

- restating the comparative amounts for the period(s) presented in which the error 

occurred; 

- restating the opening balances of assets, liabilities and equity for the earliest prior 

period presented, if the error occurred before this period; 

- when it is impracticable to determine the period specific effects, only the opening 

balance of equity is restated for the earliest exercise for which the specific period 

effects can be quantified; 

- when it is impracticable to determine the cumulative effect, at the beginning of the 

period, of an error on all prior periods, the entity shall restate the comparative 

information to correct the error prospectively. 

3.1. Example of how to correct an omission in recording an expense 

In period N an entity notices that goods totalling up to 25.000 that have been sold are 

still recorded as such at the end of period N. 

● Information regarding period N-1: 

- Income from product sales 450.000 

- The cost of sold goods 320.000 

- Retained earnings of 50.000 in the beginning of period N-1 and of 200.800 the end of 

period N-1; 

- Shareholder’s equity of 30.000 

● Information regarding period N: 


- The cost of sold goods 485.000, including expenses of 25.000 incorporated by error 

in the inventory opening balance in period N; 

- Income tax quota in periods N-1 and N 16% 

Illustrate the correction of the accounting error according to IAS 8 regulations. 

Solution: 

● Restatement of income statement information 

Table 5 ● Income statement - N-1 period 

Denomination N-1( initial ) N-1(restated)


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Income from product sales 450.000 450.000 

Cost of sold goods 320.000 345.000 

Income before tax 130.000 105.000 

Income tax expenses 20.800 16.800 

Net income 109.200 88.200 

Table 6 ● Income statement - N period 

Denomination N 

N 

(corrected) 





Net income 29.400 50.400 

Table 7 ● Restated statement of changes in shareholders' equity 

Denomination 

Registered 

capital 

Retained 

earnings 

Total 

Shareholder’s equity opening balance - N- 

1 period 

30.000 50.000 80.000 

N-1 period result 88.200 88.200 

Shareholder’s equity closing balance - N- 

1 period 

30.000 138.200 168.200 

N period result 50.400 50.400 

Shareholder’s equity closing balance – N 

period 

30.000 188.600 218.600 

Table8 ● Information to be disclosed in notes to the financial statements 

Denomination 

Increase in the income from product 

sales 

Effect on N-1 period 

On the income 

statement 

25.000 

Decrease in income tax expenses 4. 000 

Decrease in period result 21.000 

Decrease in inventory 25.000 

Decrease in income tax 4.000 

Decrease in shareholders’ equity 21.000 

There are no effects on the N period. 

On the balance 

sheet


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3.2. Example of how to correct an omission in recording revenue 

In period N an entity notices that goods sold for 25.000 (VAT excluded) have not been 

recorded as revenue at the end of period N. 

●Information regarding period N-1: 

- Income from product sales 450.000, not including the 25.000 

- The cost of sold goods 320.000 

- Retained earnings of 50.000 in the beginning of period N-1 and of 200.800 the end of 

period N-1; 

- Shareholder’s equity of 30.000 

● Information regarding period N: 


- The cost of sold goods 485.000; 

- Income tax quota in periods N-1 and N 16% 

Illustrate the correction of the accounting error according to IAS 8 regulations. 

Solution: 

● Restatement of income statement information 

Table 9 ● Income statement - N-1 period 

Denomination 

N-1( initial 

) 

N- 

1(restated) 





Net income 109.200 130.200 

Table 10 ● Income statement - N period 

Denomination N 

Income from product sales 520.000 

Cost of sold goods 485.000


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Income before tax 35.000 

Income tax expenses 5.600 

Net income 29.400 

Table 11 ● Restated statement of changes in shareholders' equity 

Denomination Registered capital Retained earnings Total 

Shareholder’s equity opening 

balance - N-1 period 

30.000 50.000 80.000 

N-1 period result 130.200 130.200 

Shareholder’s equity 

balance - N-1 period 

closing 

30.000 180.200 210.200 

N period result 29.400 29.400 

Shareholder’s equity 

balance – N period 

closing 

30.000 209.600 239.600 

Table 12 ● Information to be disclosed in notes to the financial statements 

Denomination 

Effect on N-1 period 

On the income statement On the balance sheet 

Income from product sales 25.000 

Increase in income tax expenses 4. 000 

Increase in period result 21.000 

Increase in accounts receivable 25.000 

Increase in income tax 4.000 

Increase in shareholders’ equity 21.000 

There are no effects on the N period. 

CONCLUSIONS 

●regarding the changes in accounting policies: 

- Accounting policies are specific conventions applied by an entity in preparing in 

presenting financial statements; 

- Changes in accounting policies are different from changes in accounting estimates 

and accounting errors; 

- A voluntary change in accounting policies must be in accordance with accounting 

pronouncements and result in more reliable financial statements; 

- When it cannot be determined if it's the case of a change in accounting policies or the 

case of a change in accounting estimates, the latter will be taken into consideration. 

● regarding the changes in accounting estimates: 

- Estimation involves judgement based on latest, available information;


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- The entire range of aspects regarding depreciation, provisions and asset depreciation 

in general are the subject of judgements regarding accounting estimates; 

- - The effect of changes in accounting estimates shall be included in the net profit or 

the net loss of the current period and/or of all the following periods; 

- The notes to the financial statements shall include information regarding the nature, 

size and expected effect of changes in accounting estimates (pre-tax and after tax). 

●regarding accounting errors: 

- Significant errors are errors discovered in the current period which impact the 

financial statements of one or more periods by affecting their reliability at the 

moment of issue; 

- Errors must be corrected retrospectively in the earliest set of financial statements 

authorized for issue after their discovery; 

- Prospective error treatment is applicable only if retrospective correction is 

impracticable. 

Bibliography 

1. Bogdan V., Lezeu D., Boloş, M. „Romanian accounting reform: stakes, achievements and 

limits”, Mirrton, 2005 

2. Bogdan V., „International accounting harmonization”, Economic, 2004 

3. Colasse B.”General accouting (PCG, IAS/IFRS and Enron), Economic, 2005. 

4. Epstein B.J., Mirza A.A., „Interpretation and application of International Accounting 

Standards, John Wiley 

5. Feleagă L.,Feleagă N., „Financial accounting: a European and international approach”, 

Infomega, 2005 

6. Feleagă L.,Feleagă N., „Accounting policies and options”, Economic, Bucureşti, 2002 

7. van Greuning H., Koen M., „International Accounting Standards”, Irecson, 2003 

8. Gîrbină M. M., Bunea Ş., „Syntheses, study cases and quizzes regarding the application of 

IAS (revised)-IFRS”, CECCAR, 2006


ISSN: 1842-4856 

THE FUTURE OF THE COMMON AGRICULTURAL POLICY 

ABSTRACT 

POPA DIANA CLAUDIA, ASSIST. LECTURER, PHDS. 

FACULTY OF ECONOMICS, UNIVERSITY OF ORADEA 

This article deals with the future of the common agricultural policy. The bold project of 'simplifying the 

agricultural policy', regarding the diminishing of the complexity of this policy by increasing the help provided to 

the agriculture and the developments of the instruments for the rural development policy will be hard to achieve. 

Maybe the new economic conditions created by the external pressures and the fact that the European Union has 27 

member states, will boost the decisional process. Still this will be strongly influenced by the parts involved and their 

interests which in the case of the CAP simplification will not possibly be fulfilled uniformly. 

ABSTRACT 

Cet article débat l′avenir de la politique agricole commune. Le projet audacieux de «simplification de la 

politique agricole » qui vise la réduction de la complexité de cette politique par l′amélioration de l′appui offert à 

l′agriculture et par le développement des instruments pour la politique de développement rural, ce projet sera 

donc difficile à réaliser. Les nouvelles conditions économiques crées par les pressions externes et le fait que 

l′Union Européenne a 27 états membres, dynamiseront sans doute le processus décisionnel. Celui-ci sera 

cependant influencé par les parties impliquées et par leurs intérêts, lesquels dans les conditions de la 

simplification de PAC ne pourront pas être satisfaits uniformément. 

The Common Agricultural Policy (CAP) is among the first and the most important 

common policies adopted by the European Union – at that time European Economic Union – 

being explicitly included in the Treaty of Rome (1957). It was created as a response to the food 

shortage that the people in Western Europe were confronted with after the WWII. It has to be 

mentioned form the very beginning that the term "common policy" reflects accurately one of the 

CAP's defining features, that for 90% of the agricultural products the decision does not belong to 

the member states anymore but to the European Union. 

Initially, the common agricultural policy had as objectivesF 

• The increase of the agricultural productivity by promoting technical progress; 

• Assuring an equitable life standard for the agricultural population; 

• The stabilization of the markets, assuring security in supplying and assuring reasonable 

prices for the consumers. 

The first agricultural measures appear in 1962 by creating 6 common market organizations 

and the European Fund of Agricultural Orientation and Guarantee (EFAOG) by the EEC 

Regulation 25/1962. The founding principles of the common agricultural policy in 1962 were 

then promoted: market uniqueness, the communitarian preference and the financial solidarity: the 

total transfer of competences to the Community and the ensemble of expenditures of the common 

53 Luciana Alexandra Ghica“Enciclopedia Uniunii Europene”, Editura Meronia, Bucureşti,2007, p.111-112 

53 

F:


ISSN: 1842-4856 

agricultural policy is supported by the Community budget, with no theoretically explicit 

54 

correspondence from the members states between what they contribute and what they achieveF 

F. 

The common agricultural policy in 1962was based on mechanisms (intervention price, 

restitutions – subventions covering the difference between the intern price and the global price, 

the threshold price for import) that triggered a price stabilization, with prices aligned to the 

increased price of intervention, an increase in the potential production independent of the final 

increase and an increase of the budgetary expenditures in favour of the most productive 

exploitations. In 1959, the Community budget comes up to 18 million Euros, and exceeds 3 

billion, in 1970, 90% of which bound for CAP. 

In the almost 50 years of existence, the Common Agricultural Policy has passed through a 

continuous process of adapting, undergoing important reforms, being practically boosted by the 

social-economic changes. 

The decrease in the agricultural prices globally has led to an uncontrolled increase in the 

costs of this policy and to the accumulation of large quantities of agricultural products at the level 

of the Community. Consequently, between the 70s and the 80s there were several attempts to 

reform the common agricultural policy, especially by stabilizing a mechanism of offer control, 

such as by introducing a guaranteed maximum quote for each sector and by a stricter planning of 

agricultural expenses. 

Still, a radical reform took place just as late as 1992 when there was a transition from the 

system of guaranteed prices to a system of direct subventing of the producers (McSharry 

reform). In order to conciliate the communitarian preference, the control of offer and the relative 

control of the budgetary expenses, the reform predicted a substantial decrease in administrative 

prices compensated by direct aids determined according to the historical lucrativeness or the 

number of animals, as well as the introduction of new measures of control or of limiting 

agricultural production (large farms, over 20 ha getting direct aid under the condition that they do 

not cultivate 15% of the respective land). The goal of the reform in 1992 was thus the reduction of 

the agricultural production, of the export disposals and of the stocks without affecting too much 

55 

the incomes of the farmersF 

F. 

But the reform in 1992 concerned only the cereals sector and even though it had relevant 

positive effects, permitting the absorption of some agricultural leftovers, the improvement of the 

incomes of the agriculturists (due to direct payments), and the reduction of the prices at the 

consumers (sustained by the guarantee fund EFAOG) soon proved insufficient. The 

implementation of the common agricultural policy in the member states induced huge 

differences at a regional level and between producers, due to the disproportionate aid offered. 

The wealthy regions benefited from support at the expense of the less favoured producers. 

Much in the same way, the problem of the leftovers was still unsolved especially with some 

products (beef, cheese and powder milk), the beginning of the new WTO negotiations outlined 

again the fact that the common agricultural policy had to adjust to the requirements of the big 

participants on the global agricultural markets (USA). To this the new European political frame 

was added, respectively the perspective of the EU extend towards the Central and Eastern 

Europe. In these circumstances it was obvious that the CAP had again to be reformed. 

The necessity of the elaboration and the implementation of a coherent rural development 

policy included in the market policy as well as the aim of some agriculture friendlier with the 

environment and more pretentious regarding the quality of products came to complete the need 

of reform. 

Tending to respond to the pressures of the main states net contributors to the 

communitarian budget, the CAP reform of 1999 had the following objectives: the limitation of 

54 M. Lechantre&D. Schajer „Le budget de l' Union europénne”, La documentation Française , Paris, 2003, p. 70 

55 Peter Prisecaru „Politici Comune ale Uniunii Europene”, Editura Economică, Bucureşti, 2004, p.33-37


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the CAP financing cost, the preparation of the international commercial negotiations but also 

the protection of the environment and the considering of the 'multifunctionality' of the 

agriculture which forms a basis of the rural development policy. In terms of financing, the 

Berlin debates were held around the best methods of controlling the CAP expenses. 

Confronted with the necessity of stopping the acceleration of expenses, the 1999 reform 

introduced the notion of eco-conditionality of expenses (whose application is left to the 

56 

appreciation of member states) and especially with the possibility of a modulationF 

F of the aids 

between exploitations, the product of a modulation being capable of co-financing the rural 

development aids (in 2001 only France and Great Britain applied the modulation, suspending its 

57 

application in 2002).F 

The CAP reform defined by the European Council in Berlin transferred the rural 

development of the structural policy to EFAOG –guaranty. This policy is aimed to correct 

some negative effects of the policy of the markets concerning environmental issues and rural 

development or labour force utilisation. Among the 22 measures of rural development 

reflecting 9 domains of action one can distinguish 2 main categories: the measures of 

accompanying resulted from the 1992 reform (environment protection measures in favour of 

reforestation and anticipated withdrawal) and the new measures as the modernisation or 

diversification of the agricultural exploitation, the install of young agriculturists, the training, 

actions of promotion. 

Between 2000 and 2006, through the program named 'Agenda 2000', the European 

Union introduced in this way a new perspective on the common agricultural policy, 

transformed from an agricultural products market policy in a rural development policy, with 

an important component of protection of the environment, of the rural patrimony and of the 

consumers. At the same time, the guaranteed prices for the agricultural products decrease 

progressively with 20% till 2006. The European Union Continues to guarantee the incomes of 

the agriculturists but engages the member states in co-financing this policy. It is the same 

Agenda 2000 that instituted SAPARD, an agricultural and development fund designated for 

the candidates for the European Union integration.F 

The European Union expansion on 1 st May 2004 with the 10 central eastern European 

countries also had consequences on the implementation and functioning of this policy, caused 

especially by the increase of the number of agriculturists which maintained a high pressure on 

the European budget, in the conditions of the decreasing of the average GDP at EU level. For 

this reason it was necessary to develop a new approach of the common agricultural policy 

which materialised in 2002 in medium term reform proposals in order to replace the present 

system of subventions by encouraging high standard production for obtaining the best profit 

on the market (Fishler's reform). 

Following a French-German compromise, the European Council in Brussels, held on 

24-25 October 2002, reached the agreement of limiting the agricultural expenses at their 2006 

level for the financial period from 2007 to 2013 (only a 1% per year increase is allowed 

considering the effects of the inflation). With a view to the 1 st May 2004 enlargement, the 

European Council in Copenhagen on 10-11 December 2002 confirmed this limitation for the 

direct aids for 2007-2013, that is to say following Romania's and Bulgaria's adherence on 1 st 

January 2007. In the case of exceeding, an adjustment of the direct payments infused in the 

member states of the former EU-15 will permit the respecting of this decision. 

56 

Modulation consists in taking a part of the aids contributed beyond a certain level, in order to use them for 

distinct objectives, making allowance in a certain way for the agricultural auto-financing of some measures and 

the redistribution of the aids from a CAP sector to others. 

57 

Marc Lechantre&David Schajer Le budget de l' Union européenne, La documentation française, Reflexe 

Europe, Paris, 2003, p.72-73 

58 

Luciana Alexandra Ghica“Enciclopedia Uniunii Europene”, Editura Meronia, Bucureşti,2007, p.113 

58


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The agricultural policies of the member states that joined the EU on 1 st May 2004 (the 

10 central and eastern European countries) and on 1 st January 2007 (Romania and Bulgaria) 

cannot be approached in the same way as those of the older member states of the EU-15, 

because the situation of the agricultural sector differs very much. Moreover, as the strong 

disparity between the rate of the active population involved in agriculture and the differences 

in the agricultural land repartition show, the situation in rural zones varies considerably from 

a new member state to another. 

Globally, the agricultural sector of the new member states features an important 

potential of development due to some very favourable endowment with natural and human 

resources. Still the considerable structural problems amplified by high unemployment, low 

incomes, a declining rural economy and the depopulation of the rural areas reduce the 

development of the agricultural sector. These problems inherited mostly from the Soviet era 

and then from the transition period impede, generally, the economic and social development 

of the member states. 

The rural deficit is enormous for the member states integrated in the EU on May 1, 

2004. To redress the poor rural situation these new member states have to deal with the 

competitiveness of the outdated agricultural sector at the same time guarantying a reasonable 

income or the important rural population. It could be noticed that the funds for rural 

development are mostly used for measures of an agricultural nature rather than for nonagricultural 

measures. The programs for rural development should facilitate on a long term 

the progressive consolidation of a viable agriculture and rural environment, also assuring a 

reasonable life standard for the agriculturists, providing the consumers with quality products 

and protecting the environment. But, while the objectives of the EU's plan for rural 

development seem pertinent, their implementation in the realities of the new member states 

remains controversial. Indeed, the current policy, which regulates insufficiently the durable 

development and the solving of the rural non-agricultural problems has only partially 

achieved its objectivesF 

59 

F. 

All in all, it seems that the agricultural sector of the new member states has developed 

by adhering to the EU and by implementing CAP even if these vary from a country to 

another. The agricultural incomes have risen because of the direct aids and the prices 

stabilised, compared to the transition period, for cereals, white beet, beef and milk. However, 

it is not sure that the average communitarian aid level given to the new member states as 

direct payments and for rural development is enough to permit a medium term modernisation 

and competitivisation. It is difficult indeed for these agriculturists to make up for the 

structural delay through such aid rates per agriculturist and per hectare as 31% and 

respectively 63% from the support level in EU-15. 

Independent of the coherence and quality of different policies, the restructuring 

process would last inevitably a certain period and is less probable for the new member states 

to become competitive from now until 2013. At this time the direct aids will reach the EU-15 

level and will constitute a vital part of the agricultural incomes in the new member states. The 

agriculturists in these countries rely on maintaining the direct aids.F 

Beginning with 1.01.2007, the European Fund of Agricultural Guarantee (EFAGA) and 

the European agricultural fund for rural development have financed the main measures of CAP 

within a shared administration between the member states and the European Commission, thus 

substituting the European Fund of Agricultural Orientation and Guarantee (EFAOG). 

Despite the disconnection, strong disparities remain between the national 

transpositions of the 2003 reform concerning the direct aid distribution to farmers. Thus, for 

59 

Pierre Boulanger „Les arbitrages budgétaires”, September 10, 2007, Notre europe, pag.12 

60 

Damien Fontaine „L′ integration des nouveaux etats membres dans la nouvelle agriculture européeenne”, 

September 2007 Notre Europe, pag.14-15 

60


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2005, two thirds of the direct aid beneficiaries received yearly less than 5000 euros. Less than 

5% of the total direct aids are attributed to them while from more than the half of the total 

package benefit only 5.6% of the agricultural exploitations. 

The payment of the direct aids in favour of the agriculturists is conditioned by the 

compliance with the regulations regarding the environment, regarding public, animal and 

vegetal health. Thus, these direct aids seem like some compensatory payments related to the 

being in conformity with the European directives and regulations concerning the public goods 

supply. The beneficiaries of the public aids undertake to follow "the agricultural good 

practices" and to maintain the lands used in satisfactory agricultural and environmental 

conditions. This conditionality is not yet harmonised at European level, each country being 

able to privilege some conditions. Also the disconnecting degree and the way of 

implementation participate at the fragility of the system. The payments proper to the first 

pillar have to assure the provision of European public goods. A strict definition of the notion 

"European public good" would probably allow the determination of the level of local 

competence, of financial subsidiarity. 

The Commission, the supervisor of European interest, does not want a drastic CAP 

reform but an intensification of the one in 1999 and 2003 (disconnection, conditionality, 

modularity, simplification). It wishes to act in two stages: a health balance in 2008 evaluating 

the implementation of CAP until 2013 (considering the short term adjustments) preceding a 

deeper analysis upon the CAP with a view to take into account the European citizens' 

expectations and to remunerate the public goods supplied by the agricultural sector. It should 

61 

also suggest a more visible modulation between the two pillars CAPF 

F counts on, following 

the model for the proposals in 2002-2003, limiting at the same time the attempts to renationalize 

the instruments of financing the agricultural measures and of rural development. 

Germany, the first net contributor to the European budget wants a reduction of the 

agricultural expenses, Sweden, Denmark, The Netherlands, Great Britain sharing the same 

budgetary orientation. France, Switzerland, Belgium, Luxemburg, Spain, Ireland, Italy, 

Portugal are member states that support the preservation of the same volume of expenditures, 

such as numerous other states newly joining the Union do. France got to the end of this 

coalition. It presented, through its Ministry of Agriculture and Fishing, at the Ministers' 

Council on 20-21 March 2006, a memorandum on the implementation and the future of the 

reformed CAP. This memorandum co-signed by 12 of the member states (Cyprus, France, 

Spain, Greece, Hungary, Ireland, Italy, Lithuania, Luxemburg, Poland, Portugal, Slovenia) 

and approved also by Romania and Bulgaria, present a defensive position of maintaining the 

2003CAP reform until 2013. 

The European Parliament has just a consultative role in what the CAP expenses are 

concerned. It however managed in March 2007 to overrule a decision of the Council 

concerning the optional modulation. This emblematic success tends to confer it new political 

perspectives in the agricultural field and in that of rural development. The adopting of the 

financial perspectives 2007-2013 has revealed the Parliament's wish to modernise the 

European budget, i.e. to grant additional credits to policies that serve European priorities. By 

the pressure exercised by the expenditures with the market common organizations of CAP 

and the contribution of the rural development measures to the communitarian objectives, the 

62 

Parliament should be in favour of a more visible modulationF 

F. Finally, the same as the 

Commission, it should oppose the attempt of re-nationalisation of CAP and it manifests its 

desire to approach the problem of the co-financing of agriculture within the frame of its 

reviewing in 2008-2009 (JOCE 2006/C139/01). 

61 

Organizaţii comune de piaţă şi pilonul II : Dezvoltarea rurală (Pillar I : Market common organizations and 

pillar II : Rural development) 

62 

Pierre Boulanger „Les arbitrages budgétaires”, September 10, 2007, Notre europe, pag.11


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The post-adherence exercise of the ten country that got integrated in EU in 2004 and 

the Romanian and Bulgarian adherence in 2008 revealed thus, to a different extent from 

country to country, the difficulty of CAP implementation and "the progression" of the 

mechanisms in a 27 member union, caused especially by the increase in the number of 

agriculturists, that resulted in a high pressure against the communitarian budget in the 

circumstances in which the average GDP at EU level has decreased. In these conditions the 

problem of the reform was put forward again, in fact the idea of CAP simplification. 

In October 2006, The Direction for Agriculture and Rural Development of the 

European Commission elaborated a work document for a plan of actions dedicated to the 

simplification of CAP that was submitted to discussions. This plan of actions is an exercise 

focused on "the technical simplification" and "the simplification of the policy". Maybe the 

boldest project is the one of "the simplification of the agricultural policy" that practically will 

concern the diminishing of the complexity of this policy by improving the aid granted to 

agriculture and the development of the instruments for the rural development policy. 

There is already a project on the go, whereby a single Market Common Organization 

will be proposed, which shall replace and homogenize gradually the 21 market common 

organizations currently integrating parts of the Common Agricultural Policy. The proposals for 

this new market common organization will not include in an initial stage the sectors already 

reformed or in the process of reforming, sugar, wines, fruits and vegetables, and bananas that 

are presently in a radical process of reform. 

The main changes will probably concern the alteration of the regulations that refer to 

the horizontal competition and the regulations on the state aid in the agricultural sector. 

Alterations will occur in the field of the regulations concerning the marketing standards as 

well, in order to harmonise the latter with the marketing international standards. 

The supporting instrument for the prospect financial perspective should, in our opinion, 

be such built so that it can fulfil both the short term objectives of minimal income and the long 

term objectives of modernization of the rural sector in the countries of the Central and Eastern 

Europe integrated in EU on 1 May 2004, as well as in Romania and Bulgaria. 

The bold project of 'simplifying the agricultural policy', regarding the diminishing of the 

complexity of this policy by increasing the help provided to the agriculture and the 

developments of the instruments for the rural development policy will be hard to achieve. The 

experience of the previous reforms has proved it undoubtedly; any change in this policy has 

followed a rather painstaking and long decisional process. Maybe the new economic conditions 

created by the external pressures and the fact that the European Union has 27 member states, 

will boost the decisional processF 

63 

F. Still this will be strongly influenced by the parts involved 

and their interests which in the case of the CAP simplification will not possibly be fulfilled in a 

consistent manner. 

References: 

1. Luciana Alexandra Ghica“Enciclopedia Uniunii Europene”, Meronia Publishing House, 

Bucharest,2007 

2. M. Lechantre&D. Schajer „Le budget de l' Union europénne”, La documentation Française. 

Reflexe Europe Paris, 2003 

3. Peter Prisecaru „Politici Comune ale Uniunii Europene”, Editura Economică, Bucharest, 

2004 

4. Pierre Boulanger „Les arbitrages budgétaires”, 10 September 2007, Notre Europe 

5. Damien Fontaine „L′ integration des nouveaux etats membres dans la nouvelle agriculture 

européeenne”, September 2007 Notre Europe 

63 Daniela Giurcă “O nouă schimbare a Politicii Agricole Comune - oportunitate sau constrîngere pentru România?”


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6. Daniela Giurcă “O nouă schimbare a Politicii Agricole Comune - oportunitate sau constrîngere pentru România?” , 2007 

7. Marius Profiroiu& Irina Popescu „Politici europene”, Editura economică, Bucharest, 2003 

THE GAME THEORY MODELS OF COMPETITION 

Dobre I. Claudia, lector univ. dr. , 

Universitatea “Ovidius” Constanţa 

ABSTRACT 

The Game Theory models of competition do not supplant the textbook wisdom; they supplement it. 

They do not undermine the crucial finding that, under certain precisely specified conditions, competition sets 

prices right, thereby generating an efficient allocation of resources. What the new models do is add micro-detail 

to the classical theory, modeling, among other things, how prices get to be set through competition The classical 

theory of perfect competition takes a broad-brush approach: it depicts the outcome of competition , but not the 

activity of competing. Much of what is interesting and important about competition is hidden in the 

background. The new game-theoretic models, by contrast, view competition as a process of strategic decisionmaking 

under uncertainty; they depict people and firms engaged in competition. 

Introduction in game theory 

What economists call game theory psychologists call the theory of social situations, 

which is an accurate description of what game theory is about. Although game theory is 

relevant to parlor games such as poker or bridge, most research in game theory focuses on 

how groups of people interact. There are two main branches of game theory: cooperative and 

noncooperative game theory. Noncooperative game theory deals largely with how intelligent 

individuals interact with one another in an effort to achieve their own goals. That is the 

branch of game theory I will discuss here. 

The Oxford English Dictionary defines competition as "Rivalry in the market, striving 

for custom between those who have the same commodities to dispose of." A perfect 

competitor, as depicted in the textbooks, does not actually do any competing in this sense. 

"Striving for custom" implies an dynamic process, the action of competing. A perfectly 

competitive firm does not pay attention to what any of the other firms in the industry are 

doing. Instead, it passively accepts the going market price. Any "rivalry in the market" is 

assumed away. 

In addition to game theory, economic theory has three other main branches: HUdecision 

theoryUH, HUgeneral equilibrium theoryUH and HUmechanism design theoryUH. All are closely connected to 

game theory. 

Decision theory can be viewed as a theory of one person games, or a game of a single 

player against nature. The focus is on preferences and the formation of beliefs. The most


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widely used form of decision theory argues that preferences among risky alternatives can be 

described by the maximization the expected value of a numerical utility function, where 

utility may depend on a number of things, but in situations of interest to economists often 

depends on money income. Probability theory is heavily used in order to represent the 

uncertainty of outcomes, and Bayes Law is frequently used to model the way in which new 

information is used to revise beliefs. Decision theory is often used in the form of decision 

analysis, which shows how best to acquire information before making a decision. 

General equilibrium theory can be viewed as a specialized branch of game theory that 

deals with trade and production, and typically with a relatively large number of individual 

consumers and producers. It is widely used in the macroeconomic analysis of broad based


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economic policies such as monetary or tax policy, in finance to analyze stock markets, to 

study interest and exchange rates and other prices. In recent years, political economy has 

emerged as a combination of general equilibrium theory and game theory in which the private 

sector of the economy is modeled by general equilibrium theory, while voting behavior and 

the incentive of governments is analyzed using game theory. Issues studied include tax policy, 

trade policy, and the role of international trade agreements such as the European Union. 

Mechanism design theory differs from game theory in that game theory takes the rules 

of the game as given, while mechanism design theory asks about the consequences of 

different types of rules. Naturally this relies heavily on game theory. Questions addressed by 

mechanism design theory include the design of compensation and wage agreements that 

effectively spread risk while maintaining incentives, and the design of auctions to maximize 

revenue, or achieve other goals. 

About competition reveals 

Competition, as we will discuss, helps sellers to price items when buyers' willingness 

to pay is unknown. Being faced with competition on the other side of the market is a source of 

bargaining power. Competition can be used to generate incentives for productive effort. 

Competition in product markets disciplines managers and in financial markets promotes 

efficient commitments. 

The simplest setting in which to study competition is in the sale of a single item by 

open outcry auction. What is learned from this can be generalized to richer and more complex 

competitive mechanisms. Suppose that each of the competing bidders attaches a different, 

subjective value to the item for sale. They all know exactly how much it would be worth to 

themselves to own it, but not how highly any of the others values it. (This is called the 

independent-private-values case.) The seller is ignorant of the bidders' valuations, so would 

find it difficult to set a price for it. Each bidder's rational strategy in the open auction is to be 

willing to bid until the price passes his or her valuation. Rather than let the item sell to 

someone else for a price below one's valuation, it is better to bid and possibly it is better to bid 

and possibly obtain a profit. 

Conversely, should the price go above one's valuation, winning would mean paying 

more than value; bidding above one's valuation is unprofitable. The selling price therefore 

equals (approximately) the second-highest valuation. The bidding process reveals 

information. The seller may have initially known nothing about the value of the item. After 

the auction, the price gives the seller an estimate of value. It is an underestimate, since the 

price is the second-highest valuation. But if the number of bidders is reasonably large, the 

price reached in the auction comes close to the winning bidder's valuation. 

Bidding competition can also serve to reveal another kind of information. Let us 

change the nature of the uncertainty about valuations, so as to make valuations objective 

rather than subjective. The item, in this model (the common-value case), is worth the same no 

matter who wins it. At the time of bidding, however, no one knows what this value is. Each 

bidder has an estimate of value, which is subject to error. (This model applies to the bidding 

for an oil well, for example.) Bidders are now faced with the risk of the winner's curse. The 

winner is likely to be the bidder who has most overestimated the item's value. 

There is a tendency, therefore, for the winning bidder to overbid. Bidders can avoid 

the winner's curse by bidding cautiously: recognizing they will win only if they have 

relatively high estimates, and discounting their estimates. The winning bid then is on average 

below the item's true but unknown value; but with more and more bidders the price


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approaches the true value, and with a very large number of bidders, comes very close to it 

(Wilson, 1977; Milgrom, 1979). 

This is a remarkable result. No one person knows the true value; each individual's 

estimate may be highly imperfect. But the price is an accurate value estimate. The competitive 

process serves to aggregate the scattered information. Auction theory generates practical 

recommendations for an organizer of a bidding competition. Open bidding rather than sealed 

bidding should be used, for this encourages higher bids. A minimum price should be set, high 

enough to force a high bid but not so high that no one is likely to bid. Royalties or other forms 

of revenue sharing might be used to make the bidding more competitive. The seller should 

release any information she has that is relevant to the bidders' assessment of the item's value, 

for doing so will increase the competitiveness of the bidding. 

The Game Theory models of competition 

Competition is a good substitute for bargaining skill. Consider a seller of an 

indivisible item who has the choice of selling by means of either bargaining with a single 

buyer, or offering the item for competitive bidding between two potential buyers. In the 

bargaining case, we will allow the seller to be a determined, ruthless negotiator, who is wellinformed 

in that, although she does not know the buyer's valuation exactly, she does know the 

range of possible valuations. In the bidding case, the seller passively accepts bids without 

setting a minimum price, knowing nothing about even the range of possible bidder valuations. 

To be specific, let us suppose that a buyer's valuation could be either $40 or $100, 

each with equal probability; only the buyer himself knows which it actually is. The seller 

attaches no value to the item if it is unsold. Under bargaining, the best the seller can do is set a 

take-it-or-leave-it price of $100, selling the item only if the buyer happens to have the higher 

valuation, for an expected profit of $50. (Given that the seller is not very risk averse, she will 

prefer this to the alternative of pricing the item at $40 and selling it for sure, for a profit of 

$40.) Under bidding, on the other hand, there are four equally likely possibilities for the two 

bidders' valuations: ($40, $40), ($40, $100), ($100, $40), and ($100, $100). Bidding 

competition drives the price up to the second-highest valuation, $40 in the first three cases 

and $100 in the fourth, so the seller's expected profit is $40 X 0.75 + $100 X 0.25, which 

equals $55. 

The price reached by competitive bidding, on average, is more than the negotiated 

price. The intuition behind this result (which is due to Bulow and Klemperer (1996)) is that a 

good bargainer functions like an artificial competitor. The bargainer's main source of 

bargaining power, the threat to refuse to sell the item if the price is not high enough, is 

analogous to going to another bidder in the competitive case. A real competitor is more 

effective than a fake one. The result generalizes to describe varying degrees of competition. 

An extra bidder helps the seller, in that she is better off with n+1 bidders than with n bidders 

and actively stimulating the bidding competition by setting a minimum price. 

Bulow and Klemperer (1996) show this result to hold in far more general settings 

thanh ere, though a caveat is needed. The conclusion that the expected price is higher with 

two bidders and a passive seller than with a single buyer and a committed seller assumes the 

probability distribution function of valuations satisfies what is called the monotone-hazardrate 

condition; this will hold in most but not all cases. 

The seller is better off, therefore, being a passive accepter of bids from competing 

potential buyers than a tough, clever bargainer without buyer competition. Moreover, being a 

bid-taker puts much less of a burden on the seller's knowledge and abilities than being a 

negotiator. The bargaining game requires the seller to know the range of possible buyer


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valuations and to compute the best price to charge, while in the bidding game the seller needs 

no information about valuations and needs put no thought into her strategy. 

To implement the optimal bargaining strategy the seller has to be able credibly to 

commit herself to her $100 price demand, even in the case that the seller finds out the buyer's 

valuation must be $40 through the buyer's rejecting the offer. The seller, upon failing to 

negotiate a price of $100, will be tempted to cut the price to $40. But any such willingness to 

undercut would reduce the seller's initial bargaining power, for the buyer, in the event that he 

values the item at $100, would now be tempted to wait for a price reduction (McAfee and 

Vincent, 1995). In the bidding game, by contrast, the seller's commitment is merely to sell to 

the highest bidder, a much easier commitment to stick to. Competition, therefore, economizes 

on knowledge, computation, and commitment abilities, and yields higher prices. Competition 

is more effective than bargaining. 

"The best of all monopoly profits is a quiet life," as John Hicks said. Do monopolists 

produce above minimum cost, causing a welfare loss? Conversely, does competition force 

lean production, mitigating the weak incentives that come from the separation of ownership 

and control? Generations of economists have believed that product-market competition 

disciplines managers to make relatively efficient production decisions. Despite the familiarity 

of the idea that product-market competition promotes efficiency and the fact that it has 

empirical support, however, it still lacks a rigorous theoretical basis. The proposition is so 

fundamental to economics that at some level it just has to be true. But it is surprisingly 

difficult to obtain it as an unambiguous prediction from a principal-agent model. 

Competition in financial markets also can have efficiency-enhancing effects. In a 

monopolized financial system, borrowers' budget constraints may be soft: they can go on 

getting further loans even after it becomes clear to the bank that the project should be 

jettisoned. Competition among banks (according to Dewatripont and Maskin (1995)) creates 

the ability to make commitments: a decentralized banking system can commit to abandon any 

project if it is revealed to be unprofitable, while a monopoly bank cannot. 

A monopoly bank might have an incentive, once started, to invest resources in 

propping up an unprofitable project. If banks are small enough that it takes more than one to 

fund a project, on the other hand, then the bank that makes the initial loan has no incentive to 

persist with the project after it sees it is a money-loser, as the benefits from its efforts will 

accrue to the other lending banks. A competitive financial system will therefore have a more 

efficient loan portfolio than a monopolized one. 

Competitive mechanisms tend to be robust: they work well even in the face of 

mistakes or irrational behavior by the market participants. This theme runs through the new 

models of competition, though it has yet to be fully explored. A well designed (or 

appropriately evolved) competitive mechanism works efficiently even when the the people 

whose behavior it determines lack the knowledge and computational abilities that are usually 

assumed in economic modeling. 

The outcome of market competition is more likely to be in conformance with game - 

theoretic rationality than the outcome of a bilateral negotiation, according to the experiments 

of Roth et al. (1991). The competitiveness of the market process constrains participants in 

their choice of strategies, so the outcome is usually the game -theoretic equilibrium, whereas 

the indeterminacy of bargaining leaves scope for bargainers to engage in complicated game - 

playing, with the result that outcomes are more idiosyncratic. 

That is, the range of (Pareto efficient) outcomes that are Nash equilibria but not 

perfect equilibria. 

Different competitive mechanisms differ in their robustness. An open auction, in 

which bidders call their bids and go on raising them until only one remains, is more robust 

than a sealed-bid auction, in which bidders make a single bid in ignorance of their rivals' bids.


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This is because, in the open auction, bidders can learn from the others' bids, while in the 

sealed-bid auction they cannot. To make a good bid decision in the sealed-bid auction, a 

bidder must conjecture the others' bid decisions. Bad outcomes--either losing by bidding too 

low, or overpaying through bidding higher than turns out to be needed to win--can result from 

incorrect conjectures. In the open auction the bidder's decisions are easier and the outcome is 

more controllable. 

For these reasons bidders typically say they prefer open auctions to sealed-bid 

auctions, even though, according to auction theory, open auctions produce higher prices. 

The rules for competition, if well designed, can ensure that a market produces an 

allocation that is close to efficient even with traders who are incapable of calculating what is 

in their interest, according to experiments by Gode and Sunder (1993). The wisdom of the 

market compensates for the lack of rationality of the market participants. 

Competitive tournaments, as noted earlier, provide effort incentives. They are not the 

only way of generating incentives; instead, people could simply be paid according to their 

own performance. But tournaments are more robust than direct pay-for-performance, in that 

they economize on the principal's information gathering. Observing whether one person has 

done a better job than another may be easier than measuring each person's output precisely. 

Also, if the randomness that affects output is correlated across the agents, the tournament 

filters out the common randomness, permitting more accurate inferences about each agents' 

effort. 

Conclusion 

The ultimate test of a theory of markets, more stringent than confronting the theory 

with data from existing markets, is to use the theory in designing innovative market 

mechanisms. The new theoretical understanding of how competitive markets function, 

together with the use of high-speed computers, has made possible the invention of novel 

markets. Electronic markets can allocate goods efficiently in circumstances where simple 

supply and demand works poorly: because goods are idiosyncratic and differentiated, or there 

are multiple goods with synergies among them, or buyers' preferences are ill-behaved by the 

criteria of standard theory, or there is a need to match particular buyers and sellers. Economic 

theory has been used in the design of competitive bidding mechanisms to sell spectrum 

licenses, to devise railroad schedules, and to trade electric power and long-term contracts for 

the supply of industrial chemicals. These new competitive mechanisms permit decentralized 

decision-making in situations where, before, decisions were necessarily made centrally, and 

inefficiently. 

The Game Theory models of competition do not supplant the textbook wisdom; they 

supplement it. They do not undermine the crucial finding that, under certain precisely 

specified conditions, competition sets prices right, thereby generating an efficient allocation 

of resources. What the new models do is add micro-detail to the classical theory, modeling, 

among other things, how prices get to be set through competition The classical theory of 

perfect competition takes a broad-brush approach: it depicts the outcome of competition , but 

not the activity of competing. Much of what is interesting and important about competition 

is hidden in the background. The new game-theoretic models, by contrast, view competition 

as a process of strategic decision-making under uncertainty; they depict people and firms 

engaged in competition. 

References 

1) Bulow, Jeremy, and Klemperer, Paul, "Auctions vs. Negotiations," American 

Economic Review, 1996


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2) HUDavid K. LevineUH,”What is Game Theory?” HUDepartment of EconomicsUH, HUCLAUH, 

disponibil pe http://levine.sscnet.ucla.edu/general/whatis.htm 

3) Dewatripont, Mathias, and Maskin, Eric, "Credit and Efficiency in Centralized and 

Decentralized Economies," Review of Economic Studies 62, October 1995, 541- 

555 

4) Gode, Dhananjay K., and Sunder, Shyam, "Allocative Efficiency of Markets with 

Zero-Intelligence Traders," Journal of Political Economy 101, Feb. 1993, 119-138 

5) McAfee. R. Preston, and Vincent, Daniel, "Sequentially Optimal Auctions," 

Northwestern University Discussion Paper No. 1104, 1995 

6) Milgrom, Paul R., "A Convergence Theorem for Competitive Bidding with 

Differential Information," Econometrica 47, 1979, 670-688 

7) Roth, Alvin E., Prasnikar, Vesna, Okuno-Fujiwara, Masahiro, and Zamir, Shmuel, 

"Bargaining and Market Behavior in Jerusalem, Ljublana, Pittsburgh, and Tokyo," 

American Economic Review 81, Dec. 1991, 1068-96 

8) Wilson, Robert B., "Strategic Analysis of Auctions." In Aumann, R. J., and S. 

Hart, eds., Handbook of Game Theory with Economic Applications, Vol. 1. 

Amsterdam: North-Holland, 1992, pp.227-280


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THE IMPORTANCE OF RISK MANAGEMENT FOR MAKING 

69BLONG 

-TERM FINANCIAL DECISIONS 

Miroslav Gveroski, PhD 

Faculty of economics-Prilep 

Aneta Risteska 


ABSTRACT 

The paper consists of four parts. The first part is introduction of the analyzing problem. Second part 

explains different types of risks whish have a influence in making investment decisions. Third part includes 

process of risk management and its phases. Fourth part is dedicated to involving responds of risk in investment 

project evaluation and methodology of some criterions. This part includes importances of these criterions for 

making quality investment decision. At the end is conclusion made by researching in way to help managers to 

handle with risk. 

Key words: risk, risk management, investment decision 

5 

3 

BIntroduction 

Investment decision is complex process whereon foregoes evaluation of investment idea. 

Realization decisions for certain investments create the future of the company and 

achievement of its goals. Presiding of investment ventures is a prominent step so the company 

can exist in competitive surrounding. Through realization of investment projects assets are 

used in present while projected incomes are expected in the future. Investment project 

lifecycle is a long-term period. In order to bring decision whether investment project will 

realize or not, requires analysis exerted with investment criteria assistance. The goal of each 

entrepreneurial venture is attainment of income (profit), well even in this case investment 

project will carry out if projected incomes are bigger than costs. After bringing decision for 

realization of investment process, the influence of multiple risks that can change expected 

movement of the project in market horizon should be estimated. Therefore the risk 

management has great significance.

1. Types of risk which have respond for making investment decisions 

The main motive of companies is making profit. If they want to successes in their goal they 

have to intercourse a lot of investment projects. Making investment decisions is a hard process 

which has influences of different types of risk. The risk can be classified by many aspects. 

1. From the aspect of importance of risk for making investment decision, risk can be: 

· financial and non-financial risks [13]: a term risk means opportunity for becoming 

unexpected alteration where financial lost would crop up, while from other types such loss 

wouldn’t occur. 

· Statistical and dynamic risks; [14, page 14-19] statistical risks refer to all ongoing events 

that doesn’t mean alteration in economy, but still unexpected movement may occur during the 

implementation of intended goal; while dynamic risks come as a result of certain alteration in 

economy which in correlation to statistical are more unpredictable, as an example: price 

variation, consumption variation, income, production and technology and other changes that may 

provoke creation of unexpected results. 

2. From the aspect of risk analysis of investment project as a special unit and from aspect 

of project as one of multiple accomplished and future projects of a certain company, the risk 

oversees as individual riskiness to project, riskiness of project for the company, market riskiness 

of project. .[8, s.208] 

Other division of risk in investment division is to systemic and non-systemic risks. In 

systemic risk interlace various external effects of success of investment challenge, from where 

socio-economic and political goings-on can be distinguished as well as the general market 

movements. While non-systemic risk includes those changes that haven’t got prevalent 

dimension and doesn’t influence to each investment, but also should be analyzed for each 

investment. According to this division following types of risks can be distinguished: credit risk, 

liquidity risk, capital price list, currency risk, and country risk. [3, p.284-287]. 

3. The other types of risk which are important for making investment decision are: [16] 

Inflation Risk: The risk that the rising costs of inflation will outpace the growth of your 

investment over time. 

Company Risk: This is the risk that the individual company in which you invest will fail to 

perform as expected. 

Legislative Risk: Whatever laws the government passes today may be extinct tomorrow. For 

example, the long-term capital gains tax rate has been changed five times in the last 20 years, 

with the most recent cut at 20%. Factors such as tax deduction and deferral should never be your 

sole reason for selecting an investment. These perks are at the mercy of Congress. 

Global Risk: It's always a bigger risk to invest overseas than at home. Then again, it's generally 

more rewarding to vacation in Europe than lounging around in the backyard. Over 50% of the 

world's capital market opportunities exist outside of the U.S., so a purely domestic strategy can 

severely limit your long-term earnings potential. 

Timing Risk: Timing risk works two ways. First, you run the risk of investing a large sum of 

money when share prices hit their peak. Second, there's the risk that you'll need to access your 

money to pay for retirement or college expenses during a temporary market setback--causing you 

to lose money on your investment.


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2. Risk management 

Risk management is a central part of organisation’s strategies management. This compound 

process includes: identifying, analysing and handling with risk during the lifecycle of 

investment project. Risk management should be a continuous and developing process which runs 

throughout the organisation’s strategy and implementation of the strategy. At the beginning it’s 

necessary to define a risk. Risk is possibility of loss, injury, disadvantage or destruction. Risk is a 

measure of probability and consequence of not achieving project goal. Most people agree that 

risk involves the notion of uncertainty.[6, p 653 ]. The main goal of risk management is 

maximizing incomes and minimizing the potential risk in the project. Risk management includes 

several related actions involving risk: planning, assessment (identification and analysis), handling 

and monitoring. 

Risk planning is the process of developing interactive strategy and methods for identifying 

and analyzing risk issues, developing plans for handling with risk and monitoring how risk have 

changed. The important output of risk planning is the risk management plan. At the begging of 

the project, project team maintain a meeting with one important goal – to develop plan for risk 

management. 

The risk plan management process (RMP) is the risk – related roadmap that tells the project team 

how to get from where the program is today to where the program manager wants it to be in the 

future. The key to writing a good RMP is to provide the necessary information so the program 

team knows the objectives, goals, and techniques of the risk management process: reporting, 

documentation and communication; organizational roles and responsibilities; and behavioural 

climate for achieving effective risk management. Since it is a roadmap, it may be specific in 

some areas, such as the assignment of responsibilities for project personnel and definitions, and 

general in other areas to allow users to choose the most efficient way to proceed [6, p 663 ]. 

Another aspect of risk planning is providing risk management training to project personnel. The 

training can be performing by individuals, whether inside or outside the project with experience 

in making risk management work on project. 

The phase of risk assessment includes identification and analyzes of risk. The result of this 

phase is a key input to many subsequent risk management actions. This phase is very difficult 

and time – consuming part of the risk management process. Risk assessment has a large impact 

on project outcomes. The goal of risk identification is to identify all potential risk issues. The 

important techniques for assessing the risk are: 

− Brainstorming is a technique which is used for finding solutions for the problems which has 

happened spontaneously. 

− A Delphi technique is an interactive procedure which is based of known and unknown inputs 

which are connected with actions in the future. The data are collected by experts, and they 

give hypothesis about future development. 

− The interview is a technique for collecting data in direct speech with employ or managers. 

− SWOT analysis is a technique that undertakes into account strengths, weaknesses, oportunties 

and threats, adjacent to playing great role in strategic planning it is also used for identification 

of potential risks of the particular project. 

A lot of techniques and methods are used during the risk analyzing. For example, tree 

decision and simulation whish are used for quantitative analyze. 

After the identification risk can be ranges as:


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− High risk : substantial impact on cost, schedule or technical; 

− Medium risk : some impact on cost, schedule or technical; 

− Low risk: minimal impact on cost, schedule or technical 

These terms for rating the risk are relative terms. A risk viewed as easily manageable by some 

managers may be considered hard to manage by less experienced or less knowledgeable 

managers. 

Risk handling includes methods and techniques to deal with known risk, identifies who is 

responsible for the risk issue, and provides and estimate of the cost and schedule associated with 

reducing the risk, if any. The evaluators who assess risk should begin by identifying risk and 

developing options and approaches for handling risk. The options for handling risk fall into the 

following categories:[6, p 682 ]. 

- risk assumption is an acknowledgement of the existence of a particular risk situation 

and a conscious decision to accept the associated level of risk, without engaging in 

any special efforts to control it. The key to successful risk assumption is twofold: 1. 

Identify the recourses that will be needed to overcome a risk if it materializes. This 

includes identifying the specific management actions that may occur. 2. Ensure that 

necessary administrative actions are taken to identify a management to accomplish 

those management actions. 

- risk avoidance involves a change in the concept, requirements, specifications and 

practice to reduce risk to an acceptable level. It eliminates the sources of high or 

medium risk and replaces them with a lower risk solution. 

- risk control does not attempt to eliminate the sources of the risk but seeks to reduce 

the risk. This option may add to the cost of a program, and the selected approach 

should provide an optimal mix among the candidate approaches of risk reduction, cost 

effectiveness and schedule impact. 

- risk transfer may reallocate risk from one part of the system to another, thereby 

reducing the overall system and/ or lower – level risk. 

The phase risk handling has cost implications. The mangers should choose specific approaches 

which means minimizing the cost. 

Risk monitoring – The goal of risk monitoring is providing and developing risk handling 

strategies or reanalyzing known risks. In some cases monitoring results may also be used to 

identify new risks and revise some aspects of risk planning. Risk monitoring as proactive 

methods helps in reducing risks to acceptable levels. As any other monitoring and review process 

as risk monitoring should determinate wheather:[15] the measures adopted resulted in what was 

intended, the procedure adopted and information gathered for undertaking the assessment were 

appropriate, improved knowledge would have helped to reach better decisions and identify what 

lessons could be learned for future assessments and management of risks. 

3. Investment decisions in terms of risk 

The larger complexity, versatility and improvidence of relevant factors that enable 

development and endurance of the company, impose the need of sufficient risk management 

throughout investment decision. Therefore it is necessary to choose adequate techniques with a 

goal for adjustment of investment decisions to changes as a result of risk existence. In this part of


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the paper three techniques will be exposed: net current value, internal profitability rate and return 

period. 

One of the most commonly used adoption techniques for adjustment of the process of 

investment decision and projected dimensions of risk influence is net current value. Utilization of 

this procedure can be performed twofold: accommodation of discount rate or calculation of 

equivalence ratio. Within net current value criteria, if current value of the projected cash flow is 

bigger than current value of project cost, investment is estimated as acceptable, and opposite, if 

current value of projected cash flow is smaller than current value of the project cost, investment 

is estimated as unjustified. 

While amongst internal profitability rate if project incomes are bigger than capital costs it 

would mean that within realization of the project it will increase investor’s welfare. Economic 

feature of these criteria rely on calculation of discount rate and economic aspects fixed in its level 

and influence on investment’s decision. The process of determination of level rate with which 

cash flows will be discounted it’s not simple because of among its size influence multiple factors, 

where most important are: 

- Varieties and separately participation of financial sources in financial construction of the 

project; 

- Condition at domestic capital market; 

- Condition as international capital market; 

- Economic condition of domestic economy (situation in national economy) 

- Economic-financial condition of the company itself; 

- Variety and risk ration in investment.[7] 

This means during that process discount rate has to be adjusted of percept level of risk, with 

an objective in consistence of bringing investment decision because the risk is estimated. 

Discount rate adjustment is pursued through embedding of so-called risk premium. The new 

discount rate will present summary of non-risk discount rate and estimated value of risk 

premium. With that discount rate will become higher for the risk premium. The question 

propounds, how much premium estimate should be: two, four, ten or more percents. The risk 

premium range has to consist: compensation for expected inflation, extra income for uncertainty 

of future incomes and market risk premium. Investors at the time of decision of investment 

project have more alternative projects with various risk level. Risk variances also mean 

supplementing of various risk premiums of discount rate. Those projects with highest risk would 

be discounted with highest discount rate because of the highest risk premium. 

In the usage of discount rate with added risk premium when current value of cash flow is 

estimated, it will contribute to smaller amount of cash flow from projected value, and then the 

investor may overview the project validation. On this way the investor is more sure in the choice 

whether to invest or not. 

The substance in usage of discount rate is that in monetary value of projected cash incomes and 

outcomes is transferred into current value. Throughout the choice of discount rate has to take into 

account to build-in (include) following: to represent average value of used capital sources for 

project financing pond rated ponderated for the level of their contribution, it’s calculation to be 

adjusted on the tax level of cash flow, need to build in inflation rate if previously not included 

into projected cash flow, the rate being adjusted to the level of systemic risk and need to consider 

certain corrections of the level of interest account because of adjustable risk dimension. [4]


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Another technique that can be used for adjustment of investment projection of possible 

investment risks is direct adjustment of risk cash flow. That is realized on a way that once 

evaluated cash flows are converted in non-risk by usage of safety equivalence. Used safety 

equivalence is obtained by dividing of risk and non-risk cash flow. Based on that that calculation 

of discount rate is subjective and safety equivalence itself it’s not exempted from that negativity. 

Based on that the choice of investor will depend on that whether he prefers high risk or not. 

Usually, it is considered that cash flows referred to long term, in the future are more risky than 

those relate to close future. This doesn’t has to be correct, so more common it is happening 

investment projects with incomes in near future being more risky. That usually refers to projects 

that mean introduction of new product on the market or approach to new market and similar. 

Another procedure for involvement of the risk thru investment decision is return period criteria. 

This criterion enables to determine the return period if invested capital. Investor would decide for 

project with short-term return of invested capital, because on short-run would quote return of 

invested capital. 

Conclusion 

The main goal of this paper is to get accomplishments about investment process and 

making financial decisions in terms of risk. There are a lot of types of risk which have influence 

in making decisions. Therefore the risk management is very important and risk management 

sholud be a central part of organisation’s strategies management. This compound process has to 

include: identifying, analysing and handling with risk during the life-cycle of investment project. 

Risk management should be a continuous and developing process. A probable investor should 

know about all types of risk during the making investment decisions and how to manage with 

them. The probable investors should not call off idea to invest just for subsisting the risks but the 

opposite, they should accept the investment projects, they should handle with risk and on that 

way to realize incomes. And there are investment decisions adoption techniques of risk efficacy, 

which helps to investors for making investment decisions. 

References: 

1. Axelsson Helen, Jakovicka Lulija i Khedache Mimmi, Capital Budgeting Sophistication 

and Performance A Puzzling Relationship), Graduate Business School, School of 

Economics and Comercial Law, Goteborg University; 

2. Block B, Stanley & Hirt A. Geoffrey, (2002), Fondation of Financial Management, 

McGrow – Hill Irwin, tenth edition; 

3. Cvetkovič Nataša, (2002), Strategija investicija preduzeča, Institut Ekonomskih nauka, 

Beograd; 

4. Đuričin Dragan, (2003), Upravljanj e(pomoči) projekata, vtoro izdanje, Ekonomski 

fakultet, Beograd; 

5. Fiti Taki, Vasileva Hađi – Markovska Verica, Bejtmen Milford (2007), 

Pretpriemništvo,vtoro izdanie, Ekonomski fakultet, Skopje; 

6. Harold Kerzner, Project management - a system approach to planning, scheduling And 

controlling, John Wiley & Sons, New Jersey, 2003 (eight edition), 

7. Nestorovski Metodija, (2000), Ekonomija na investiciite, Ekonomski fakultet, Skopje;


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8. Orsag Silvije, (2002), Buđetiranje kapitala procjena inveticiskih projekata, Masmedia, 

Zagreb; 

9. Peterson P.Pamela & Fabozzi J. Frank, Capital Budgeting, Theory and Practise, Wille 

Finance 

10. Peterson Pamela – Drake, Capital Budgeting and risk, Atlantic University, Florida; 

11. Sarnat Marshall, (1979), The impact of Enhanced Risk on Capital Budgeting Decisions, 

University of California, Los Angeles; 

12. Seldin Maury & Swesnik H. Richard,(1970), Realstate investment strategy, John Wiley 

and sons Inc, USA; 

13. Vogan J. Emet & Tereza Vogan, (1999), Osnovi na rizikot i osiguruvanjeto, John Willey 

Sons Inc, ( prevod Ministrestvo za finansii na R. Makedonija); 

14. Willet H. Alan The Economic (1951), Theory of Risk and Insurance, University of 

Pennsylvania Press, Filadelfija; 

15. HUwww.bussineslink.gov.ukU 

16. www.typesrisk.htm


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The influence of globalization over the comercial banks' strategies 

RÉSUMÉ 

Tatiana Spulbăr, PhD Student, University of Craiova 

La stratégie de la banque a accompagné le processus de formation, la consolidation et le développement des 

banques, qui a accompagné le long de leur évolution au cours des siècles. À l'époque contemporaine, le rôle des 

banques ahs augmenté de façon exponentielle et, en conséquence, la stratégie a composé un grand air et ont 

enregistré une augmentation de la complexité. Dans les conditions du XXIe siècle, le processus fondamental de 

stratégie prend en considération certaines tendances de l'évolution économique et sociale déterminée par les 

phénomènes de mondialisation, les progrès technologiques et exécutions et le "savoir-faire", la constitution et le 

fonctionnement de l'Economique et monétaire européenne Union. 

Pour caractériser les stratégies, les tactiques et les instruments utilisés par innovantes grandes banques 

européennes pour le démarrage de la mondialisation et de la tenue avec lui, il doit être pris en compte également les 

flux de capitaux vers l'extérieur de la zone de l'Union économique et monétaire. Les marchés étant de plus en plus 

global, les investisseurs sont attirés encore plus à faire en dehors des stages. La situation est valable pour toutes les 

banques. Lorsque la banque souhaite prolonger d'une certaine région ou un pays, peut tout d'abord décider de la 

présence d'un secteur après les critères, considérés du point de vue de la situation mondiale, mais sans perdre aucun 

détail de la spécificité de l'environnement correspondant. 

Within the social, economical and political conditions offered by the market economy, the 

bank can realize its attributions and functions by making an objective internal and external 

analysis, respectively, by naming the strong points and the vulnerable ones, the detailed study of 

the economical environment, the opportunities and the dangers which this contains, materialized 

in elaborating several ways of alternative strategies, on various themes and after that 

implementing the chosen strategy. The banking strategy has accompanied the formation process, 

the consolidation and development of the banks, which has accompanied their evolution along 

the centuries. In the contemporary era, the role of the banks ahs increased exponentially and 

accordingly, the strategy has comprised a large aria and registered an increased complexity. 

Under the conditions of the XXI century, the strategy fundamental process takes into 

consideration some tendencies in the economical and social evolution determined by the 

globalization phenomena, the technological performances and the “know how”, the constituting 

and the functioning of the Economical and Monetary European Union. 

Elaborating the banking strategy resides in the activity through which managers state the 

objectives, the time period in which these need to be done, the fazes and the methods of touching 

the objectives and the necessary resources for which these can become reality. The strategic 

planning avoids errors, loses and delays and at the same time makes the efforts become efficient, 

representing the first function of the banking management. Transposing into practice, under 

efficiency conditions, of the strategic process assumes several steps. 

In a first step which aims the fundamenting of the strategic objectives and directions of 

the bank; management, network, organization, human resources, clients, products and services, 

performance indicators, etc. the stipulated objectives must be characterized by the capacity of


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exactly showing the aimed purpose at a department or territorial level, by coherence, clarity and 

high professional rigor. Through a rigorous fundament of the strategic targets and objectives, as 

well as a corresponding strategic diagnosis are created certain premises for rolling, scientifically, 

all the steps of the banking strategy process. 

In a second stage, the strategic department of the bank in collaboration with all the bank 

directions elaborates the project of the strategic plan on fields of activity. After the debate on the 

project and the introduction of the eventual modifications, the project of the strategic plan is presented to 

the competent authorities for approval. 

In the next stage, it is followed the insurance of the necessary logistic for the 

implementing the strategic plan. At the same time, operational plans are done, such as business 

plans, income and expenses budget, which, even if are organizing and functionally independent 

must insure transposing into practice the aims and provisions from the strategic plans. By 

practicing some specific politics for the strategy components it is followed finding some 

solutions according to materializing the strategic objects for some difficulties that may appear, as 

well as for the problems in the diagnosis fazes and strategic planning. 

The final stage of the process is constituted by the quarterly analysis, terminal or yearly of 

the stage of strategic implementation, which are done at the level of the bank administration 

council and aim: 

♦ monitoring the materializing the objectives included in the implementation plan, the 

quantifiable results, and in some cases the realization way reflected in methodological terms, 

instructions, circulars, programs, organizing and functioning regulations, making date basis; 

evaluating the main effects over the bank activity; 

♦ using a score to reflect the level of materializing the general strategic objectives according to 

the analyzed problem; 

♦ the results of some studies and projections whose elaboration was determined by the touching 

of the objectives written in the implementation plan. 

In conclusion, when a bank determines its short, medium, long term strategy, and on this 

basis, the implementing politics in the activity of the various strategic components and promoting 

the materialization means within the external environment, the fundamental objective from which 

it begins is the maximum level of the possible profit under the concrete conditions of the 

economical environment and with the conditions of minimizing the risk. Though a bases criteria, 

the profit is not the only factor which the banks have to take into account when establishing their 

politics on various themes. They have to ensure an active balance between profitability, cashdeposit, 

solvability and risk. The banks action under uncertainty conditions, both in the resources 

field which do not have as compared to the non-banking entities, a quantifiable stability, but 

especially within the field of placements, which contain a risk element through their very nature. 

The analysis of the national banking systems from the developed countries show that 

these are very different and constitute a big variety of institutions, particularly within the field of 

financial European space. In this respect it can be appreciated that the financial globalization 

process translated through the progressive emergency of a world banking industry, to promote a 

unification tendency of the banking systems but also of the banking activity. 

The technological evolution has influenced the bank clients relationship, which can be shown by the model 

of the distance bank, which appeal to a series of instruments based on technology and information, through which are 

mainly done three banking operations: administration of the payment means, distributing the credits, administrating 

the economies. During the permanent efforts of the banks to attract new clients, the informational and 

communication technologies have a played an important part, leading to the model of the virtual bank. The new 

technologies raise important problems for the banks from the commercial and organization strategies point of view, 

which in case are solved in the wrong way, may carry along bad effects:


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♦ the nature of the bank – client relation may be transformed facilitating the consumer’s migration; 

♦ the more exigent clients will be preoccupied of gathering advantages offered to the various 

actors of the financial system; 

♦ the virtual bank will carry out the distancing of the client from the bank and the 

depersonalization of the bank client relations. 

Within the new context, the success of the banks stresses even more on the new 

technologies whose development modifies the competition rules, in the sense that promotes the 

direct compensation operations between companies, which decrease the fluxes within the banking 

system. Also, the model of the virtual banks will increase the funds transfer speed and will reduce the 

volume of actual financial intermediation. 

Analyzing the European developed banking systems can be also appreciated that banks will evolve in the 

sense of concentration, done by both the taking over of the small or bankrupt banks by the big ones, but also by 

merges or alliances of some financial – banking institutions, but also a specialization according to the served market 

segment. This way, in a broad sense, the banks have two alternatives of fundamenting the development strategies 

according to the extension of the developed activity (corporate objectives): 

♦ on one hand, they can choose for a limited development at national level; 

♦ on the other hand, can aim a European development strategy. 

The European universal bank strategy is the strategy of big banks, small institutions 

having effective capacity of purchasing or installing agencies network in other countries of the 

European community. In practice, the extension of national banks is done especially by taking 

over shares or mergers between the big national universal banks. Because the bank is in the 

centre of the economical power, it is obvious that a big European bank plays a major part within 

the unified community. 

The strategy of the European bank is applied especially by the mid banks, though a part of 

them have the real capacity of developing such a strategy at European level. They are specialized 

at European level over a certain product or banking service or a particular clients segment. 

Not all banks can apply such strategies due to certain constraints that limit their 

possibilities. This way, big universal banks, which dispose of considerable means, may apply any 

of these strategies. Just a few of these big universal banks (Credit Lyonnais; Barclays bank; 

Deutche bank) declared to be interested in the European universal bank strategy, most of them 

choosing for national universal bank strategy or of specialized European bank, but on a long term 

the situation can change. In what the regional banks are concerned, these have had a specializing 

tendency on both a national level but also European; they will compensate the operational week 

points with strategic affiliations. The specialized banks and the banks without network by 

definition are not interested in the universal bank strategy, but tend to apply the European 

specialized bank strategy. 

The belonging to a certain strategy is submitted to legal conditions of competition of the 

bank, the products and the offered banking services, as well as the aimed clients segments. 

Regarding this last aspect, the division of the banking clients seems to be a necessity of the 

application of a European bank strategy. The banks consider that making an efficient clients 

division is the key of obtaining a competition advantage, this being one of the main developments 

methods of the banks in Europe. The division allows choosing the most profitable clients 

attracting them by suitable distribution means. Also, the division of the clients can lead to a 

modification of the pricing way of the banking services in the sense that the identification of the 

real needs of the clients will allow certain banks to offer them specified services priced at the real 

cost in change for a global service. This way the distribution of a whole pack of services will allow 

their performance at an inferior price.


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Also it has to be shown that in the west European countries, the financial markets are 

developed, which means that 99% of the natural and juridical persons work with at least one 

bank. In most countries, clients usually work with two or more banks and that is why the “fight” 

is mostly given for existing clients devotion and not for attracting the potential clients. As a 

consequence, the banks have started to action intensely for clients satisfaction, this assuming that 

satisfaction and loyalty act together. Even more, loyalty is considered to play an important part in 

the profitability, being able to lead to its increase if it is manipulated correspondingly. Each 

institution makes everything possible for proving the clients that they offer the best service, best 

consultancy, best performance and best price. Also, the banks will aggressively exploit every 

opportunity of distinguishing, taking into account that the differences between them are very 

small. In the end, the inputs of the banks are the people, money and informational technology, 

which cannot be monopolized. 

That is why many west European banks have made out of clients devotion and keeping 

clients the main objective of their strategy and the division, targeting and placing on the market 

have become the most important activities in drawing up the products and the banking services. 

This way, the entire bank activity has been oriented towards the client, with all the organizing 

consequences in search for a quality service. Within this context can be also shown the strategy 

which aims bettering the bank’s position on the market and the correlation with the advantage of 

the own funds. The banking environment blames at present the activity increasing strategies, 

which carry along both a destructive competition process but also a decrease of the own funds 

advantages, promoting for a change the increase of the banking concentration, accompanied by 

important costs reduction. For the European banks it can be established a correlation between the 

concentration level of the banking industry and the advantages level. The mergers done on the 

national market determine a concentration which betters the advantages and reduces the 

exploitation coefficient by minimizing the functioning related costs as a consequence of the backoffice 

mergers and closing the agencies. The strategies based on an optimal dimension of the 

banks suppose a productivity benefit resulted from service integration, network rationalization, 

doing some technological investments in common (e.g. in Great Britain the merger in which 

Loyds Banks had been involved carried along the closing of 200 ATM and 3000 agencies). In 

such conditions it can be appreciated that the merger operations and inconveniencies, which can 

be found at the level of the clients and operational difficulties, explaining why announcing such 

operations brings along a quota degradation. 

By applying the integration norms of the European Union, the approval in cases of the 

foreign banks is not necessary anymore, resulting a competition intensification. The liberalization 

gives the possibility for a banking society to establish on any market within the European Union 

without additional approval. The control will be done through the “mother unit” (central), the 

foreign banking societies applying the banking norms from the origin country. Exceptions from 

applying the norms from the country of origin refer to three special situations: 

♦ within the monetary politics if the country of domicile of the bank practices a constraint of the 

credit in the economy, the foreign baking society has to submit to the aimed objectives; 

♦ the functioning norms of the financial local markets are also valid for the foreign banking 

societies. 

For characterizing the strategies, tactics and innovating instruments used by big European 

banks for starting the globalization and for keeping up with it, it has to be taken into account also 

the flux capitals towards the exterior zone of the European and Monetary Union. The markets 

being more and more global, the investors are even more attracted to make outside placements. 

The situation is valid for all the banks. When the bank wants to extend in a certain area or


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country, can first of all decide the presence after a sector criteria, considered from the point of 

view of the global circumstances, but without losing any detail of the specificity of the 

corresponding environment. A certain economical sector of any country has or doesn’t have 

chances to be noticed in the global economy, the companies from any sector can have the 

perspectives of a performance above or under the global average of that sector. After this step of 

the analysis it can be passed on to establishing the profitability limits without establishing 

excessive targets or sub-dimensional. Examples of such expansion strategies in Central and 

Eastern Europe countries are many and in this context should be mentioned the expansion of 

ABN AMRO, which has purchased one of the biggest Hungarian banks during 1996, Magiar 

Bank; Societe Generale from France, which has been chosen in the Czech Republic, for taking 

over Komercini Bank and has also purchased the Slovenian bank SKB Bank, as well as others in 

Central and Eastern Europe: since 1999 CSG has 97,95 % from Expressbank, retail bank in 

Bulgaria. This way, together with what has brought the Romanian Development Bank in 

Romania to the group, almost a quarter of the CSG clients coming from Central and Eastern 

Europe – generally implants through acquisitions that especially aim the retail banking. Other 

banks which have aggressively extended the market quota through acquisitions by local banks 

are: UniCredito and Banca Intesa (Italy) and KBG (Belgium). For a change, other big 

international banking groups have preferred to be present in Central and Eastern Europe by 

founding foreign branches, in the disadvantage of some major acquisitions. The strategy has 

followed the quick monopolization of the big performing companies and the high income clients, in 

the period in which the local banks were going though a restructuring process. Though, the lack of an 

increased local network will prevent the banks from extending on the retail segment which will gain 

importance as the economy will develop. Most entrance opportunities on the market through major 

acquisitions were exhausted, Romania, Serbia and Slovenia being the only one offering such 

possibilities. In Romania’s case the Commercial Romanian Bank represents such a target, its 

privatization being done when the international investments climate will notice an improvement, 

because the potential which can offer is very high. 

We appreciate that the future competition will be even more global in orientation and that 

it will be a limit of the number of banks wish will truly be leaders on the market under these 

circumstances. For developing some profitable activities, within the context of a severe 

competition and the risks, a bank will have to identify the needs of the market and choose a 

strategic position on that market, which should be compatible with its own management. The 

global market will be extended as a consequence of the world economy interdependencies. The 

banks will have to adopt a strategic position which should allow them the consolidation of their 

power through the common action of three elements: aria of activity, client, products and offered 

services. 

For managing the global market penetration, the banks have to take into account a series of 

conditions of banking organization referred to: 

♦ decentralized structures: 

♦ efficient management to allow a rapid decision, to be close to the clients and to respond to their 

solicitations; 

♦ promoting cross selling which will constitute the key of profitability for the future; 

♦ dimension, respectively the bank size, must allow big investments, done in a short period of 

time, for the technological development and improving the global network. One of the 

development banking ways will be done through investments in software products of the 

companies from the technological field;


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♦ the bank should be capable to put up with the competition including the one from the 

newcomers on the banking market. 

There is the theory that for the future the banks’ contribution in economy will be 

decreased, or it will even disappear, if it is considered the fact that traditional functions of the 

banks intermediation and payment meet a permanent decline, both because the new instruments 

and technologies and for the new technical and informational conquests in the field of the 

transmissions and programs. Nevertheless a series of non banking institutions produce and offer 

services and products which were previously provided only by banks. Yet the banks react to these 

tendencies by changing their activity, by offering a large range of products and services adapting 

and permanently evolving. 

REFERENCES 

1. Dupuch P., La banque – un essai d' organisation, La Revue Banque, 1990 

2. Garsuault P., La banque. Fonctionnement et strategies, Economica, 1995 

3. Mehta D., Fung H.G., International Bank Management, Blackwell Publishing, 2004 

4. Spulbăr C., Bank Management, Sitech Publishing, 2003 

5. Spulbăr C., Comparated Banking Systems, Sitech Publishing, 2005


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THE INFLUENCE OF HUMAN FACTOR 

UPON BUDGETARY ACTIVITY 

Monica Patruţescu, Lecturer Dr. 

The University of Craiova 

The Faculty of Economy and 

Business Administration 

Abstract: putting into practice the accountancy on responsibilities generates problems, because the managers 

have to answer only for the costs and benefits upon which they can have a major influence. At the same time, they 

are expected to have influence in elaborating the activities’ budgets that they are responsible for. The involvement of 

human behavior within the relation accountancy – resolution process ratio is obvious, that’s why it needs to be 

analyzed, with different points of view, in order to point out its positive influence on the entire budgetary process or 

not. 

The necessity of having control over resources and answering to their usage stresses the great 

contribution that accountancy can have within managerial activity. A manager, unlike a nonmanager, 

has the power to direct the way in which resources are to be used. 

As a result, the manager is the one who allocates resources, the one that creates the 

conditions in which the activity will be carried out so that it should work at the proper 

parameters. An indispensable component in creating these conditions is the effective 

administration of financial resources, fact that can determine the taking over under direct control 

of these or delivering in some other persons’ responsibilities. 

It is very important that the costs, incomes, assets and liabilities should be correlated to the 

managers’ activity, being directly responsible for the decisions regarding all these problems. 

Each manager’s authority and responsibility must be clearly defined, so that the managers from 

each level should become aware of the personal responsibility for their departments’ 

performances, within the organization. 

Although the idea of accountancy on responsibilities is clear enough, putting it into practice 

creates a lot of problems. Normally the managers should be made responsible only for that costs 

and incomes upon which there is the possibility of exerting a significant influence. At the same 

time, the managers expect to have a strong influence within the budget’s elaboration upon the 

activities for which they assume responsibility. 

Within the accountancy on responsibilities, the reports regarding the achievements must be 

limited to those aspects that are recognized as being “controllable” by those managers. 

Allocating to some persons a budget administration responsibility reaches some behavioral 

aspects. From this point of view one can speak about the analysis of behavioral aspects within 

budgetary activity. Without interfering with the human attitudes study, we cannot ignore that, 

within a budgetary activity analysis, the human factor is essential. People are those who 

undertake the necessary activities for achieving the objectives.


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The correct understanding and appreciation of the relation between accountancy, as a 

decisional process and human behavior let us deeper analyze the implications of carrying out the 

whole budgetary process. 

Traditionally speaking, the accountants have the tendency to supervise the organization’s 

activities from the technical point of view and to ignore what is called “the human resources’ 

accountancy”. Recently, one can also observe the managers’ and accountants’ awareness of the 

fact that the accountancy reports, in diverse forms and aspects have a major role in influencing 

the actions undertaken by managers. Accountancy can influence the behavior as well and if the 

influence is favorable the effect is an improved activity. 

Starting with this aspect, the American Association of Accountancy stated in 1991 that: 

“through its nature, accountancy is a behavioral process”. This statement has a special relevance, 

since budgetary activity refers to: 

- evaluating the way managers have completed their responsibilities; 

- identifying those domains that request collective actions; 

- determining managers to achieve targets 

The entire process is influenced by the managers’ attitude and actions, context in which the 

importance of four main elements is being stressed: 

1. organization; 

2. management; 

3. staff and planning; 

4. objectives’ management 

All the organizations have a better or less good structure, this being strongly influenced by 

the managerial culture. The traditional approach of the organizational, classic structure is directed 

towards identifying the tasks that have to be completed in order to achieve the organization’s 

objectives. By contract, the approach from human relations’ point of view passes from the 

orientation towards identifying the tasks to studying the behavior of the organization’s members 

and of the way it can be used in order to achieve the objectives. A great support is given to the 

theory according to which within projecting the organization’s structures there must be taken into 

account first of all its members, since they represent an important component part. Within the 

classic approach the individual is left on a second place. 

The usage of either these two approaches cannot grant that the organizational structure is an 

ideal one. That’s why, lately there has been developed a third approach, the one of alternative 

options. This asks for a close attention paid to three factors: 

- the manager’s particularities. The managerial qualities result from a complex 

combination between experience, instruction and assumed values. All these influence the 

actions and especially the perception upon the strategy and objectives. Taking into 

account that the organization’s activity is led by managers, there must be paid attention to 

particularities and their individual qualities, because they are those who define strategy 

and objectives, not the organization. 

- The environment in which an organization functions. It has an important role in 

determining its structure and form. When the environment is modified, there can appear 

some problems, because the structures are more strict and bureaucratic (very close to 

classical approach), they are also more capable of adapting to environment changes, 

unlike non-bureaucratic structures, with a more flexibility at changes. 

- The task’s particularities, where there are two main factors of influence, namely: 

1. the impact of new technology (such like information technology);


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2. the nature of the entrusted tasks that can lead to certain expectations from 

managers. 

Thus, those confronted with tasks that request complex managerial and professional 

qualifications want to get involved within the decisional process whereas those that are requested 

less pretentious qualifications do not come to expect a great implication. 

The conclusion is that a great concentration of qualified people and managers want to get 

involved in the adoption of a more democratic and participative structure. 

Another idea regarding the influence upon the organization’s activity involves the 

management. If an organization admits that the managers stand for an essential factor within the 

decisional process it is important to have leaders that should appreciate thoroughly and support 

this approach. 

The leading styles can be classified referring to one of the two characteristic styles, the X 

theory and the Y theory. 

The X theory supports an authoritative style of leadership that involves a bureaucratic and 

hierarchical structure. It states the fact that the leadership team is responsible for all the aspects of 

an organization’s activity and that the individual has a second place within the organization’s 

necessities. At the same time, it states the fact that the leadership team knows everything in the 

best way and the rest of organization is subordinated to it. 

The Y theory is being situated at the other side, promoting the idea that the organization can 

benefit of recognition, development and satisfaction of personal requests of its employees. This 

recognition, sustained by corresponding actions, would be a defining characteristic of a more 

efficient control. 

The third theory views the effects of planning the budget upon people. The usage of budget 

within the control can have some deficiencies, especially in the motivation domain. In most 

organizations the results are being compared with the established budgets. 

There are nevertheless some drawbacks associated to the systems of traditional budgetary 

control in some domains such like: 

- the standards settlement process, especially there where managers say that they are 

incorrect no matter from what reason; 

- the leadership’s points of view, that can be situated very far from the ones of the middleleveled 

or inferior leaders; 

- the weak communication that can lead to wrong interpretations of the difficulties, 

uncertainty and wrong orientation; 

- the objectives’ non-convergence, when each manager follows his own goals and not the 

organization’s ones; 

- the budget’s vitiation, that is “ increasing” the budget’s proposal with a certain 

percentage, the manager expecting not to earn as he asked; 

- the initiative’s limitation, especially there where the budgets and standards are inflexible, 

thing that can have as a consequence the reduction of motivation 

The system of planning and control taking into consideration all these aspects is the main 

objectives management. It transposes the organization’s objectives so that those should become 

the specific objectives of each manager. 

The objectives management implements an efficient system of self-control for the managers 

and does not impose a control from those situated higher on the hierarchical scale. 

The functioning of the objectives management requires tracing some characteristics that 

should contribute to the general decisional process: 

- reviewing on short and long term the organizational objectives;


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- the analysis and where it is necessary the company’s reorganization; 

- establishing a clear image of the hierarchy with responsibilities delegation; 

- obtaining an agreement between leadership and managers within the process of standards 

settlement; 

- emphasizing the fact that budgetary control system shouldn’t be viewed as a restriction 

but on the contrary it should be viewed as an orientation and resources guarantees that are 

to help the managers to achieve objectives; 

- implementing a participative process of measurement, involving common discussions 

with managers; 

- periodical revisions of the factors that affect the organization, with its management 

structures and systems 

The importance of the organization’s recognition of the behavioral aspects within the control 

system is not exaggerated. The possible advantages of implication of all the managerial levels 

within budgets elaboration process can be thus synthesized: 

1. one can take advantage from instruction, initiative and the experience of planning each 

manager; 

2. the managers’ mood is getting improved due to the feeling of participating in the planning 

process; 

3. all of them become aware of the place they occupy within the general actions that take 

part in the organization; 

4. it is being encouraged the collaboration between departments; 

5. the managers placed in inferior levels are getting familiar to the organizational strategies 

and objectives and become aware of the difficulties; 

6. the objectives inside the budget are easier accepted by all those who have the 

responsibility of achieving them 

Involving all the managers in preparing the budget, one can create a channel of 

communication any changes in the operations will be easier understood for they can act in a 

constructive and creative way in their responses. 

Bibliography: 

1. Bogdan, Ioan (coord.) - “Financial – Banking Management Treaty”, Ed. Economica, 

Bucharest, 2002; 

2. Drucker, F. Peter - “Strategic Management”, Ed. Teora, Bucharest, 2001; 

3. Maracine, Virginia – “Managerial decisions. Improving the Company’s Decisional 

Process”, Ed. Economica, Bucharest, 1998; 

4. Parvu, Florea – “Costs and Decisions’ Substantiation” Ed. Economica, Bucharest 1999.


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THE INSUFFICIENCY OF TRADITIONAL ACCOUNTING MODEL – 

THE HISTORICAL COST IN AGRICULTURE HOLDINGS 

Deaconu Sorin-Constantin 

12BDoctoral 

student 

40BUniversity 

„1 Decembrie 1918” Alba Iulia 

ABSTRACT 

En cet article soyez les aspects notionnels actuels au sujet des capitaux biologiques d'évaluation aux coûts 

ou à la valeur juste. Des capitaux biologiques devraient être mesurés sur l'identification initiale et aux dates de 

reportage suivantes à la valeur juste moins de coûts estimatifs de point de vente, à moins que la valeur juste ne puisse 

pas être sûrement mesurée. Le produit agricole devrait être mesuré à la valeur juste moins de coûts estimatifs de 

point de vente au moment ou la moisson. Puisque le produit moissonné est un produit commercialisable, il n'y a 

aucune exception 'de fiabilité de mesure 'pour le produit. Le changement de la valeur juste des capitaux biologiques 

est le changement physique de partie (croissance, etc...) et changement de prix unitaire de partie. La révélation 

séparée des deux composants est encouragée, pas exigés. La révélation d'une description mesurée de chaque groupe 

de capitaux biologiques, distinguant entre les consommables et les capitaux de porteur ou les capitaux mûrs et non 

mûrs, est encouragé mais pas exigée. 

A good financial information represent nowadays a necessity for the management of 

agriculture exploitations. 

In the practical activity it is used to evaluate the elements by the professional accountants 

at a considerable value, on a side of those, and in the same time verifiable, named historical cost. 

Besides even the European and international accounting standards (a part of those) has taken, as a 

fundamental principle of the elements evaluation, the historical cost. 

Regarding the objectivity of historical cost, the aspect is disputable because no evaluation 

base has the general use and it is not satisfactory in absolute and in consequence a problem of 

option stands in this way. The European and International Accounting standards are orientated 

towards the historical cost, without losing from a point of view to combine with other evaluation 

bases or using other alternativesF 

64 

F. 

Accounting in historical costs is orientated through past, which she describes it through 

the distinction of supplies flux: assets account, - statement of account. The continuity perspective 

of enterprise should not direct the enterprise to future even in evaluation matters? Not to limit 

exclusive to the past? Lately it became more actual the idea of accounting certain elements at the 

value estimated of the future fluxes of treasury, which those can bring to the enterprise in general 

and to the agriculture exploitations. Indeed to evaluate in historical cost means to keep the 

structures of the statement account at the entering value, which are in fact the historical values. 

Such a value is based on the assumption of monetary units established on the monetary 

nominalism, and event though the economic parameter does not stop to evaluate: the buying 

power, rate of profit, the profitability etc. Choosing a monetary unit as a measure creates an 

64 

Mihai Ristea, Accounting between fiscal and management, Publisher House Tribuna Ecomonică, Bucureşti, 1998, 

p. 31.


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unitary language, but it does not assume that all the events and the information especially the 

qualitative ones. The historical cost represents besides the others bases of evaluation a series 

of advantages and also limits, but not event the advantages nor the limits does not have to be 

generalized. 

Accounting does not have to limit by giving only retrospective information’s 

regarding the financial position and the performances of agricultural exploration, it should 

allow the exact wording of anticipation about the growing up of the enterprise. In a period of 

stability characterized by repeatable and absents of incertitude, where the future is anticipated 

in the present at least from a theoretical point of view the absents of future information can 

not fell the effects very badly, the accounting information can be judged as having a 

satisfactory and predicative character and focusing the accounting through past can not be 

considered an inconvenient, because it determines the future. 

And still the environment in which it takes action the agricultural entity is based on 

the irreversibility of time and incertitude the elapse is accompanied by the continue growing 

65 

of in formations that reduce the incertitudeF 

F. 

At present, the accounting profession is more and more aware by the potential impact 

of medium changes over the capacity of this to respond in the plan of financial information 

the needs of prediction but also the certitude of users of financial information. To respond the 

needs of the users, a financial report must: give more information on the projects, 

opportunities, risks and incertitude, to concentrate more on the factors that creates values on 

66 

long terms, on the non-financial terms of value” processes, innovation, human resourceF 

F. 

To present from a value point an asset, it tends to account the future incomes than to 

the past expenses. Confronting to the traditional evaluation in historical costs, this inclination 

at least for the start has the mission to upset so much the accouter and the financial analyst of 

classic structure. 

To approach the problem of currency, comparative with the one of the physic measure, 

the French teachers Casimir, Caspar and Cozian were asked the next question “ it can imagine 

to perform an operation, scientific coherent , if the length of meters is shorter from year to 

67 

year?F 

F A similar question is considered to be asked in the field of accountancy, considering 

that the financial situations are expressed in a measure of which unit (buying power) oscillates 

from a financial exercises to another. With all these, the evaluation based on the historical 

cost offers an advantage, meaning: it assures the spacing compatibility of enterprises, which 

68 

use the same system of evaluationF 

F. The bad point appears in the temporary comparison 

cases, the accounting information gives an unreal imagine of the reality, which alternates 

badly the quality of the represented model of reality, with effects on the decisions of 

management and behaviour of the agriculture work. 

The distortions made by the historical cost on the accounting dates given by the 

accounts science have consequences to the macroeconomics level too, because there are 

deformed a series of indicators with the value of information big at the national economic 

level. 

The fundamental truth of the historical cost is not found in the Romanian legislation, it 

69 

is only implicit. But OMFP nr.1752/2005 explains that on the time entering in patrimonyF 

F of 

65 

Phillipe Lorino, Methodes et practiques de la performance, le guide du pilotage, Les Editions Organisation, 

Paris, 1997. 

66 

Special Committee of Insures services of AICPA – the professional organism of free American accounting. 

67 

J.P. Casimir, B. Caspar, M. Coyian, Comptabilite generale de lènterprise, Deuxime edition, Editor Litec, 

Paris, 1990, p. 12. 

68 

Constantin Toma, The evaluation at the historical cost and the brand loyal imagine, the magazine Accounting, 

expertise and the audit of business, Publisher House CECCAR, Bucureşti, nr. 9/2003. 

69 

The concept of patrimony is used in the same law namely at point 99 “investments made through…. Including 

the explorations expenses in a period of time decided by the administrative councilor or the manager of


ISSN: 1842-4856 

70 

an entity, the landed property with free titles can be evaluated and registered at a good priceF 

F. 

So the good price is specified clear as a way of evaluation and record of the assets in the 

patrimony of entities. Is this provision a moment that indicates an evolution in the auditors 

rationalism? We consider that a part of the auditors from Romania will not separate very 

quickly from the evaluation to the historical cost and will agree very hard to practice for the 

assignation of real values and new patrimony elements. The opponents of the historical model 

had introduced possible methods of evaluation to applied, among those right value has a 

honorary place. 

The right value in the context of the IAS 41 Agriculture application 

The expression “right value” is formed from two concepts: 

- value – comes from the French valeur and represent the sum of the qualities that 

give the price of an object, creature and phenomenal. 

- Right – comes from the French juste and has many significations: concordant with 

the truth, right, and properF 

71 

F. 

In a general manner we can say that the right value represents the right price, of an 

object, creature, phenomenal etc. 

The expression right value is given in many accounting standards (IAS 16.17.18,41 

ETC.) and it assumes an update of some sums which it will be receive in the future for the 

making evident the present value, or to evaluate some assets through specific accounting 

72 

methodsF 

F. Through the paper we will make connection to the right value mentioned by IAS 

41 that defines her similar with the international laws, for example IAS 16 Immobilizations of 

capital, or “ the sum for which an asset can be transaction willingly by the both parts, in a 

closing transaction in which the price is given by the targetF 

From the definition given below we can conclude the next general ideas regarding the 

right value: 

- it represents an value equivalent, expressed mostly through a sum of money; 

- it is an estimated value, which can suffer changes in any time, (this idea is from an 

asset can be transfer); 

- it is compulsory the existence of a transaction at least between the tow parts that 

were informed; 

- the parts implicated in the transaction, namely the buyer and the seller, it is supposed 

that they were informed about the operation that will place through the determination of the 

right value in a contract each part follows to obtain economic benefits. Those economic 

benefits are bigger with every influence of the two partners when they can influence the report 

of requesting –offer. We can detach the idea that the right value is given by the demand and 

the active biological offer compared, agricultural products or additional biological actives. 

- it is mentioned the concept of price, were we have the idea that we can put the 

sign of equal between the expressions “right value” and “right price”. 

In accordance with the Romanian agricultural laws, right value is equal with the 

market price or the market value: “the price made under the conditions of open competition, 

patrimony. This fact denotes that the Romanian accounting standards are trying the give up the patrimony, but 

we notice that the law persists to make us believe that the notion in case… at least from the point of view of 

accouters and theoretician. 

70 

OMFP nr.1752/2005. 

71 

Ibidem, p. 552. 

72 

Adela Deaconu, Market value- different opinions presented in the accounting standards and in the evaluation 

of the assets, Magazine accounting, expertise, and audit of affairs, Publisher House CECCAR, nr. 8/2001. 

73 

IAS 41 Agriculture, paragraph 8. 

73 

F.


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in which none of the market agents can not influence or decide one-sided the level or the 

74 

dynamic of this, made on the direct confrontation between the buyers and sellers”F 

F. 

In accordance with the evaluation standards, the market value is considered the sum 

estimated for an active at the time of the evaluation between a buyer and a seller decided in an 

equilibrated transaction and after a proper marketing, in which every one acts noticed, 

precaution and with no restraining. 

The right value of an asset is calculated depending on the place and situation of it. The 

most important element for the established of the right value of some actives is the existence 

of an active market for those. A market is consider to be active when: 

- the consumed goods are equal 

- the buyers and the sellers can be easily found in any moment 

- the prices are known by the public 

The determination of the right value can depend sometimes on the biological assets or 

on the agriculture products, depending on the significant attributes (such as quality and age) 

The right value is determined by the market price, when there is an asset market. If an 

agriculture work has access to more active markets, it will use the price from the most 

representative market for her. 

The agriculture situation can be in the situation in which she cannot accede to an 

active market, and in this case we can use the next element to determine the right value: 

- the most recent price in a transaction similar from the market, in the case in which 

there is no major economic changes between the transaction data and the financial situations 

data; 

- The market price for similar products, adapted to in order to reflect the differences 

(quality, age, weight etc.); 

- Specific criteria of the industrial field (the value of an animal expressed in 

lei/kilo). 

Further on we will speak about the problem of biological actives evaluation and the 

agricultural products from the point of view of IAS 41 Agriculture. 

The IAS 41 establish as a general rule, the evaluation of the biological assets and the 

75 

agriculture products at the right value minus the costsF 

F prices estimated at the point of sales 

(can be considered a base accounting treatment).In exceptional situations in which the right 

value or the alternative estimations of the right value are not right an biological asset can be 

evaluated only with the occasion of the initial recognition, at her lower price(and can be 

considered an alternative accounting treatment). 

We conclude that the international norms are providing separate evaluation of the 

biological assets of agriculture products. 

Below we present a parallel between the ways of evaluation of biological actives 

according with the intern and international laws. 

Ways of evaluation of biological assets according with 

76 

the intern and international lawsF 

74 

The decree 45/2005 regarding the market organization of agriculture and agro alimentary products, Official 

Monitor nr. 754/2005. 

75 

IAS 41 uses the cost notion at the point of selling. We consider that we should use the expression “expression 

at the point of selling”, because the concept cost is used in case of obtaining from the own production an 

agriculture asset. 

76 

The notion right value mentioned in the Fourth Directive of the Council from 25 Julie 1978, section 7a 

“Evaluation at right value”, tells that states members allow or demand to the others commercial societies or to 

some classes of society to evaluate the financial instruments, including the derived financial instruments to the 

right value.


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Table 1 

The steps of 

evaluation 

At the beginning of 

77 

the patrimonyF 

F 

The elaboration of 

the financial 

situations 

OMFP nr. 

1752/2005 

Accounting value 

(entering value) 

Net accounting 

value 

Bases accounting 

treatment 




selling 




selling 


Alternative 

accounting 

treatment 

Cost minus 

repayment and 

devalue 

Cost minus 

repayment and 

devalue 

The exception from the rule presented, operates only in the case of biological assets at 

the initial knowing (IAS 41, paragraph 30). 

In accordance with paragraph 27, at the initial knowing of a biological asset can 

appear losses because the estimated costs at the point of sales are deduced when the right 

value is determinate. 

The agriculture products are evaluated at the initial knowing (the moment of crops) at 

the right value minus the costs estimated at the point of sales (IAS 41, paragraph 13). The 

crop marks the critical point the represents the transferring from the IAS 41 to IAS 2 or 

another standard. Such a transfer it is justified in the moment of crop, the agriculture activity 

stops and it starts the associate activities of the obtained products processF 

78 

F. The right value 

minus the costs estimated of the point of selling established at the crop, in accordance with 

IAS 41, for the products turns into cost by the time that IAS 2 is applied or another standard. 

Systemizing with the below table, the ways of evaluation of the agriculture products 

according with OMFP nr. 1752/ and IAS 41: 

Ways of evaluation of the agriculture products according with the intern and 

international laws 

Table 2 

The 

moments of 

evaluation 

At the 

entering in 

the patrimony 

OMFP 

nr.1752/2005 

Accounting 

value (entering 

value) 


Accounting treatment 

(Crop) 


cost from the 


selling 

After the 

crop is 

done 

IAS 2 

Inventory 

Accounting 

treatment 


becomes the 

cost 

77 The international norm uses the syntagm “initial recognition”. 

78 The experts Corps of accounting and the Authorized Accountants from Romania, Guide for understanding and 

application of International Accounting Standard, nr.41 Agriculture, Publisher house CECCAR, Bucureşti, 2004, 

p. 80.


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The 

elaboration of 

financial 

situations 

Net 

accounting 

value 


cost from the 


selling 


becomes the 

cost 

For the farm products cropped it does not exits the alternative accounting treatment 

(the respective the costs minus the repayment accumulated and the losses from the devalues 

accumulated) like in the case of biological assets, considering that in this situation there is the 

possibility to estimate the right value with sufficient credibility. And with the initial 

acknowledgement of an agriculture product at the right value minus the estimated costs of the 

selling point it can be record an income or a loss which it will be included in the result of the 

financial exercise. 

Concluding, without entering in the polemic of the historical cost – right vale 

“comparing with the historical cost, the right value has more trump then this, so we can say 

that she is an imperfection and still she approaches to the perfection”F 

79 

F. And still the right 

value remains in its assents an hypothesis so a supposition based on a possibility and not a 

mathematical hypothesis in the meaning of the given element which it develops a 

demonstration. In consequence the right value must be known as one of the accounting 

estimations, not the only real and perfect, which can be kept from the others bases of 

80 

evaluationF 

F. 

54BBibliography 

7. Cenar, I., Todea, N., Bazele contabilităţii, Editura Aeternitas, Alba Iulia, 2003. 

8. Feleagă, N., Malciu, L,, Bunea, Ş., Bazele contabilităţii – o abordare europeană şi 

internaţională, Editura Economică, Bucureşti, 2002. 

9. Zahiu, L., ş.c., Structurile agrare şi viitorul politicilor agricole, Editura Economică, 


10. Ordonanţa nr. 45/2005 privind organizarea pieţei produselor agricole şi 

agroalimentare, Monitorul Oficial nr. 754/2005. 

11. Ordinul 1752/2005 pentru aprobarea reglementărilor contabile conforme cu directivele 

europene, Monitorul Oficial nr. 1080 bis/2005. 

12. Legea contabilităţii republicată nr. 82/1991, Monitorul Oficial nr. 48/2005. 

79 

Elena Mihaela Barbu, Qualities of the right value under the sign of question, in the magazine Accounting, 

expertise and audit of affairs, nr. 6/2002. 

80 

Mihai Ristea, Corina Dumitru, Affairs Accounting, Publisher House Economică, Bucureşti, 2006, p. 57.


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THE IS-LM MODEL FOR THE ROMANIAN ECONOMY 

FRAMEWORK 

Alina Cristina NUŢĂ, PhD Student FEAA, 

“Alexandru Ioan Cuza” University of Iaşi 

ABSTRACT: 

This paper examines the applicability of the IS-LM model under the concrete condition of the 

Romanian economy. We try to identify the main connections between fiscal, budgetary and monetary policies 

that can be used for the increasing of the decision-making efficiency. First of all we will make a general 

presentation of the model, its structure and its changes that he suffered over time, and secondly, we analyses the 

data for specific Romanian economic framework. 

The IS-LM model was presented by Fisher and Dornbusch as the core of modern 

macroeconomics. This model presents the interaction between the goods market and the assets 

market in the interest rate and income reactions framework that implies both monetary and 

fiscal policies. The structure of the model is presented above: 

Assets Markets 

Money 

Market 

Demand 

Supply 

Monetary 

Policy 

Bond 

Market 

Demand 

Supply 

Income 

Interest rate 

Goods Market 

Aggregate demand 

Output 

Fiscal 

Policy 

Figure: The structure of the IS-LM Model 

Source: Dornbusch, Rudiger, and Stanley Fischer (1992), Macroeconomics, 6th ed. (New 

York: McGraw–Hill Book Company), p. 89 

Analytically point of view, the first section of this model, and by that I mean the 

IS curve, shows all the combinations of interest rates and income for witch the goods market 

is in equilibrium. The IS curve is negatively sloped because an increase in the interest rate 

reduces planned investment spending and therefore reduces aggregate demand, thus reducing 

81 

the equilibrium level of income. Dornbusch and FischerF 

F find that the smaller the multiplier 

81 

Dornbusch, Rudiger, and Stanley Fischer (1992), Macroeconomics, 6th ed. (New York: McGraw–Hill Book 

Company), p. 93


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and the less sensitive investment spending is to changes in the interest rate, the steeper the IS 

curve. An increase in autonomous spending will shift the curve out to the right. To the right 

side of the IS curve is excess supply in the good market and to the left side of the curve there 

is excess demand for goods. 

About LM curve, Dornbusch and Fischer find that when the money market is in 

equilibrium, the bond market is in equilibrium to. The LM curve is positively sloped. Given 

the fixed money supply, an increase in the level of income has to be accompanied by an 

increase in the interest rate that reduces the quantity of money demanded and maintains 

money market equilibrium. Three is an excess demand for money at points to the right of the 

LM curve, and at points to its left, there is an excess supply of money. 

The IS-LM model presents the simultaneous equilibrium for the goods and money 

markets, and for that, interest rates and income levels have to be such that both the goods 

market and the money market are in equilibrium. The demand for goods is equal to the level 

of output on the IS curve, and on the LM curve the demand for money is equal to the supply 

of money. The IS-LM model shows the channels through which fiscal and monetary policies 

affect the economy. 

The IS-LM model applicability under Romanian economy wants to demonstrate 

and to measure the influence and degree of effectiveness of the fiscal and budgetary policies 

of the government (mainly through the effect on final consumption of general government and 

taxes) on economic indicators (interest rates, GDP, household consumption, etc.) in the given 

period and of the National Bank of Romania monetary policy (mainly through its effect on the 

money supply and demand for money) and to simulate the effects of possible changes in 

monetary and fiscal policies on real interest rates and GDP and to determine, in the light of 

the proposed changes in the volumes of real money (M/P) and final consumption of general 

government (G), a combination of monetary and fiscal policies (restriction and/or expansion), 

which would affect the development of interest rates (R) and GDP, without causing 

imbalances in the economy. 

By applying the IS-LM model to the conditions of Romanian economy, it is 

possible to determine and quantify not only the effects of monetary and fiscal policies on 

GDP and interest rates, but also for example the effect of interest rates on investment and 

demand for money. At the same time, the IS-LM model may be applied for analysis when the 

development of GDP and interest rates is stimulated so that the market for goods and services 

and also the money market are in equilibrium. If the expected base index of consumer prices P 

is known and M and G are selected correctly for corresponding period, the decisions of the 

NBR, Government, and Parliament may positively affect the values of GDP and R. 

The fundamental equations defining this model are: 

C= Ca + cYd (1) Consumption function 

Yd= Y-T, (2) Disposable Income 

T = Tf + tY (3) Tax function 

I=Ia + dR (4) Investment function 

G=G (5) Government spending 

X = g - mY - nR (6) Net exports function 

M/P = M/P (7) Supply of money 

M/P = kY - hR (8) Money demand 

IS= Y = C + I + G + X (9) IS curve 

R = (k/h)Y - (1/h)(M/P). (10) LM curve 

The first equation concerns on the final consumption (C), which is dependent on 

the marginal propensity to consume (c) and the positive value of GDP, adjusted by the tax 

coefficient. The second equation expresses the disposable income, which is the tax after tax 

income. The third equation presents the tax function that consists of fixed (lump sum) taxes


ISSN: 1842-4856 

(Tf) and an income tax (at rate t). The forth equation is for gross capital formation (I), which 

depends on the interest elasticity of investments (d) and R (interest rate-with a negative sign). 

The fifth equation presents the government spending function. The sixth equation 

is a modified equation for net exports (X), expressed as a function of the net exports (g), of the 

marginal propensity to and import (m) and the interest sensitivity of net exports (n). The 

seventh equation presents the supply of money, which is M - the nominal quantity of money 

in the economy M and price level denoted as P. The eighth equation presents the money 

demand, which is dependent on the income elasticity of demand for money k, and h is the 

interest elasticity of demand for money. 

The ninth equation is the IS curve that describes all the combinations of interest 

rates (R) and levels of real GDP (Y) such that spending balance holds; this is the income 

identity, which means that gross domestic product (according to the expenditure based 

method) equals the sum of final household consumption, gross capital formation, final 

consumption of general government, and net exports. 

The tenth equation refers to the LM curve, that describes all the combinations of 

interest rates and levels of GDP for which the money market is in equilibrium. Specifically, it 

defines each interest rate for which the money market is in equilibrium for every level of 

GDP. 

Using the Romanian economy data and these equation we try to construct an IS 

curve, illustrating all combinations of interest rates with the levels of income at which the 

market for goods and services is in equilibrium and the LM curve expressing all combinations 

of interest rates with the levels of income at which the money market is in equilibrium. The 

intersection of IS and LM represents the point at which the market for goods and services and 

also the money market are in equilibrium. 

In the next rows we shows the modifications that appears in the Romanian 

indicators of the analysed period, initially by offer an explanation about the fiscal policy that 

was promoted by the Romanian government and then, the monetary policy expressed by the 

National Bank of Romania decision. 

The following time series of annual data were used for the analysing the fiscal and 

monetary actions of the Romanian decision-makers: 

Table 1: Macro-indicators of the Romanian economy, 2000-2006 

Year 2000 2001 2002 2003 2004 2005 2006 

GDP (mil RON) 80377.3 116768.7 151475 197564.8 246468.8 288047.8 U342418U 

Public 

expenditure (mil 

RON) 

23801.2 33812.5 42671.5 53375.4 65780.7 75304.3 116422 

Net investment 12498.7 20419.5 27173.5 35651.2 44869.9 54566 63296.5 

(mil RON) 

Interest rate (%) 35 35 20.4 20.41 17.96 7.5 8.75 

Final 

consumption 

(mil RON) 

69253.3 99473.7 127269.2 169233.4 210155.4 252431.8 311572 

Final 

63459 91718.5 116940.4 149259.1 191050.5 225978.3 missing 

consumption of 

information 

household 

RON) 

(mil 

Final 

5794.3 7755.1 103.28.8 19974.3 19104.9 264530.5 missing 

consumption of 

government (mil 

information


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RON) 

Tax rate (%) 35 28.4 28.3 27.5 27.3 27.2 28.5 

Broad money 18506 27051.2 37371.3 46074.1 64461.7 86331.9 missing 

(mil RON) 

Source: Romanian National Institute of Statistics, National Bank of Romania 

information 

The figures above shows that the expansive fiscal policy determined an increase 

in the GBP level during the period under review. The final consumption has the same trend 

that the others indicators have and represent an important part of the GBP. The gradual fall in 

interest rate (that is a monetary policy decision) present a positive effect on the GBP 

evolution. 

Figure 2: The public expenditure growth impact on GDP in Romania, 2000-2006 


Figure 3: The interest and tax rates of Romania for 2000-2006 


This study want to express the effects of the fiscal and budgetary policies of the 

government on interest rates, GDP, household consumption and the effects of monetary and 

fiscal policies on GDP and interest rates under the condition or Romanian economy. This 

work represents the first step in the analysis of the IS-LM model for Romania. 

References: 

- Dornbusch, Rudiger, and Stanley Fischer (1992), Macroeconomics, 6th ed. (New 

York: McGraw–Hill Book Company); 

- Greene, William, H., Econometric analysis, 5-th edition, Prentice Hall, 2002, p.3


ISSN: 1842-4856 

- Hettich, W., Winer, S., - Democratic choice and taxation. A theoretical and empirical 

analysis, Cambridge University Press, 2005 

- IMF: Macroeconomics Analysis and Policy, IMF Institute, 1999; 

- Data from the Romanian National Institute of Statistics and National Bank of Romania 

THE MANAGEMENT OF PORTFOLIO RISK 

ON THE ROMANIAN CAPITAL MARKET 

Dalia SIMION, lect. dr. 

Daniel TOBA, lect. dr. 


ABSTRACT: In a society strongly dependent and intensively industrialized such like the one we live 

in, risk cannot be an isolated event, but the consequence of some facts that determine its transfer from one point 

of the planet to another. As a result to the general tendency of increasing the volatility of the financial markets 

but also to the increasing complexity of the global financial system there was registered a continuous interest in 

the domain of risk management. 

Within the article there are being presented methods of reducing risk for financial titles portfolio, 

coming to support the investors that want a greater security when making the portfolio. We will further present 

the way in which diversity can reduce risk, but at the same time in order to better understand the complete effect 

of diversity we will show the way in which a portfolio risk depends on an individual risk of each component 

title, exemplifying some titles quoted at Bucharest Stock Exchange. 

In the context of the last years, in which the financial markets are being integrated and 

affected by globalization in an accelerated rhythm, there appear new possibilities of placing 

the available resources and at the same time new opportunities of accessing the financing 

markets. The new global order in the finances’ domain increases the circulation of financial 

flows in parallel with facilitating the access to the financing sources and thus leads to the 

diversification of the international strategies concerning the structure of portfolios. 

The globalization of financial markets readdresses to an efficient system of economic 

levers, by increasing the financing capacity and through the fast transformation of economies 

in investment but simultaneously with the appearance of new risks. 

After increasing the complexity of the global financial system as well as the general 

tendency of developing the volatility of the financial markets there appears an increasing 

interest for the management of risk domain. 

The management of risk does not analyze what went wrong after things had been 

achieved as well as it is not an ex-post analysis but a process in which risk becomes 

transparent. It requires seeking for new risks, measuring and administrating them. We don’t 

have to have in view a unique answer concerning risk. The management of risk is a cyclic 

process from which one can learn. 

The conceptual definition of risk as well as its analysis is made in the context of 

establishing criteria that are at the bases of the investment in financial titles and of the 

indicators that surprise in a complex frame the situation of risk.


ISSN: 1842-4856 

Risk stands for a complex phenomenon that should be defined in a close correlation to 

human subjects that divide it into two categories: the persons with appetite for risk that take 

any risk for an adequate remuneration and the ones who fear risk trying to minimize it in 

almost all the situations. 

As a consequence to this, the management of portfolio takes into consideration the 

individual investors’ needs and preferences. Minimizing risk is a fundamental purpose in the 

administration of the portfolio of titles and allows the capital investment to be allocated


ISSN: 1842-4856 

according to the investor’s attitude against risk. Nevertheless there can be made a possible 

estimation of the predicted gains for certain values without making reference to individual 

investors and without taking into account his needs or preferences. The results of the financial 

analyst on the capital market are determinant for the management of portfolio, but managers 

use the financial analyst’s calculations only in correlation to the preferences and financial 

situation of individual investors. 

The theory of portfolio is formed around the following central ideas: 

- the relevant characteristics of a portfolio are the predicted gain and its risk; 

- rational investors will prefer to own efficient portfolios that maximize the predicted 

gains at a certain level of risk or in an alternative equivalent way minimize risk at a 

given level of the predicted gain 

The relation between the gain (profitability) of a portfolio and the rate of profit of each 

movable value that compose the portfolio is thus expressed as a balanced sum: 

R p ∑ xi 

⋅ Ri 

(1) 

= i 

The weight of each movable value (xi) is the percentage of the total value of the portfolio 

that is invested in the respective title. 

In case the profitability of certain movable values is known with precision then the 

portfolio’s profitableness can be accurately predicted. Taking into account that future is not 

secure the managers of portfolio must fundament their selections on the gains’ prognoses. 

If we think of a portfolio made up of 4 titles whose expected weights and rates of 

profitability are presented in the following chart: 

Tabel 1 

Title Weight (xi) Predicted gain (Ri) 

1 0,4 0,10 

2 0,2 0,20 

3 0,3 0,15 

4 0,1 0,05 

then the portfolio’s profitability is: 

R p 

= 0, 4× 

0, 

10 + 0, 

2× 

0, 

20 + 0, 

3× 

0, 

15 + 0, 

1× 

0, 

05 = 0, 

130 sau 13% 

(2) 

The analyst predicts the following gains: 

Gains Probability 

9% Very probable 

6% Possible, but improbable 

11% Possible, but improbable 

Tabel 2 

The 9% prognosis is the analyst’s best estimation, but this cannot be sure. For a deeper 

and more efficient prognosis there are being made supplementary calculations with the help 

of a histogram in the following picture:


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Probability 

25 

20 

15 

10 

5 

0 1 2 3 4 5 6 7 8 9 10 11 12 Expected Gain (%) 

Picture 1. Analyst’s prognosis concerning the possible gains 

On the horizontal axis there are being represented the middles of the intervals, that is 

number 6 stands for the interval (5.5; 6.5) whereas on the vertical axis there are being 

represented the probabilities of appearance of the expected rates of profitableness. 

This distribution reflects the probabilities through which the title can offer certain gains 

in a certain period of time. With a probability of 0.05, the expected income will be of 6% or 

11% whereas with a probability of 0.25 the expected income will be of 9%. The predicted 

gain or the sense of distribution is equal to the balanced sum of the possible gains, the weights 

being represented by probabilities. In this case the average or expected gain is of 8.66%. 

Thus the expected gain of a portfolio can be defined as the balanced sum of the expected 

gains of the individual movable values. 

Nevertheless one can stress the problem of estimating the risk of each movable value and 

the estimations of a portfolio risk. For this there are being used two statistic values: standard 

variance and deviation. 

The two measures of estimating risk are relevant only if the expected results describe the 

normal law of probability (are normally distributed). 

The risk of an asset is being defined by the probable variability of the asset’s future 

profitability. If for instance an investor buys government titles with an anticipated rate of 

profitability of 6%, then the investment’s profitability is of 6% and it can be predicted with 

precision because this type of investment is without risk. But if the investor buys shares from 

a recently appeared company, the investment’s profitability cannot be estimated with 

precision. Studying the company’s results, an analyst can estimate an expected rate of 

profitability of around 20%. The investor can also expect to fluctuations of the rates of 

profitability from for example +100% to -100%. 

As a result to this one can say that risk is connected to the probability of having a reduced 

profitability than the expected one. The more frequent the opportunity of a reduced 

profitability appears, the more risky the investment is. 

In case of a normal distribution (Gauss’ bell) this is ascendant and the probabilities that a 

gain should be placed in the interval of expected value (E) plus or minus the standard


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deviation (s) are approximately 2 out of 3. The probabilities that a gain appears in the interval 

E+2s – E-2s are of around 95 out of 100. 

The question that is often asked is how we get to these probabilities. The special 

publications offer indications, advice but not the appearance probabilities. Most analysts start 

with studying the previous variability and it is supposed that portfolios having a history with 

increased variability have the least predictable results. 

The modern financial theory shows that the previous evolution of the course of a 

financial title is not sufficient in order to predict the future behavior of the respective title but 

depends on the following factors: 

- the offer and request for the respective title, existing on the market at that moment (a 

title for which the request is greater than the offer can determine the price to grow or 

vice versa); 

- the market’s liquidity on which the title is being operated (a title operated daily shows 

the high interest of the investors and its course will be sensitive to the events 

connected to the market or issuer; a title occasionally operated is less attractive, its 

course modifies occasionally and changes are usually greater than in the case of a title 

currently operated); 

- the general evolution of the market on which the respective title is being operated (the 

price of a title operated on a market with an ascendant evolution will generally register 

an increasing trend. The ascendant evolution of the market is given by the value 

increase of the stock exchange indices, the ascendant tendency of the total volume and 

of the total value of daily transactions as well as of the number of investors on 

market); 

- the general status and the registered performances of the issuing society of a title (a 

real increase of the issuer’s economic activity will determine a great level of security 

for the issued titles investment); 

- future certain events that will affect the issuing company (fusions, future acquisitions, 

payments of dividends and so on); 

- the title’s previous evolution (if there is being registered an increasing trend of a 

title’s course one can predict with the help of a graphic analysis that the market price 

can grow continuously); 

- unpredicted events that affect the stock exchange market (the economic events – 

government’s decisions, then those of monetary authority; juridical events – the 

adoption of new laws, the change of the functioning, operating and discounting rules 

and stipulations; other events such like natural catastrophes, wars, terrorist attacks, 

etc.). 

The standard deviation is a useful synthetic indicator in appreciating the level of 

spreading as compared to the expected value. Within the estimations, the variable’s dispersion 

is more used as compared to the standard deviation. While the standard deviation on each 

invested monetary unit does not change together with the invested sum, the dispersion on 

each invested monetary unit increases together with the invested sum. 

The standard deviation is marked withσ , whereas variance is market with 2 

σ . If the 

rates of profitability are calculated according to some alternative scripts then the standard 

deviation can be obtained through the formula: 

∑ 

( R − R) 

σ = 

⋅ p 

(3) 

s 

s 

2 

s


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in which R stands for the balanced average of the real values of the rates of profitability Rs, 

and ps stands for the balanced average probability of deviation from the expected value that 

indicates how much greater or smaller the real value is as compared to the expected one. 

If the only available data are the values of profitability in a past period then the standard 

deviation of profitability is being estimated using this formula: 

N 

∑ 

= 

( R − R) 

i 

2 

i 1 σ = 

(4) 

N −1 

N being the number of observations, and N-1 is the level of availability. 

The portfolios that are efficient from the variable’s dispersion point of view are efficient 

as well from the standard dispersion’s and vice versa. 

Though the net gain of a portfolio is the balanced sum of the expected gains of the 

component values, the portfolio’s dispersion is not calculated as a balanced sum of the 

component movable values dispersion. 

The portfolio’s dispersion is calculated with the formula: 

n 

n 

∑∑ 

2 

σ = x ⋅ x ⋅ cov 

(5) 

p 

i= 

1 j= 

1 

i 

j 

ij 

in which covij is the covariance between the predicted gains of the movable values i and j. 

Analyzing the Romanian capital market, one can observe that some of the operated titles 

have a greater variability than others, but for all of them the standard deviation is greater than 

the one corresponding to the market. 

As the standard deviation of the market (measured through the standard deviation of the 

stock exchange indices) is a composition of standard deviations corresponding to each title 

that makes up the portfolio, there can be concluded that diversity spreads the risk. Even a 

short diversity produces a substantial reduction of risk. 

When two titles are combined and the covariance is smaller than 1, the risk of the 

portfolio will be smaller than the balanced average of the risks belonging to the two titles. 

In order to exemplify we consider a portfolio of shares issued by the Romanian Bank of 

Development and Transilvania Bank. The dates of the shares’ analysis in 2007 are presented 

in the following chart: 

TITLE Average 

Profitability 

Average deviation 

of profitability 

(dispersion) 

BRD 0,2054%/day 24.1656% 24.2278% 

TLV -0,0223%/day 1,7196% 2,7267% 

• Source: Dates from BVB, HUwww.bvb.roU 

Tabel 3 

Average deviation of 

the estimated 

profitability 

(estimated dispersion) 

Investing sums in the two categories of shares, we will get a portfolio’s rate of 

profitability of 0,0916 (9,16%) and the risk σ p = 0, 

127 that is 12,6953%. 

Calculating the balanced average of the risks of the two titles we get: 

M = x σ + x σ = 0, 

5 ⋅ 24, 

1656 + 0, 

5 ⋅ 2, 

7196 = 0, 

13443 that is 13,44%. 

12 

1 

1 

2 

2


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The covariance between the two titles is 12 0, 

3794153 

= σ 

One can observe that the portfolio’s risk is smaller than the balanced average of the risk 

of the two categories of shares as a consequence to the fact that there were combined two 

kinds of shares for which covariance is smaller than 1, fact that permitted a risk reduction. 

Comparing the standard deviation for portfolios formed of a title, 2 titles, 3 titles and so 

on, one can notice that the size of the standard deviation is being reduced as the number of 

titles within the portfolio increases. But the reduction is smaller and smaller if the number of 

titles within the portfolio exceeds 20 or 30 (picture no. 2). 

Standard 

D i i 

20-30 titles 

Picture 2: Risk reduction through diversification 

No. of titles 

From the picture no.2 one can notice that a part of risk cannot be eliminated through 

diversification (the potion graphically situated and abscissa) and this is the market risk 

(systematic, undiversified) that refers to those articles that threatens all the business inside the 

market. 

The Romanian capital market amplifies the risks that the investors take and offers a few 

variants for investment diversification. Bucharest Stock Exchange wasn’t a very attractive 

market. But though generally speaking, the emergent markets are characterized by increased 

volatility and performance, Bucharest Stock Exchange rather offered a large volume of 

uncertainty without satisfying the investors. 

Most risks are connected to the stage of development of the Romanian capital market as 

compared to other countries. 

The liquidity of Bucharest Stock Exchange is quite reduced, the average value of daily 

transactions not exceeding 10 million euros. 

The high volatility of the operations from the Romanian capital market is another risky 

factor and is due to the investors’ behavior, present on the market (rather speculators than 

investors). 

Within the category of risky factors there is also included the lack of instruments with a 

fixed income, including here corporatist or mortgage obligations, of derived instruments for 

certain assets and reduced possibilities of hedging on the derivatives market.


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In order to minimize risks on the Romanian capital market there is not being imposed the 

formation of portfolios combining investment in listed shares on the Romanian stock 

exchange market and the ones on the international markets with a greater liquidity. 

Taking into consideration the economic increase in our country, in the last period of time, 

with much more over the average of the countries with a mature economy, one can see that 

Romania tends to become the preferred destination of foreign capitals. 

The Romanian companies listed at the stock exchange have a great potential of 

development of a short and long term and that’s why local investors especially the foreign 

ones will be interested to have investment in these companies. 

A capital market that tends towards maturity, such like the Romanian capital market, 

needs three main categories of factors: 

- portfolio investors of small and middle size that invest on middle and long term according to 

the expectations of the companies’ economic evolution; 

- speculators moving on the spot and giving liquidity to the market; 

- great local investors such like local investment funds, pension funds, assurance societies, 

etc. 

An equilibrated development of all these investors contributes to the increase of the 

market’s stability and to the reduction of vulnerability that otherwise they might have in the 

actions, sometimes completely unpredictable and unjustified of the foreign capitals. 

BIBLIOGRAPHY: 

1. Bank, P., Baum, D.- Hedging and portofolio optimization in illiquid financial markets 

with a large trader, Mathematics Financial, 2004 

2. Blackwell, W. David, Griffiths, D. Mark,- Modern Financial Markets: Prices, Yields 

and Risk Analysis, Wiley and Sons Lmtd. Publishing House, 2007 

3. Chance, Don M.; Brooks, Robert – An Introduction to Derivatives and Risk 

Management, Seventh Edition, Irwin Publishing, 2007 

4. Reilly, Frank K., Brown, Keith C – Investment Analysis and Portofolio Management, 

South-Western College Pub; 7 th edition, 2002 

5. HUwww.bvb.roU 

6. www.kmarket.ro


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13BTHE 

NECESSITY OF A FRAMEWORK FOR 

ELABORATING AND PRESENTING THE FINANCIAL STATEMENTS 

Odi Mihaela Zarnescu, lect.univ. drd., 

Universitatea Spiru Haret, 

41BFacultatea 

de Contabilitate si Finante Campulung Muscel 

Abstract: The financial situations of one company represent the most important way hereby the 

accounting information is put at the decisional factors’ service. 

The way how companies publish their financial situations must be explicit to be understood by the interested 

users. 

The objective of the financial situations consists the in the supply of financial bookkeeping information 

concerning financial position, the performances and the modifications of the financial undertook. These pieces 

of information are useful of a large range of users for taking economic financial decisions as considering the 

activity the firm. The users can be grouped the in: domestic users, external users and intermediate users. 

The necessity of a framework for elaborating and presenting the financial statements, 

named and conceptual accounting framework IASB, represents a trying for systematizing of a 

theoretical elements of accounting in a coherent construction which will guide the accounting 

practice. 

The process of elaborating the accounting rules has evolved for two decades, without a 

conceptual framework to stay on the base for preparing the financial statements. For this 

reason, many of standards released had unclear or illogical points. More, the accountant 

profession needed an assistance element which had to protect it against of tendencies of the 

public power to divest of its normalization role. 

On the other hand, the enterprises from all over the world make financial statements to 

be presented, in special, to the extern users of financial information. Also, this kind of 

financial statements can appear the same from a country to other, between them there are 

differences caused by a diversity of social, economic and juridical factors, how I explain 

above. 

These factors leaded to use distinct definitions of the financial statements elements; 

contributed to use some different criteria for recognising the financial statements structures 

and using different ways of evaluation. The applicability area and the information presented 

in the financial statements were also influenced. From this point of view an important factor 

in the organisations working which has activated in elaborating the accounting rules since 

1970, constituted gradual elaborating of some conceptual framework. 

The defining the financial-accounting concepts in 1975-1985, made by FASB, an 

American organism of accounting normalization were the base of the next definitions of the 

other organisms which elaborated the standards, like IASB. 

In 1989, IASB elaborated and published own conceptual framework, called 

“Framework for the Preparation and Presentation of Financial Statements”, because the


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necessity to approach the positions and to harmonisation the regulations, the accounting rules 

and the processes for preparing and presenting the financial statements. 

The purpose is to offer an orientation of the IASC Council members in their activity 

for elaborating the standards, for sustaining those who elaborate and audit the financial 

statements in the standards enterprise or in solving the other problems. 

Although the IASB is an organism which hasn’t juridical ability to impose directly or 

to apply the standards, owing to the coherent conceptual framework succeed to impose their 

standards like the valuable elements which were recognised by the business international 

community. 

The IASC Council considers that the financial statements elaborated on the base of 

conceptual accounting framework answer the common necessity of the majority users, 

because they take the economical decisions which refer to: 

- determinate the moment when to be bought, to be conserved, or to be sold the parts of 

the capital; 

- verify the transaction or the board’s report; 

- estimate the enterprise capacity to remunerate the wage earners by paying the wages 

or offering other advantages; 

- estimate de guarantees which the enterprise offer to their creditors; 

- determinate the fiscal policy; 

- determinate the benefits distributed and the dividends; 

- elaborate and use the national statistics; 

- regularize the enterprise activities; 

If the members of accounting profession had reasoning and experience until appeared 

an accounting conceptual framework, after this appearance they could base on a reference 

instrument, capable to assist in their working. 

If the reasoning and the professional judge are proved to be utile and sufficient in the 

solving the known problems, they become insufficient in the inedited problems what appear 

with the changing of the economic and social field. More, a conceptual framework represents 

a “protection screen” between the accountant professionals and the public power with has the 

tendency to divest of their normalization role. 

IASB give the following objective to its conceptual framework: 

- to sustain the IASC Council in elaborating the future International Accounting 

Standards (IAS) and revising actually ones; 

- to sustain the IASC Council in promoting the harmonisation of the rules, standards 

and accounting processes for presenting the financial statements with realising of 

some important concepts so that to decrease number the accounting alternative 

treatments permitted by the IAS; 

- to sustain the national organisms in elaborating the standards, in processes of 

developing of a national standards; 

- to sustain the persons who realise the financial statements in concordance with IAS so 

that to solve the problems which don’t find here; 

- to sustain the auditors to form an opinion for conforming the financial situation with 

the IAS; 

- to sustain the users at the interpretation of the information presented in the financial 

statements elaborated in concordance with the IAS; 

- to provide the information to those interested about the IASB activity with reference 

of the elaborating the standards. 

In the paragraph no. 2, the IASC Council says that this framework isn’t an 

international accounting rule, so that, it doesn’t determine an evaluation or information 

standard, and in paragraph no. 3, the IASC Council defines in case that appear a conflict


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between framework and an international rule, the obligations anticipated by that rule prevail 

in this framework. 

The conceptual framework has a Preface and 110 paragraphs, which treat the 

following problems: 

1. Introduction; 

2. The objective of financial statements; 

3. The principal principles; 

4. The quality characteristics of financial statements; 

5. The elements which compose the financial statements; 

6. Recognising (taking in the account) the financial statements elements; 

7. The evaluation of the financial statements elements; 

8. The concepts of capital and maintain the capital; 

The financial statements objective, in concordance with the Conceptual Framework 

IASB, the paragraph no. 12, contains in the information given about the financial position, 

performance and changing the financial position of the enterprise utile for a large number of 

users in the economic decisions. 

Like in the conceptual American framework, the IASB conceptual framework defines 

that the financial statements are for the users only an element into the others, from the 

assembly of information asked for, and in the conceptual framework doesn’t refer to the 

annual account presentation according to the specific necessity of the users. To answer at the 

annual accounts objectives, the framework defines that for these elaborations it must be taken 

in calculation two suggestions: applying of the accrual basis and affirming of the continuous 

state of the enterprise activities in a predicable future. 

The paragraph no. 9 of the Conceptual Framework configures the financial statements 

users in 7 categories, defining the informational necessity like: 

1. Investors, the persons who report the capitals, “the capital bidders and their consultants”, 

ask for the financial statements to decide the moment for buying, to conserve or to 

issuance, and to obtain the information which permitted the determination of the 

enterprise capacity to pay dividends. 

2. The engaged are interested by the information about the enterprise stabilisation and its 

efficiency and the information about the wages level, the advantage offered by the 

enterprise for retiring, the nature and the opportunities capacity for employing them. 

3. The financial creditors are interested by the information about the defining how the loans 

and the rate of interest will be returned at the term. 

4. The producers and other commercial creditors are interested by the information which 

permitted to define if the sums which are owed them will be paid at the term, so that to 

continue their activities. 

5. The clients ask for the information about the continuing the enterprise activity, in special 

when they have relations with them for a long term, or when their activities are dependent. 

6. The Government and its institutes are interested by the information about the whole 

enterprise activity to establish the fiscal policy and to calculate the national income and 

others similar statistics indicators. 

7. The public ask for the information about the recent evolution and future tends of the 

enterprise, about its contribution at the local economy, especially for occupying the work 

force and about the rate paying by it in the local budget. The ecological movements and 

those about the consumer protection are also interested by the effects of enterprise 

activities in the environment. 

The information beneficiaries are divided in different ways, in concordance with the 

relation with the economical agent, respectively and/or the information type asked. 

So that, we can talk about:


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� The intern users of accounting and financial information (managers and engaged are 

their representatives), 

� The extern users (the shareholders, the creditors, the producers, the clients, the state, 

the public) 

� The intermediate users, representatives of financial analysers and speciality press. 

Schematically we can synthesise the financial and accounting information users in the 

scheme no. 1: 

Scheme no. 1. The users of financial and accounting information 

Bibliography: 

THE USERS OF 

FINANCIAL AND 

ACCOUNTING 

INFORMATION 

THE EXTERN USERS 

(The state, the clients, the 

producers, the shareholders, the 

creditors) 

THE EXTERN USERS 

(The engages, the managers, the 

society representatives) 

THE INTERMEDIATE USERS 

(The financial analyzers and the 

speciality press) 

1. N. Georgescu, Analiza bilantului contabil¸Editura Economică, Bucureşti, 1999; 

2. Standardele Internaţionale de Contabilitate, Editura Economică, Bucureşti, 2001; 

3. Cadrul general IASB pentru întocmirea şi prezentarea situaţiilor financiare.


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THE QUALITY CHARACTERISTICS OF THE INFORMATION 

PRESENTED IN THE FINANCIAL SITUATIONS 

Odi Mihaela Zarnescu, lect.univ. drd., 

Universitatea Spiru Haret, 

Facultatea de Contabilitate si Finante Campulung Muscel 

Abstract: In the vision of the IASB General Cadre, the qualitative characteristics of the financial 

situations are: the intelligibility, the relevance, the credibility and the comparability. 

The utility of the information presented in the financial situations is assured by the qualitative 

characteristics of them. 

These features are the main attributes that carry the utility of the information offered by the financial 

situations. The audibility is adverted to the fact that pieces of information presented the in financial situations 

are due to the intelligibly of users immediately. A piece of information is relevant if economic decisions of the 

users are influenced by it . 

The pieces of information are credibly when these don’t contain errors or elements that can drive to 

wrong interpretations, and the users trust in the pieces of information presented. 

The information is due to be comparable, in direction that the users are due to compare financial 

situations of a firm to temporally identify the tendencies in its financial position and performances. 

These characteristics are attributes which determine the utility of the in information 

offered by financial situations. Paragraphs 25-46 of the Conceptual Framework present four 

characteristics : relevance, credibility, comparability, intelligibility. 

The framework, also analyses the required restriction for the information to correspond 

to the twoo fundamental qualities: the relevance and the reliability. 

The intelligibility 

The paragraph no. 25 of Conceptual Framework says that the financial situations must 

be immediately understood by the users. For this, the users must have sufficient economic 

knowledge, book-keeping notions and to raise an interest for studying the presented 

information. 

The relevance 

The paragraph 26 says that a piece of information is relevant if this influences the user’s 

economic decisions, helping them assess the past the present or the future, confirming or 

correcting their prior evaluations. 

The pieces of information concerning the present level land the structure of their own 

capitals have value for investers wohen they try to foresee the firm capacity to act in bad 

situations. This means that the 2 values, the predictive and the retrospective one are dependent 

on relevance ( paragraph no.27). 

In the same sense is the paragraph no. 28 , which links the financial situation with the 

past and future firm’s performances, in the sense that the financial situation and the past 

firm’s performances may be used as a basis of or foreseeing of the financial situation and of 

the future firm’s performances, but also for other interesting fields for the users: the wages, 

the shares, etc. 

The shape of a piece of information relevance is influenced by its nature and importance 

( paragraph no.29). In some situations the nature of information is sufficient to assure the


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relevance; for example the information about the appearance of a new sector in the firm is 

sufficient to see the changes and risks, indifferently the size of the obtained results in the new 

sector or activity. 

In other situations, only the nature of operation isn’t sufficient to assure its relevance, 

this having to be accompanied by its importance; for example , the nature of a firm’s capitals 

must be accompanied by the sieze of information concerning the size of different kinds of 

capitals, own or borrowed. 

The paragraph no. 30 speaks about the importance of the information. The importance 

of the information is appreciated by the consequences on its omission or inaccurate economic 

decisions of the users. This apppreciation leads to the notions of „significant information” and 

„ limit of information”. 

The significant pieces of information are those whose omission or inaccurate declaration 

could influence, significantly, the decisions taken on them, the limit of significance depends 

on the size of tje element or of the error. Thus, the limit of significance represents more a 

limit than a qualitative attribute of the useful piece of information. 

The credibility ( fiability) 

As the Conceptual Framework IASB says in paragraph no. 31, a piece of information is 

credible wohen this doesn’t contain errors or elements which can lead towards wrong 

interpretations, and , thus , the users can trust it. 

There are also shades as concerning the credibility of a piece of information. Following 

the paragraph no. 32, a piece of information may have credibility, but less reliability after its 

nature or manner of represantation, for example: if in a law action, the validity and the value 

for a damage request is a serious dispute, taking into account the whole value of this piece of 

information may lead to same errors. It will be more convenient to have the size and the 

circumstances of the request. 

The paragraph 33-38 shows some criteria of credibility of a piece of financial 

information. Thus: the piece of information has to correctly present the transaction and other 

elements to be represented ( paragraph no.38). 

The profit and loss account has to present with accuracy the transactions and other 

elements from which the income and expences result when the accounts are closed. 

The piece of information has to correctly present the transaction and other events. It has 

to be book- kept and presented accordingly to its substance and economic reality and not only 

after its law form, this means that the priomordiality principle governs upon law principle. 

The piece of information has to be neutral and prudent. To be neutral, a piece of 

information has to be deprived of subiectivity ( paragraph no.36) , to serve equally to all 

groups of users the piece of information isn’t neutral if influences the taking into account of 

some decisions that can lead to obtaining an deliberate result. 

In essence , a piece of information is prudent if the principle of prudence was applied in 

book – keeping. 

The piece of information has to be exhaustive, in measure in which i sit allowed by its 

relative importance, because the lack of some elements may fake the information which lead 

to wrong economical decisions. 

The piece of information has to be verifiable, so it can assure the users that can be 

verified by authorised third persons. 

The paragraph 43-46 of the Conceptual Framework IASC show the limits of the credible 

and relevant pieces of information. 

The first limit refers to opportunity, that is to respect the terms when presenting the 

financial information. An inopportune piece of information may lead to loss of its pertinence. 

The inopportunity of a piece of information refers to either the presenting before knowing all 

the aspects connected to a transaction or event, or to its presenting with delay.


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In the latter case although the fiability is high, the utility is much affected. It is necessary 

a balance between the pertinence and fiability. 

The second limit refers to the balance between advantages which have to be superior to 

the necessary piece of informatin to be useful in taking decisions, the obtained advantages 

have to be superior to the necessary cost for producing them. This supposes some relativity. 

Other limit refers to the existance of balance between the quqlitative characteristics of 

the information. This balance is necesary especialy for the satisfaction of the financial 

situation objectives and it is more difficult to get , more the relatie importance of the 

characteristics is the result of the professional judgement. 

The pieces of information have to offer an accurate image or to present accurate 

financial situations, the firm performances and financial evolution, by realising the main 

qualitative characteristics and by applying the book – keeping rules. 

The comparability 

The piece of information included in the financial situations has to be comparable, the 

users can compare the financial situations in time, to identify the trends for financial position 

and its performances. 

The comparability may be assured also in space, that is the users can compare the 

financial situations of different firms in order to assess their financial position, their 

performances and financial position changes. 

One of the comparability implications is that the users must be informed about the used 

methods and about the evolution of these methods ( paragraph no. 40 ) ; in order to assure the 

comparability in time the financial situations, these have to offer pieces of information 

suitable for the previos periods( paragraph no. 42 ). 

The financial piece of information presented in the annual account address both to some 

well advised users and to other types of users. The latter wait for the pieces of information 

being useful in taking their decisions. 

The supplied pieces of information lose any utility if they don’t have the above 

mentioned qualities, but they don’t have all the above mentioned qualities. We have to 

imagine the utility of a piece of information as being a mixture of qualitative characteristics 

with variable weight. 

On the other hand, the changes in the changes in time and space of the users 

informational necessities determined by the changes in the business field turn a useful piece 

of information at a certain moment and characterised by different weights of its quality into a 

reconsidered piece of information, useful only with changed weights. 

The quality of the financial and bookkeeping information are presented below:


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THE QUALITY OF THE 

FINANCIAL AND BOOK- 

KEEPING INFORMATION 

RELEVANCE 

CREDIBILITY 

COMPARABILITY 

INTELLIGIBILITY 

Scheme no. 1 The quality of the financial and book-keeping information 

Bibliograph: 

1. Cotlet, D. – Situatiile financiare ale intreprinderii, editura Orizonturi Universitare, 

Timisoara, 2003 

2. Dutescu, A.- Informatia contabila si piete financiare de capital, Editura Economica, 

Bucuresti, 2000 

3. Lezeu, D.N. – Analiza situatiilor financiare ale intreprinderii, Editura Economica, 

Bucuresti, 200


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THE ROLE OF IAS 17 IN HARMONIZATION OF FINANCIAL LEASE 

IN INTERNATIONAL LEVEL 

Mihaela Tulvinschi University Reader 

Marian Socoliuc University Assistant 

Veronica Grosu University Assistant 

“Stefan cel Mare” University of Suceava 

Abstract 

Le leasing est un accord par lequel le société de leasing transfère qu locataire en échange d'un payement 

périodique nome tranche de leasing, le droit d'utiliser un bon pour une période de temps convenue. À la fin de 

cette période de leasing le société de leasing s'oblige á respecter le droit d'option de l'utilisateur de pouvoir 

acheter le bon, de pouvoir prolonger le contrat de leasing et de cesser les rapports contractuels. 

Sur le plan international la comptabilisation des contrats de leasing est réglementée par la norme IAS 

17 – Contrats de location. Conformément á cette norme, un contrat de location – financement est un contrat qui a 

comme effet le transfère au locataire du cvasitotalité des risques ainsi que des avantages inhérents au propriété 

d'un actif. N'importe quel contrat de location qui ne réponde pas à cette définition – est un contrat de location – 

exploitation. La difficulté principale de leasing réside en l'opposition entre la conception économique et la 

conception juridique. Cette difficulté est difficile à résoudre parce que le leasing représente le capital sous une 

forme double. 

Donc, du point de vue juridique, le bon représente un capital technique à la disposition du locataire. En 

séparant la propriété de l'exploitation du bon, le leasing finance le capital technique par les rentes assurées de son 

exploitation. 

The term “leasing”, etymologically Anglo-American, is a notion used recurrently by 

economists and jurists, no matter where they are geographically. Aristotle, in his writing 

“Rhetoric”, was noting, “Wealth is not in assets ownership, but in the manner in which one 

82 

chooses to use them.” This idea illustrates clearly the economic coreF 

F of leasing – to obtain 

profit, it is not necessary to own the assets; it is sufficient if you own the right to use them and 

to generate income. The lease stands for an agreement through which the lessor transfers to 

the lessee, in return for a regular payment called leasing rate, the right to use an asset for a 

pre-determined time interval. At the conclusion of the leasing time interval, the lessor 

assumes the responsibility of observing the lessee’s right of opting for purchasing the asset, 

for extending the leasing contract and for ending the relations stipulated by contract. 

At the international level, the IAS 17 Standard “Finance Lease” regulates lease 

accounting. According to this standard, “a finance lease is a lease resulting in the substantial 

transfer to the lessee of all the risks and rewards incident to ownership. Any lease that does 

83 

not match this definition is an operating lease.”F 

A finance lease operation develops in three stages. In the first stage, the lease 

company acquires from the suppliers, according to a sale – purchase contract, the assets that 

form the lease object, according to the conditions clearly stated by the lessee. The lessor has 

82 Adrian Liviu Alexe – Reglementari privind operatiunile de leasing, Editura Centrului de Informare si 

Documentare Economica, Colectia Bibilioteca Economica 2006 

83 B. Roffournier – Normes comptables internationalles, Ed. Economica, Paris, 1996


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the obligation to guarantee to the lessee the possibility of negotiating with the supplier the 

contract corresponding to the asset that is going to form the object of usage. In this manner, 

the lessee engages in direct relations with the producer – seller, who will communicate a 

series of aspects concerning the corresponding asset, such as technical-economical details, 

selling price, term of guarantee and the delivery location. 

In the second stage, the lease company pays off the money due to the supplier, thus 

becoming the owner of the asset. Next, it elaborates the lease contract and makes the asset 

available for the lessee. From the moment that the lease starts generating its effects, the lessee 

uses the asset and pays off the lease rates. 

The last stage concerns the possibilities the user might have at the end of the lease 

contract. He or she may return the asset to the lease company; he or she may ask for the 

renewal of the contract for a new term and price or may ask for purchasing the asset. 

84 

The IAS 17 international standard makes clear a set of finance lease features:F 

- the finance lease contract stipulates that the ownership of the asset will transfer to the 

lessee, at the end of the contract; 

- the lessee has the possibility of purchasing the asset at a price appreciated as being 

small enough as compared to its fair value, at the moment that the option becomes 

pursuable, so that, at the inception of the lease contract, the guarantee that the option 

will be performed exists in a reasonable manner; 

- the lease term covers, for the greatest part, the economic life of the asset, even if the 

ownership title is not transferred; 

- at the inception of the lease, the updated value of the minimum lease payments is 

equal at the least or higher than the entire fair value of the asset that forms the object 

of the lease; 

- the assets that form the object of the lease are of a special nature, in such a manner that 

only the lessee can use them without major modifications 

85 

To what concerns the practiceF 

F in other European countries, information from the National 

Bank of Romania indicates that the majority of the member states of the European Union 

practice a particular type of regulation and supervision of the lease. However, there is no 

standard pattern at the European level. One can notice that in many countries there is no 

86 

special lawF 

F to regulate the juridical system applicable to lease operations. This does not 

mean that these countries do not use the lease. The lease applies at a large scale, having at the 

basis civil or commercial right standards, or the rules applicable to certain named contracts, 

also considering the tax and accounting legislation concerning leases. 

In countries such as France, Greece, Portugal, Spain and Sweden, the lease activity is 

under the supervision of the central bank, whereas in Germany, Belgium, Finland and Turkey 

there is a distinct authority for this purpose. 

In addition, there are countries that do not have an authority concerning the regulation and 

supervision of the lease activity, such as the Great Britain, Austria, Ireland, the Netherlands, 

Poland, Russia, Switzerland, Slovakia, or the Czech Republic. 

In the USA, a lease is a finance lease for the lessee, if it meets one of the following 

87 

criteria:F 

- the lease asserts that asset ownership will transfer to the lessee, in a free of charge 

manner, at the end of the contract; 

84 

xxx International Standards for Finance Reporting 2005 including International Standards for Accounting and 

their Interpretations, January 1 st , 2005 

85 

The Financial Yearbook 2006 – supplement for the Financial Journal 2006 

86 

Tita-Nicolescu, Gabriel – The Juridical Conditions of Lease Operations. Publisher ALL BECK, Bucharest, 

2003, p. 17-19. 

87 

Liliana Malciu – In-depth Accounting, Ed. Economica, Bucharest, 2000


ISSN: 1842-4856 

- the owner gives the lessee the option of asset purchase, at a cost very low under the 

fair value of the asset at the date when the option can be exercised; 

- the lease covers at least 75% from the economic life of the asset; 

- the updated value of the minimum payments, at the date of the activation of the 

contract, is equal to or higher than 90% of the asset fair value, at the same date 

The lease is a finance lease for the lessor if, apart from the conditions enumerated previously, 

the following two are also fulfilled: 

- the return of the amount owed by the lessee is reasonably predictable; 

- there are no major uncertainties as concerns the value of the costs without return 

remained in the responsibility of the lessor 

The providing of fiscal facilities, the accelerated liquidation and the investment fiscal 

facilities (up to 10% from the investment value was deducted from the tax total) represented 

the determining elements, which have secured a rapid dynamics for the lease market. 

However, one could benefit from the right to such facilities only when the lease was 

88 

corresponding to the regulationsF 

F set through lease operations by the Finance Ministry in the 

USA: 

- the lease term should be smaller than 30 years; 

- the purchase of lease items should take place at a price lower than the one set on the 

market; 

- the graphic of the rate lease payments should not register a declining dynamics; 

- the lease has to offer to the lessors a normal profit; 

- the extension of the lease has to be made at an optimum price of the equipment 

Currently, operators of the lease market in the USA can be grouped in three basic segments: 

- the independent lease companies; 

- the lease companies founded by financial and credit institutions, and 

- the lease companies founded on the equipment producers 

89 

In the Great Britain, a finance lease has to meet the next conditions:F 

F 

- the lessee has to bear all the losses caused to the lessor in the event of the cancellation 

of the contract at this or her specific request; 

- the lessee has to take advantage of the fluctuation of the residual value of the asset; 

- the lessee has the possibility to obtain a second lease in return for a set of insignificant 

rents; 

- the lease term is approximately equal with the useful life of the asset; 

- the lease asset is specific to the lessee’s activity and could not target another activity 

without suffering critical modifications 

In France, according to the note no. 29 of the Order of the Accounting Experts, in order 

to qualify as a lease, a contract has to meet one of the following conditions: 

- the contract states that the asset ownership will transfer to the lessee at the end of the 

lease term; 

- the owner gives the lessee the option of asset purchase and the conditions of option 

exercise are advantageous enough; 

- the lease term covers the greatest part of the asset life; 

- the updated value of the minimum payment is close to the fair value of the lease asset, 

at the date of the signing of the lease 

France is the follower of the conception of the economic owner. Generally, the option is 

the mandatory condition of the lease. The economic owner is the one who has the exclusive 

88 Adrian Liviu Alexe – Regulations concerning the lease operations, Ed. Centrului de Informare si Documentare 

Economica, Colectia Biblioteca Economica 2006, p. 44. 

89 N. Feleaga, Compared Accounting Systems, second edition, vol. 1, Ed. Economica, 1999; Klee, Lavoyer – 

Contrats de locations et equivalence d’information, Revue de droit comptable, 95-1


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right of using an asset, throughout its normal life, in the same manner in which the owner of 

the legal title is excluded from the use of that asset. 

90 

In FranceF 

F, any lease that includes at the expiry the option (the redemption right in return 

for the residual costs) is viewed as a crediting transaction. The important thing is that such 

transactions are regulated by the state through these procedures. The French legislation does 

not allow the asset producer to effect lease transactions. 

In individual accounts, the lease asset cannot appear amidst the lessee’s assets, because he or 

she is not an owner as long as he or she has not made use of the purchase option. The dues are 

registered in the profit and loss account. In the consolidated accounts, the accounting 

treatment of the finance lease is similar to the one included in the international standard IAS 

17. 

In Spain, a lease is a finance lease when, having in mind the economic circumstances of 

the lease, there are no reasonable doubts to that concerns the exercising of the purchase 

91 

option.F 

F The conditions to remove reasonable doubts are mentioned by the Spanish 

organizing entity, which presumes the purchase intention if one of the following conditions is 

met: 

- the lease includes a purchase option at a price significantly inferior to the estimated 

value of the asset at the date of the option exercising; 

- the lease term is equal with the economic life of the asset; 

- the updated value of the lease is equivalent to the asset value (the asset value is 

represented by the normal selling price). 

The general accounting Spanish planning treats the lease in an original manner. On the one 

hand, the lease asset is registered amongst the lessor’s assets. On the other hand, the lessee 

registers in this or her assets the right to use and the right to opt for the purchase of the assets 

used in lease conditions. At the same time, in passive mode, the due and the option price are 

registered. The difference between active and passive, residing in the financial expenses of the 

operation, will be accounted for in an expenses post to be distributed along a greater number 

of exercises. 

The rights registered in the form of unsubstantial fixed assets are liquidated according 

to the useful life of the lease asset. The holding of the asset life span for the computation of 

the liquidation has at the basis the assumption that that the lease term is equivalent with the 

asset life, as well as the presupposition that the lessee will exercise the purchase option and, 

since he or she becomes an owner, will be able to continue the use. In the exercise of the 

purchase option, the value of the registered rights and of the afferent cumulated liquidations 

transfers to the value of the acquired asset. 

In Belgium, for one to view a contract as a finance lease, the regulations require the 

meeting of three conditions: 

- the asset that forms the object of the lease has to have been acquired by the lessor 

according to the specificities demanded by the lessee; 

- the lease term has to be equivalent to the asset life; 

- the lease has to include the transfer of the property at the end of the term or a purchase 

option 

The criteria susceptible of seizing the economic ownership of the asset upon the juridical 

ownership are the following: 

- the lease cannot be cancelled; 

- the dues and the option price cover the entire reconstruction of the capital invested by 

the lessor; 


Economica, Colectia Biblioteca Economica 2006, p. 42. 

91 O. Amat, J. Blake, Contabilidad creativa, 3 edition, Gestion, 2000


ISSN: 1842-4856 

- the ownership of the asset transfers at the end of the contract to the lessee or the lease 

includes a purchase option for the lessee 

In Germany, the lease analysis starts from the notion of economic property. Thus, 

according to tax law, it is necessary to register an economic asset in the user’s balance sheet 

when this one controls the asset in such a manner that, at the economic level, he or she may be 

able to remove the impact of the juridical ownership of this asset throughout its regular useful 

life. Such a control corresponds to the situation in which the user owns, from a physical point 

of view, the asset and assumes the risk connected to the diminution of the value or benefits 

from the chance of an increase in the asset value. It follows that, in this case, the eventual 

return of the asset to the lessor, at the end of the lease, is empty of economic significance. 

In Romania, the process of classification of the lease transactions focuses on the 

principle of the “prevailing of the economic over the juridical”. This means that it needs to 

have at the basis the extent to which the risks and rewards incident to the ownership rights of 

an asset that forms the object of a lease belong to the financier (lessor) or to the user (lessee). 

According to this criterion, the lease may be: 

- finance lease: the lease operation that transfers, to a great degree, all the risks and 

rewards incident to the ownership title; 

- operating lease: the lease operation that does not transfer, to a great extent, all the risks 

and rewards incident to the ownership title 

The Romanian legislation concerning finance lease accepts the economic approach for the 

accounting of such contracts. Lease operations may have as an object fixed assets, as well as 

mobile assets of long-term use, integrated in the civil circuit, with the exception of the audio 

and video registrations, of theater representations, of manuscripts, of patents and of authorship 

rights. 

The reference terms and phrases with which one will operate in the domain of finance 

leases, according to the Romanian legislation are the entry value, the lease rate, the residual 

value of the acquired lease asset and the lease total value. 

The entry value of the asset acquired in lease conditions is represented by the acquisition cost 

of the asset. 

The lease rate, in the case of the finance lease, stands for the part-rate from the entry 

value of the asset and of the lease interest. The lease interest is the average rate of the bank 

interest on the Romanian market. Such a method of setting the lease rate concerns only the 

situations when the lessor (the lease company) is a Romanian juridical entity. In the case 

where the lease company is a foreign juridical entity, one cannot force upon it the Romanian 

legislation. Subsequently, the lease rate will be negotiated. 

The residual value of the asset acquired in lease conditions stands for the value at 

which, at the end of the lease, one can transfer the ownership right of the asset to the user. 

The total value of the lease comprises the total value of the lease rates to which one 

will add the residual value. 

The essential feature of the finance lease between residents, from an accountable 

perspective, is in the fact that at the handing over – receiving of the assets in lease conditions, 

they will generate financial immobilizations for the lessor accounting, and loan capital for the 

lessee accounting. To delineate the financial immobilizations, the lessor will use the accounts: 

2675 “Loans on the long term” and 2676 “The rate incident to loans on the long term.” In the 

lessee accounting, the loan capital generated by the finance lease operation will reflect in the 

accounts: 167 “Other assimilated loans and debts” and 1687 “Rates incident to other 

assimilated loans and debts.” 

According to the Romanian tax legislation, a finance lease is any lease that meets at least one 

92 

of the following conditions:F 

92 The Fiscal Code and The Methodological Standards of Application in 25.03.2007


ISSN: 1842-4856 

a) the risks and rewards of the ownership right of the asset that forms the object of lease 

transfer to the user when the lease generates effects; 

b) the lease clearly states the transfer of the ownership right of the asset that forms the 

object of lease to the user when the lease expires; 

c) the user has the option to purchase the asset at the end of the lease, and the residual 

value in percentage form is lower than or equal to the difference between the normal 

maximum operating term, also in percentage form; 

d) the lease term extends over 80% from the normal term maximum operating term of the 

asset that forms the object of the lease; according to such a definition, the lease term 

includes any time interval for which the lease can be extended; 

e) the total value of the lease rates, except form the additional expenses, is higher than or 

equal to the entry value of the asset 

The operating lease stands for the prevailing of the juridical over the economic, in the 

sense that that asset of an immobilization nature, which form the object of the lease, remain in 

the ownership of the lessor (the lease company), where they are registered as immobilizations. 

Whereas the lessor liquidates the corresponding immobilizations, the lessee delineates them 

outside the balance sheet, in the order and evidence account 8036 “Dues, administration 

location, rents and other assimilated debts.” 

A comparison between the manners of approaching the finance lease in different countries 

delineates a series of criteria for the identification of the finance leases. The most frequently 

used criteria at the international level are the lease term related to the value of the lease asset, 

the existence of a purchase option the exercising of which can or cannot be proven, and the 

financial equilibrium of the lease. Even if these criteria are specified in more countries, they 

have at their basis rationales that differ from one country to the other. Thus, while in one 

country a certain criterion is viewed as sufficient, in another one, the same criterion can be 

viewed as an additional condition apart from the complying with of other conditions or as a 

necessary, but not sufficient condition. Even when a criterion is established by standards in 

various countries, it can be interpreted or applied in different manners. 

To what concerns the operating lease, the existing tax legislation states that one can 

define it as any lease signed between lessor and lessee, which transfers to the lessee the risks 

and rewards of the ownership right, except for the risk of the asset valuing at the residual 

value. Moreover, it does not meet any of the conditions stipulated with the finance lease 

(points b-e). The risk of valuing the asset at the residual value exists when the purchase option 

is not exercised at the inception of the lease or when the lease stipulates clearly the return of 

the asset when the lease expires. 

In the case of the finance lease, the user is treated from the fiscal perspective as an owner, 

while with the operating lease, the lessor owns this quality. The liquidation of the asset that 

forms the object of a lease is done by the user, in the case of the finance lease, and by the 

lessor, in the case of the operating lease, while the expenses are deductible. In the case of the 

finance lease, the user deducts the interest, whereas with the operating lease, the lessee 

deducts the rent (the lease rate). The fiscal code with applicability from the 1 st of January 

2007 brings important changes to what concerns the lease issue. 

93 

In Romania,F 

F according to the project concerning the modification of the Fiscal Code, 

the lease will stick to being treated as service supplying, regardless of its finance or operating 

nature, as it has been treated until recently. The lessor will continue applying VAT at the 

falling due of each lease rate. However, this will be applicable both to the capital component 

and to the interest 

93 Financial Yearbook, Supplement of the Financial Journal 2006


ISSN: 1842-4856 

component,the latter not being excluded any longer from the tax base of VAT. Another 

important aspect concerns the fact that the interest will not be included in the taxable value of 

lease services for the leases signed prior to first of January 2006. The existing methodological 

standards in the lease area have generated important modifications to what concerns real lease 

as well, which will be treated as an operation exempt of VAT. Thus, it will lose the right to 

deduct the VAT incident to the acquisition or the construction of the real estate property. 

The VAT deduction for these operations applies according to the adjustment principles of the 

deduction right for capital assets. The risk commissions, according to the new legal 

regulations, become mandatory for all categories of non-banking financial institutions, 

including the finance lease companies. To what concerns operating lease companies, they will 

function freely, distinctly, as commercial firms, without entering the incidence of the NRB 

authorization and supervision. This clear delineation, similar to the large European markets, 

will make possible an ample development of the operating lease, primarily expected in the 

real estate area. 

The analysis of the Romanian legislation concerning the lease indicates the existence 

of both opportunities and obstacles that contribute to or impede the development of the lease 

as a form of investment activity. 

94 

Table No. 1 Legal opportunities and impedimentsF 

Opportunities Impediments 

- The existence of an organic law 

concerning the lease; 

- The conferring of fiscal facilities and 

of other incentives to small and 

medium enterprises in the case of 

acquiring modern and import 

equipment and technologies; 

- The existence of regulatory acts that 

protect the ownership interests of the 

parts and that prevent potential frauds 

of the parts by using lease operations 

- The lack of consistency between a 

series of existing regulatory acts; 

- The insufficient (inaccurate) 

application of the law; 

- The instability of legislation 

- Complications in the case of the 

forced collection (forced execution) of 

the lease falling due; 

- Not having adhered to the Ottawa 

Convention; this generates suspicions 

from the foreign companies, when it 

comes to signing international lease 

operations 

In the case of the finance lease, the user is treated from the fiscal perspective as an owner, 

while with the operating lease, the lesser owns this quality. The liquidation of the asset that 

forms the object of a lease is done by the user, in the case of the finance lease, and by the 

lesser, in the case of the operating lease, while the expenses are deductible. In the case of the 

finance lease, the user deducts the interest, whereas with the operating lease, the lessee 

deducts the rent (the lease rate). The fiscal code with applicability from the 1 st of January 

2007 brings important changes to what concerns the lease issue. 

In conclusion from the aspects presented, one can notice that, to what concerns the 

accounting, at the international level, of the finance leases, there are two conceptions: the 

juridical conception and the economic conception. The juridical conception is particularly 

supported by France. The supporters of the juridical conception consider that the balance 

sheet has to reflect the situation of the ownership of the business. According to it, the asset 


Economica, Colectia Biblioteca Economica 2006, p. 49.


ISSN: 1842-4856 

acquired in lease conditions cannot be registered in the lessee’s balance sheet because he or 

she is not the juridical owner. 

Bibliography: 

[1]. O. Amat, J. Blake, Contabilidad creativa, 3 edition, Gestion, Paris, 2000 

[2]. Adrian Liviu Alexe – Regulations concerning the lease operations, Ed. Centrului de 

Informare si Documentare Economica, Colectia Biblioteca Economica 2006 

[3]. N. Feleaga, Compared Accounting Systems, second edition, vol. 1, Ed. Economica, 1999 

[4]. Klee, Lavoyer – Contrats de locations et equivalence d’information, Revue de droit 

comptable, 95-1 

[5].Liliana Malciu- In-depth Accounting, Ed. Economica, Bucharest, 2 000 

[6].Tita-Nicolescu Gabriel – The Juridical Conditions of Lease Operations, Publisher ALL 

BECK, Bucharest, 2003p .l7-19 

[6]. B. Roffournier - Normes comptables internationalles, Ed. Economica, Paris, 1996 

[7l. xxx Standarde Internationale de Raportare Financiara incluzand Standardele 

Internationale de Contabilitate si Interpretarile lor la 1 ianuarie2 005, Editura CECCAR, 

Bucuresti 

[8]. xxx - Ordinul Guvernului Romaniei nr.51/1997 privind operatiunile de leasing si 

societatile de leasing aprobate si modificata prin Legeanr.90l199c8u, modificarile ulterioare 

[9]. xxx Codul fiscal si Normele metodologice de aplicare din 25-03-2007 

[10]. xxx Anuarul financiar 2006- Supliment al Ziarului Financiar 2006


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THE ROMANIAN RANGING AT THE EUROPEAN'S UNION 

OBJECTIVES IN THE CONTEXT OF DOHA DEVELOPMENT 

AGENDA 

Zamfir Paul Bogdan Asist. univ. drd.Asist. univ. drd. Facultatea de 

Ştiinţe Economice Universitatea ”Constantin Brâncuşi” Târgu-Jiu 

Abstract: Further multilateral trade rule making, market opening, the integration of developing countries 

in the world trade system and the improvement of the functioning of the WTO remains a primary objective of 

EU trade policy. Hence, the basic EU priorities in the DDA are as follows: 

* On market access for industrial goods, the EU wants to do away with high tariffs, tariff peaks and tariff 

escalation, so as to significantly increase trading opportunities, both for north-south as for south-south trade. 

This objective should be achieved through tariff reduction according to a mathematical formula applied to all 

tariff lines, ensuring a similar level of tariff reduction across the board. 

* Further market access negotiations on services should bring considerable and real market opportunities for 

business as well as benefits to consumers world-wide. However, the EU does not seek general deregulation or 

privatisation of sectors where principles of public interest are at stake, and the EU is also committed to defending 

the right of WTO members to promote cultural diversity. 

* The European Union is nonetheless determined to further reduce all forms of domestic support provided to 

farmers in developed countries, eliminate export subsidies by 2013 and lower tariff for agriculture products 

imports. 


The Doha Agenda continues the Uruguay Round’s expansion of tradnegotiations into 

behind-the-border policies, regulations, and institutions. This distracts attention from the part 

of the Agenda most directly linked to poverty reduction and economic development: removal 

of distortions to agricultural tradeand of import restrictions on industrial goods—by 

developing as well as developed countries. Behind-the-border areas are important for 

development but, Uruguay Round experience indicates that trade negotiations provide here 

atroubled approach to development. On these, development institutions should lead. They are 

more comfortable with the necessary technicalities of projectdesign and cost-benefit analysis. 

Development institutions’ legalities are country-specific and project-specific, more suited to 

the one-off problems and trialerror rhythm of what is needed than is WTO’s generic approach 

to legal obligation. If there is momentum behind the development dimensions of the 

newareas, then the trade dimensions can be managed; but one cannot push thestring [1].The 

World Trade Organisation's fourth Ministerial Conference in Doha (Qatar) in November 2001 

resulted in some far-reaching decisions on the future development of the WTO: Launch a 

new round of trade negotiations - the Doha Development Agenda (DDA) - comprising both 

further trade liberalisation and new rule-making, underpinned by commitments to strengthen 

substantially assistance to developing countries.Help developing countries implement the 

existing WTO agreements; Interpret the TRIPS (Trade Related Aspects of Intellectual 

Property Rights) Agreement in a manner that ensures Members' rights under TRIPS to take


ISSN: 1842-4856 

actions to protect public health. Overall, the Doha Development Agenda takes the WTO into a 

new era. Not only will the WTO continue to improve conditions for worldwide trade; it will 

also, through enhanced and better rules, be able to play a much fuller role in the pursuit of 

economic growth, employment and poverty reduction. Better international governance and the 

promotion of sustainable development is the ambitious backdrop to the agenda. The EU 

firmly stands to push this agenda to a successful conclusion. 

2. European Union's objectives în the Doha Development Agenda 

Further multilateral trade rule making, market opening, the integration of developing 

countries in the world trade system and the improvement of the functioning of the WTO 

remains a primary objective of EU trade policy. Hence, the basic EU priorities in the DDA are 

as follows[2]: 

* On market access for industrial goods, the EU wants to do away with high tariffs, tariff 

peaks and tariff escalation, so as to significantly increase trading opportunities, both for northsouth 

as for south-south trade. This objective should be achieved through tariff reduction 

according to a mathematical formula applied to all tariff lines, ensuring a similar level of tariff 

reduction across the board. 

* Further market access negotiations on services should bring considerable and real market 

opportunities for business as well as benefits to consumers world-wide. However, the EU 

does not seek general deregulation or privatisation of sectors where principles of public 

interest are at stake, and the EU is also committed to defending the right of WTO members to 

promote cultural diversity. 

* Contrary to what many may think, Europe is the biggest importer of agricultural goods 

worldwide and it is also the world’s largest importer of farm products from developing 

countries: it imports from developing countries as much as the US, Japan, Canada, Australia 

and New Zealand taken together. The European Union is nonetheless determined to further 

reduce all forms of domestic support provided to farmers in developed countries, eliminate 

export subsidies by 2013 and lower tariff for agriculture products imports. 

* The EU strongly believes that the DDA will only succeed if it makes a real difference to 

the development opportunities of individual members, makes a tangible contribution to 

international efforts in favour of sustainable development and increases the coherence of 

action between the WTO and other international organisations such as the World Bank, the 

United Nations Conference on Trade and Development (UNCTAD) and the International 

Monetary Fund. 

The EU is also committed to finding workable solutions to Developing Countries 

(DCs) concerns about implementation of existing WTO agreements as well as to their 

proposals for specific actions for Special and Differential Treatment. The EU is dedicated to 

supporting developing countries in their efforts to integrate trade into their national 

development policies, programmes and poverty reduction strategies, through the provision of 

trade-related assistance to help DCs participate in the negotiations, to implement the results of 

the DDA, and to build up their trade capacity. The EU is engaged in a continuous effort to 

ensure that trade-related development aid responds to the actual needs of developing 

countries, be it through its own development assistance programmes, or through bilateral or 

multilateral assistance. The EU is committed to continue increasing its aid for trade up to 1 

billion EUR per year by 2010. 

Protecting the environment, social development, and consumer concerns are key 

elements of the sustainable development agenda. Increased coherence between trade and 

environment should be pursued in the DDA.


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Updating the world trade rulebook is a pre-condition for a fair, predictable and 

transparent rules-based system to govern world trade and investment. 

Ongoing WTO trade talks, the Doha Development Agenda. Trade can contribute 

positively to the Millennium Development Goals1 through its impact on economic growth. 

The World Bank estimated that a pro-poor outcome of the current Doha Development Agenda 

(DDA) could increase global income by up to € 300 bn, with half accruing to developing 

countries. However, the world's poorest countries have not always been able to fully benefit 

from the trade opportunities offered by the multilateral trading system. WTO Members have 

therefore agreed to put the issue of development at the heart of the next WTO negotiations, by 

launching the Doha Development Agenda. The DDA aims at improving market access and 

establishing rules that help foster development and increase developing countries' 

opportunities to take advantage from further trade liberalisation. For this reason development 

is the one single theme that runs through all elements of the DDA Work Programme. 

With this aims in mind the EU has tabled important pro-development proposals in Geneva, 

including: 

2.1. Market access for industrial products 

The EU proposes advancing meaningful liberalisation across all non-agricultural 

products, which represent over 70% of developing country exports, by eliminating tariff peaks 

and high tariffs, and significantly reducing tariff escalation. 

The EU intends to fulfil the promise of the Doha Mandate in this negotiating area to the 

following ways: 

• real new market access for all, with the largest opportunities for Least Developed 

Countries (LDCs) through tariff and quota-free access offered by both developed and if 

possible most advanced developing countries; 

• developing countries should contribute on the basis of their capacity and should 

benefit from flexibilities in the application of reduction modalities. This translates into a 

higher effort for developed Members than developing ones; 

• LDCs and other weak and vulnerable Members in a similar situation, should not have 

to reduce their tariff, but just bind them; 

• developing countries who have made efforts to open their markets should get 

recognition for this. On this basis the EU has proposed to apply a non-linear Swiss formula, 

achieving deeper cuts on higher tariffs, as well as sectoral initiatives on labour-intensive 

products of export interest to developing countries, such as textiles, clothing and footwear, to 

bring tariffs on these products as close to zero as possible. 

Reduction of tariff barriers between Developing Countries (DCs) is of the utmost importance 

since today 70% of tariffs paid by developing countries are paid to other developing countries. 

Furthermore, South-South trade has the highest potential to bring major benefits to 

developing countries: today trade between DCs is growing twice as fast as global trade and 

already represents 40% of their exports. This latter figure corresponds to 10% in Sub Saharan 

Africa, where the huge challenge concerns the development of regional markets, hence the 

important role of EPAs to support regional integration. 

It is also crucial that the more advanced developing countries, e.g. members of the G20, open 

their market more significantly and provide increased opportunities for the weakest Members 

as this could help to compensate for preference erosion in their traditional markets, i.e. the 

developed countries. 

Non Tariff Barriers (NTBs) are of extreme importance to developing countries, and 

this is why the EU is fully committed to negotiating their elimination and exploring the scope 

for more horizontal mechanisms to deal with trade-restrictive barriers. However, several 

"NTBs" of concern to developing countries exporters are legitimate requirements (such as


ISSN: 1842-4856 

health and safety standards for food) so there is no scope to negotiate these away. The EU is 

aware of the difficulties that export duties imposed by some Members have created for some 

developing countries and the strengthening of their industrial base. This is why the EU 

advocates to eliminate export duties. 

2.2.. Agriculture 

The EU firmly believes that further opening and expansion of trade for agricultural 

products is an important contribution to sustained and continued economic growth for all 

countries. These objectives are perfectly in line with the Doha Declaration on agriculture 

which matches the need to establish a fair and market-oriented system with the recognition of 

Special and Differential Treatment for developing countries as well as of non-trade concerns. 

Agriculture liberalisation will however not have the same impact on all developing countries: 

the most competitive exporting developing countries are likely to increase their market share, 

while less competitive developing countries exporters will face new more aggressive 

competition from those countries[3]. 

The EU is fully aware of the importance of the agricultural sector in the developing 

countries. They can therefore count in the DDA on substantial reduction of trade distorting 

domestic support in developed countries, improved market access and on the elimination of 

export subsidies. In July 2004, the EU made a substantial step forward in the framework of 

the WTO talks by committing to phase out its export subsidies as long as all forms of export 

subsidisation are eliminated[4]. 

Developing Countries defensive interests are also satisfied: all developing countries 

will benefit from a special and differential treatment (SDT) across the board (longer 

implementation periods for all commitments, lower tariff and subsidy cuts). Although these 

provisions will hamper the liberalisation process and limit south-south trade, the EU has 

always been in favour of these provisions, with criteria to be negotiated in order to avoid an 

"open ended" approach[5]. 

2.3.. Services 

In the trade in Services negotiations the EU has taken account of the interests of 

developing countries in its requests and offers, by modulating its requests according to the 

level of development of individual countries. For LDCs in particular, it has made requests in a 

small number of sectors focussing on key infrastructure services, such as financial services, 

telecommunications and transport. In its offers, the EU has put a strong focus on business 

services and on the temporary movement of people who provide particular services on a 

contractual basis in the EU. 

The EU is keen to strengthen the domestic services capacity of developing countries and 

respects their right to determine their own domestic regulation and safeguard public services. 

3. Trade Facilitation 

WTO rules protect developing countries against discriminatory practices and ensure 

that beneficial reforms and policies are kept in place and not reversed. 

Developing countries interests should be even better reflected, not only in the current 

WTO rule-book but also in the rules established in the new areas. In July 2004 WTO 

members have agreed to launch negotiation on Trade Facilitation in order to improve WTO 

rules and technical assistance in this area. Time and money are wasted because of outdated


ISSN: 1842-4856 

customs and border procedures and practices. The cost of such procedures can reach 4-5% of 

the overall cost of trade transactions, which is about the same as the current developed 

countries’ average tariff on trade in industrial goods. Halving the costs could mean 

considerable saving. Trade Facilitation could bring substantial development benefits: for 

business, the benefits are widely accepted. It promotes transparency, cuts red tape and stops a 

proliferation of incompatible requirements in export markets. For government, Trade 

Facilitation strengthens security through more effective controls, improves the investment 

climate and promotes higher customs revenues. On this latter point, revenue loss from 

inefficient border procedures in some developing countries may exceed 5% of GDP. In 

particular, landlocked developing countries are likely to gain from improved transit practices 

which will reduce their costs to access foreign markets. The negotiations will also aim at 

enhancing technical assistance and support for capacity building in this area, a field in which 

the EU is a leading donor. 

4. Special and differential treatment 

The WTO Agreements contain provisions, which give developing countries special 

rights as well as exemptions to WTO obligations. The "special and differential treatment" 

principle states that any new rule must take account of the prevailing circumstances of 

developing countries[6]. The EU approach is to increase flexibility vis-à-vis the developing 

countries, without creating a two-tier WTO. We should ensure that developing countries are 

better able to apply any new rule we negotiate in the Round, and integrate better into the 

global economy as a result. 

Improved market access and rules are not in themselves sufficient. Many developing 

countries also need assistance to improve their capacity to use the trading opportunities 

offered by the multilateral trading system. An crucial element of capacity building for 

developing countries is to make trade an integral part of their national development policies, 

programmes, and poverty reduction strategies. The European Union identified the integration 

of trade in development as one of the priorities of its development policy. It now includes 

trade in its Country and Regional Strategies. Developing country members of the WTO 

should also have the capacity to fully participate in and benefit from the ongoing negotiations. 

The EU is the main provider of Trade Related Assistance worldwide. This includes 

strengthening basic infrastructure to trade and addressing supply side constraints. 

The WTO membership set up a "Global Trust Fund" to deliver technical assistance 

and training. The EU has demonstrated its commitment to enhancing the negotiating capacity 

of developing countries by providing over 60% of the total funds. The EU is committed in 

supporting the Integrated Framework (IF) for the Least Developed Countries, a multi-agency, 

multi-donor program that assists the least developed countries to expand their participation in 

the global economy. The IF program was first mandated by WTO Singapore Ministerial 

Conference in December 1996 and was inaugurated in October 1997. In 2003, 2004 and 2005 

the European Commission funded a four week training programme for some 40 negotiators 

and administrators from developing countries . 

5. Bilateral Level 

The Development dimension is reflected in bilateral trade relations of the EU with 

developing countries[6]. The most significant example is the Economic Partnership 

Agreements (EPA) which are being negotiated between the EU and African, Caribbean and 

Pacific (ACP) countries. EPAs are an instrument for development by strengthening regional 

integration and improving the business environment in a credible and sustainable way. These 

agreements are being negotiated since 2002 and will enter into force in 2008. These are not


ISSN: 1842-4856 

classical free trade negotiations. The objective of EPAs is not to open markets but rather build 

markets. 

In addition to the multilateral and bilateral level, the EU has, for many years, operated 

unilateral preferential market access schemes under the Generalised System of Preferences 

(GSP) to provide developing countries with an added advantage on its market. 

The EU GSP is the largest of all developed-country GSP systems. In 2003 EU imports 

under GSP totalled €52 billion. Under the EU GSP between 1999-2003 developing countries 

share in total EU imports grew from 33% to 40%. The current GSP, in place since 1995, 

applies to imports from developing countries that pay duty on entering the EU market and that 

are not already duty-free under Most Favoured Nation agreements. The reform approved in 

June 2005 simplifies the EU GSP scheme by reducing the number of GSP arrangements from 

five to three. The coverage of the general GSP scheme will be extended to 300 additional 

products mostly in the agriculture and fishery sectors. A new "GSP Plus" incentive scheme 

will be targeted at especially vulnerable countries (selected before the begining of 2006) that 

have ratified and effectively implemented key international conventions on sustainable 

development, labour rights and good governance. It will cover around 7200 products which 

will enter the EU duty free. 

Finally the EU has led the way by eliminating all duties and quotas for all products 

originating from Least Developed Countries (LDCs), under the Everything But Arms (EBA) 

initiative. Developed countries had in fact committed to this objective already back in 2001 

(3rd UN Conference on LDCs). Regrettably, other developed partners are still to follow the 

EU’s example to implement the commitment taken in 2001. 

Bibliografie 

1. Polaski, S., Winners and Losers. Impact of The Doha Round on developing 

countries, Editeur, Carnegie Endowment for International Peace, 2006, p. 10-11; 

2. Fimger, J., M., The Doha Agenda and development: a view from the Uruguay round, 

Editeur, Asian Development Bank, 2002, p. 56; 

3. Fergusson, I., F., Hanrahan, Ch., E., Cooper W., H., Langton, D., J.,The Doha 

Development Agenda The WTO Framework Agreement, Editeur, The Library of 

Congress, 2005, p. 12; 

4. Buckley, R., The WTO and the Doha Round: the changing face of world trade, 

Editeur, Kluwer Law International, 2003, p. 138; 

5. Andrews, N., Bailey, D., Auteur Roberts, I., Agriculture in the Doha Round, Editeurs, 

Commonwealth Secretariat, 2004, p.27; 

6. Van Dijck, P., Faber, G., Developing countries and the Doha development agenda of 

the WTO, Editeur, Routledge, 2006, p. 74;


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UNDERGROUND BANKING SYSTEMS – HAWALA 

Irina Caunic – Doctoral student, 

University „Al. I. Cuza” of Iaşi 

ABSTRACT: The hawala system facilitates the transfer of funds or value outside the regulated financial institutions, 

without physical or electronic money movement and finds its greatest use in the absence of central authority or weak central 

authority. It is especially apparent in the less-developed world where the financial system is more open to abuse and 

manipulation by officials and criminals. 

The current primary users of these alternative remittance systems are individuals from the Indian subcontinent, East 

Asia, Africa, Eastern Europe, and elsewhere who live and work in Europe, the Persian Gulf region, and North America. In 

addition, drug traffickers, terrorist organizations, tax evaders, and other criminals also use these networks to transfer funds. 

Hawala has provided the most reliable, convenient, safe, and inexpensive means of transferring funds to far- flung regions. 

This research effort aimes at providing a historical background to its origin, and discusses why it has lasted over the 

last several hundred years. 

1. Main types and characteristics 

The hawala system is one of the parallel remittance systems that exist under different names in 

various regions of the world and it refers to an informal channel for transferring funds from one location 

to another through service providers — known as hawaladars — regardless of the nature of the 

transaction and the countries involved. 

Scholars place its origin many centuries ago when traders sought a secure system to transfer money 

and people looked for a way to travel without having to carry large sums, thereby making them less 

vulnerable to robbery by highwaymen [1. p.13]. Most experts believe that modern hawala networks took 

shape in the 1960s and 1970s as a way of circumventing bans on gold imports in Southeast Asia and 

allowing diaspora communities to send money to their families in Africa, the subcontinent, and the 

Middle East [2. p. 3]. Today it serves as an alternative for traditional financial institutions for a variety of 

reasons including political instability, lack of easy access to financial institutions, efficiency, security and 

anonymity. Although informal value transfer systems originated in Asia, they are now found to operate in 

every continent. 

In Arabic, the term hawala means transfer and exists in China (Fei-Ch'ien), Philippines (Padala), 

India (Hundi), Hong Kong (Hui Kuan), and Thailand (Phei Kwan). 

According to Lisa Carroll there are four types of informal value transfer systems based upon the 

services provided in each system [3. p. 10]: 

• hawala/hundi, transfers money or value between locations without using conventional banking 

channels and it is distinctive in that it honors verbal commitments based on the honesty and trust 

of its bankers. 

• fei ch’ien and chit/chop shop systems are distinguished from the hawala channels in that they 

involve the issuance of a receipt as proof of a transaction and both systems refer to ancient 

Chinese practice that evolved to eliminate the inconvenience of carrying goods or money over 

long distances. 

• the fourth system, hui, refers to a Vietnamese term for borrowing and lending. Unlike the 

preceding systems, hui is more a rotating loan association than a remittance method. Members of


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an ethnic community contribute to a general fund, which is loaned back to each contributor on a 

rotating basis. 

Hawala is an attractive system for a variety of reasons. It is much cheaper than bank transfers or 

commercial companies like Western Union. Commissions are minimal, exchange rates are favorable and 

most importantly, perhaps, the system is available to those who live in remote areas without accessible 

commercial banking systems. The distinguishing feature of hawala is its reliance on trust [4.]. 

Underground banking transactions in the hawala system require no identification from either the remitter 

or receiver of the funds save for the exchange (via telephone, fax or similar) of a simple password 

between the remitter and recipient of the funds. This anonymity serves illegal immigrants, who might 

fear that using a formal financial institution could lead to their discovery by immigration authorities and 

legal immigrants who, because of language, limited education or illiteracy, may experience difficulties 

with formal institutions because of language issues, limited education or illiteracy [5.]. 

The hawala dealers are often members of the same family, village, clan, or ethnic group [6. p. 37] 

and in most cases, they operate independently of each other rather than as part of a larger organization. 

They are, in general, merchants or small business owners who run a hawala operation alongside their 

other businesses. Hawaladars exploit naturally occurring fluctuations in the demand for different 

currencies and this enables them to turn a profit from hawala transactions (which, in addition to being 

remittances, almost always have a foreign exchange component). They are also able to offer their 

customers rates that are better than those offered by banks (most banks will only transact at authorised 

rates of exchange) [7.]. According to the experts, the cost of a hawala transaction will usually be between 

2 and 5 percent of the amount transferred, a rate that is generally considerably lower than the cost of a 

comparable transfer through the formal funds transfer systems [8.]. 

In addition, the hawala transactions are rapid, with authorisation and completion of transfers 

occurring within minutes or hours by telephone, fax, e-mail or similar, so they are successfully 

competing with established money transfer companies like Western Union in speed, efficiency of 

execution, settlement and delivery of money and services (Table 1). 

Table 1: Differences between formal and informal funds transfer systems 

Formal funds transfer systems 

Informal Funds Transfer Services 

10-20% cost 0-1,5% cost 

Detailed records kept Minimal/No records 

Service to main cities Service to remote areas 

Receipt to sender No receipt to sender 

Collection and delivery at agency premises At home pick-up and delivery service 

Transfer in days/weeks Transfer in hours 

Recipient presents ID Recipient cites code 

Plain instructions by wire Coded instructions by fax or telephone 

Conventional adverts Word of mouth or ethnic press 

Source: Nikos Passas, Hawala and Other Informal Value Transfer Systems: How they work 

and the challenges they pose, International Conference on Hawala, Abu Dhabi, 15-16 May, 

2002, p. 41. 

Therefore, it is important to note that the services offered by Western banks for international money 

transfers are wholly inadequate as they are costly, time-consuming, and not designed for small individual 

transactions. 

2. How the hawala system works


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A basic hawala-type of transaction involves a sender, two trusted intermediaries and a recipient. 

The most basic method is when a client wishes to send money to a relative in another country. He gives it 

to a local hawala dealer, who calls or faxes instructions for payment to his counterpart in the relative’s 

city. His counterpart makes the payment in a matter of hours and balances his account with a transfer in 

the opposite direction. When the transfers are of unequal value, from time to time the hawala agents may 

wire transfer the difference [9. p. 26]. The trust between the two hawaladars secures the debt and allows 

the debt to stand with no legal means of reclamation. There is an implicit guarantee on payments, 

however, because a broken trust would result in community ostracism constituting economic suicide for 

the hawaladar [10.] (Figure 1). 

Figure 1: Stages in a Typical Hawala Transaction 

Source: Lisa C. Carroll Alternative remittance systems distinguishing sub-systems of ethnic 

money laundering in Interpol member countries on the Asian continent, INTERPOL, 27 

February 2002, p. 3. 

Given its informal nature, there is no precise measure of the size of the system. According to John 

Wilson, the number and the scale of hawala transactions simply are not captured in any country’s 

compilation systems (for example, in balance of payments statistics, monetary accounts, or national 

income statistics) [11. p. 10]. 

Worldwide, remittances from rich countries to poorer ones amounted to more than $100 billion in 

2003, and hawala is one of the chief means of transporting that money. Moreover, it is not only ethnic 

Africans and Asians who use the system. Since the usual facilities for transferring payments hardly exist 

in Afghanistan, most international aid organizations operating in the country use hawala, and an 

estimated $200 million in relief and development funds passed into the country through hawala networks 

between 2001 and 2003 [12]. The most obvious problem with hawala in remitting countries is the lack of 

any registration or licensing, although the operations themselves are generally harmless. In receiving 

countries, there is in addition the more subtle potential clash between hawala operations and exchange 

controls whereby hawala transactions often result in increased black market transactions and expanded 

underground activity. Although the great bulk of hawala transactions are harmless, the system has proved


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to be extremely useful for money laundering and masking the intricate financial operations required by 

terrorists, drug dealers and other criminal elements [13. p. 3]. 

3. Hawala and Terrorism 

Informal value transfer systems, such as hawala have been commonly mentioned, often in alleged 

connection with terrorist activities, in the periodic typologies of money laundering systems prepared by 

the Financial Action Task Force (FATF) and by the FATF-affiliates such as the Asia Pacific Group on 

Money Laundering. 

Most experts claim that hawala has been used to facilitate a range of disparate crimes, involving 

intellectual property, arms and drugs trafficking, tax evasion and the smuggling of illegal immigrants. 

The confidentiality and anonymity of underground banking appears to be a significant incentive for drug 

traffickers and other serious offenders to use these channels, as the conventional banking avenues 

become more supervised and monitored [14. p. 38]. 

There are no known estimates of the current size and extent of money laundering through the 

informal value transfer systems. For instance, Indian authorities track the prevalence of these alternative 

channels of transfer by watching the black-market dollar price. They believe that, the lower the dollar 

price, the more prevalent must be hawala [15. p. 50]. The Drug Enforcement Administration has named 

the underground banking system as the primary money movement method for drug proceeds in some 

areas of the world, and a sub-system as the principal method of movement for heroin profits and 

operating funds within Asia [16.]. 

The fact that terrorist groups may be using underground banking systems is arguably a sign that the 

attention being paid to the formal financial system (for example, in terms of customer identification and 

suspicious transaction reporting) is becoming more effective [17.]. A case of financing terrorism through 

hawala channels is the series of bomb blasts in a major Indian city in 1993. The investigation revealed 

that the funds supporting these bombings (specifically funds used to buy explosives and to pay the 

bombers) were handled by hawala operators in the United Kingdom, Dubai and India [18]. 

The National Commission on Terrorist Attacks Upon the United States claimed that hawala became 

particularly important after the August 1998 East Africa bombings increasing worldwide scrutiny of the 

formal financial system. These informal networks were attractive to al Qaeda because they, unlike formal 

financial institutions, were not subject to potential government oversight and did not keep detailed 

records in standard form [19. p. 25]. In the wake of the recently heightened concerns that money 

launderers and terrorist groups use informal transfer systems, the number of national and international 

regulatory initiatives to license or regulate the hawala networks has increased. Therefore, the remittance 

systems have recently come under close scrutiny as part of the international efforts to counteract crime 

financing and there is need to ensure that tighter controls do not negatively affect the availability and the 

cost of these services for the poor. 

We consider that better regulation and transparency, improved technology, and greater outreach to 

rural areas offer big developmental gains. In order to achieve the desired goals and avoid unintended 

consequences, regulation must be the end-result of a long process involving fact-finding, understanding 

of local cultures and specificities, and consensus building. 

Conclusion 

Since the September 11, 2001, terrorist attacks in the United States, there has been renewed public 

interest in informal funds transfer systems. Today hawala is a vast global institution, serving millions of 

people worldwide because of its fast, cheaply and conveniently services, in places where banking 

transactions are unavailable, expensive or unreliable. The development of various informal funds transfer 

systems over many years and across many countries points to the important role that these systems can 

play in the absence of a robust and efficient formal financial sector.


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While it appears that most clients of these informal channels make honest money and try to assist 

their extended families, criminals also use these networks to launder dirty money, finance terrorism, 

make illicit payments, and commit other offenses, such as tax evasion and customs fraud. 

Dealing with hawala operators and networks thus represents a serious challenge to U.S. law enforcement 

agencies. We consider that scholars and policy makers should spend their energies in devising long-term 

strategies. The need to criminalize terrorist financing and money laundering is also critical in the global 

antiterrorism campaign. 

Bibliography: 

1. Passas N., Informal value transfer systems and criminal organizations: a study into socalled 

underground banking networks, Netherlands: Ministry of Justice, 1999. 

2. Keefe, P.R., Quartermasters of Terror, The New York Review of Books, Vol. 52, No. 2, 

February 10, 2005. 

3. Carroll, L. C., Alternative Remittance Systems Distinguishing Sub-systems of Ethnic Money 

Laundering in Interpol Member Countries on the Asian Continent, December 5 2005, 

HUhttp://www.interpol.int/Public/FinancialCrime/MoneyLaundering/EthnicMoneyUH. [Accessed 

28.10.2007]. 

4. El Qorchi, M., The Hawala System, Finance& Development, V. 39, Nr. 4, dec. 2002. 

5. World Bank & IMF, Informal funds transfer systems: an analysis of the informal hawala 

system. Washington DC: World Bank, 2003. 

6. Vaknin, S., Hawala Banking in Asia and the Middle East, Publish 101, June 15, 2005. 

7. Sfakianakis J., Antiquated laundering ways prevail, Al-Ahram Weekly Online, No. 580, 4- 

10 April, 2002. 

8. Tyree, A. L., Informal funds transfer systems, 2006, HUhttp://austlii.edu.au/~alan/hawala.htmlUH. 

[Accessed 28.10.2007]. 

9. Passas N., Informal Value Transfer Systems, Money Laundering and Terrorism, Interim 

report to Financial Crimes Enforcement Network, The Hague, Netherlands: (FINCEN) and 

the National Institute of Justice (NIJ), 2003. 

10. Jost, P.M., Sandhu, S.H., The hawala alternative remittance system and its role in money 

laundering, Interpol General Secretariat, Lyon, January, 2002. 

11. Wilson, J., Hawala and other Informal Payments Systems: An Economic Perspective, 

Seminar on Monetary and Financial Law, Washington DC: International Monetary Fund, 

May 16, 2002. 

12. Maimbo, S.M., The Money Exchange Dealers of Kabul: A Study of the Hawala System in 

Afghanistan, World Bank Working Paper No. 13, 2003. 

13. Looney, R. E., Following the Terrorist Informal Money Trail: The Hawala Financial 

Mechanism, Strategic Insight, November 1, 2002. 


underground banking networks…, p. 38. 


underground banking networks…, p. 50. 

16. Drug Enforcement Administration, Asian money movement methods, Report No. DEA- 

94023, Washington, DC: Author, 1994. 

17. Lehmkuhler S., Countering terrorist financing: we need a long-term prioritizing strategy, 

Journal of homeland security April, 2003. 

18. Jost, P.M., Sandhu, S.H., The hawala alternative remittance system and its role in money 

laundering, Interpol General Secretariat, Lyon, January, 2002. 

19. John Roth, et al., National Commission on Terrorist Attacks Upon the United States, 

Monograph on Terrorist Financing, Staff Report to the Commission, 2004, p. 25,


ISSN: 1842-4856 

HUhttp://www.911commission.gov/staff_statements/911_TerrFin_Monograph.pdfUH. [Accessed 

29.10.2007]. 

Wie definieren wir die kreative Buchhaltung? 

Cernuşca Lucian, conf. univ. dr., 

Gomoi Bogdan Cosmin, prep. univ. drd, 

Universitatea „Aurel Vlaicu” din Arad 

ABSTRACT: Die kreative Buchhaltung und der Management der Gewinne sind Euphemismen der 

buchhaltlichen Praktika, welche von den buchhaltlichen Standardsnormen abweichen. Sie sind durch eine 

übermäßige Komplexität in der Zuschreibung der neuen Definitionen und Eigenschaften des Einkommens, der 

Schulden und der Rechte charakterisiert. Diese sind in finanziellen Lagen zu finden, Lagen die überhaupt nicht 

langweilig sind aber sie haben die Verwicklungen der James Joyce-Romane. Daher der Ausdruck „kreative“. 

Manchmal werden Ausdrücke wie zum Beispiel „Neuerer...“ oder „aggressive“ benützt. 

Manchmal wird der Ausdruck mit Humor betrachtet, wenn sich die Praktiker, in das was ihren 

finanziellen Lagen angeht, auf’s Arm nehmen. In diesem Zusammenhang, hat die kreative Buchhaltung 

kompexe Bedeutungen: Spaß auf Kosten der Praktiker, der Versuch ehrliche Praktika zu fördern und manchmal 

die Verzweiflung finanzielle Lagen von diesen Interferenzen zu „reinigen“. Die „kreative Buchhaltung“ wird in 

„ernsten“ Ausdrücken benützt, damit man sich an der systematischen Vorführung der entstellten Lagen referiert. 

In diesem Zusammenhang führte die kreative Buchhaltung zu Skandale und Vorschläge die 

Buchhaltung zu verbessern. – in den meisten Fällen auf eine Erneuerung der Kapital- und 

Produktionsfaktorenanalyse konzentriert, um den wahren hinzugefügten Wert zu zeigen. 

Distorsionspraktika der finanziellen Leistungen des Unternehmens 

Es gibt mehere Möglichkeiten alle Verfahren, die eine kreative Buchhaltung 

hervorheben, zu klassifizieren. Bonnet hat zum Beispiel folgende Kategorien benützt: 

• Das Ergebnis- und Buchhaltungspolitikkonto: die Veränderung des aktuellen 

Ergebnisses und des netto Ergebnisses (Amortisation, Provisionen, Stocks, 

Ausstellen der Kosten), die Veränderung des aktuellen Ergebnisses ohne das 

Nettoergebnis zu beeinflussen (der Unterschied zwischen Ausbeutung und das 

Ungewöhnliche), die Veränderung des Nettoergebnisses ohne das aktuelle 

Ergebnis zu beeinflussen (Investionen für Beihilfe, Imputationsmöglichkeiten 

des Defizites), Fiskalität und Buchhaltungspolitik (die Aktivierung der 

Kosten). 

• Das Ergebniskonto und die Verwaltungsentscheidungen: die Verbesserung des 

aktuellen Ergebnisses (Verbesserung der Produktion, Verkleinerung oder 

Überweisung der Verluste), die Verbesserung des Nettoergebnisses (leaseback) 

• Verbesserungstechnik der Bilanz: eigene Kapitale (Wiederbewertungder 

Aktiven, finanzielle Aufstellungen), dauernde Anleihen (Leasing), das 

Bedürfnis von Betriebsfonds und das Schatzamt (Diskontierung der 

Handelswirkungen).


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Wir können mehrere Distorsionspraktika der finanziellen Leistungen des Unternehmens 

zeigen, welche von tendenziöse Buchhaltungspolitik beeinflusst werden: 

a) Das Stocksgebiet stellt genügende Oportunitäten für Subjektivismus und kreative Buchhaltung 

zur Verfüging. 

Verschiedene Methoden für die Bewertung der Stocks (am Anfang) führen zu 

verschiedene Bilder in bezug auf das Ergebnis. In den Inflationszeiten hat das Benützen der 

Methoden FIFO und LIFO folgenden Einfluss auf das Profit- und Verlustkonto: 

• FIFO führt zur Vergrößerung des Ausbeutungsergebnisses und des Profitsteuers 

• LIFO führt zur Verkleinerung des Ausbeutungsergebnisses und des Profitsteuers 

Die Bewertungsmethoden der Stocks (beim Ausgang) hängen von der Entwicklung der 

Preise und der Buchhaltungspolitik des Unternehmens ab. 

Beispiel 1: Die Aktien-Handelsgesellschaft X hat am 01.01.N ein Stock von 3000 Kg 

Werkstoff A zum Preis von 0,05 Lei/Kg gekauft. Im Januar finden folgende Arbeitsgänge statt: 

- am 05.01.N kauft man vom Lieferanten 2000 Kg Werkstoff A zum Preis von 0,052 

Lei/Kg. 

- am 10.01.N übergibt man 2400 Kg Werkstoff A im Verbrauch 


Lei/Kg 

- am 18.01.N übergibt man 4500 Kg Werkstoff A im Verbrauch 


Lei/Kg 

Charakteristiken FIFO LIFO 

Kosten 

Güter 

der verkauften 358,5 369 

Wert des Finalstocks 201 190,5 

- Lei - 

Wie man im Beispiel bemerken kann, wenn man FIFO benützt und wenn die Preise 

steigen, wird die Bewertung der Ausgänge zu den kleinsten Preisen und die der Stocks den 

größten Preisen gemacht und wenn man LIFO benützt, wird die Bewertung der Ausgänge zu den 

größten Preisen und die der Stocks zu den kleinsten Preisen gemacht, so dass der 

Ausbeutungsprofit und die Profitsteuer verkleinert werden. 

Das Einschließen der vergangenen oder der moralisch gebrauchten Stocks in Stocks stellt 

eine Manipulierungsmethode dar. Wenn die vergangenen oder die moralisch gebrauchten Stocks 

von der Evidenz rausgenommen werden, werden die Kosten affektiert und das Ergebnis wird 

verkleinert. 

Eine andere Manipulierungsmethode der Stocks ist die Darstellung einiger Stocks größer 

oder kleiner als das was eigentlich am Ende des Jahres vorhanden ist. Ein Kontrolleur kann die 

Durchsicht der von den Angestellten seines Kundes durchgeführten Stocksuntersuchungen nicht 

machen. So kann das zu einer der größten Veruntreuungen führen, welche unter den Namen „the 

great salad oil swindle “ bekannt ist (Neag, 2000, S.104).


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IAS 23 erlaubt die Kapitalisierung der Kosten mit den Zinsen. Das geschieht im Fall der 

Stocks, die eine längere Zeit brauchen bevor sie benützt oder verkauft werden. 

Beispiel 2: Während der Übung N erhaltet die Aktien-Handelsgesellschaft X 

Fertigfabrikate zum Preis von 20.000.000 Lei (ausschließlich Zinsen). Durch die kapitalisierung 

der Zinsen werden keine Kosten festgestellt und si wird die Leistung der Gesellschaft verbessert. 

In der folgenden Tabelle wird ein Auszug aus dem Profit- und Verlustkonto dargestellt 

und das in dem Fall in dem der Management des Unternehmens die Kapitalisierung der Kosten 

mit den Zinsen entscheidet, als auch im Fall in dem die Zinsen nicht kapitalisiert werden. 

Kosten- und 

Der Management des Der 

- Lei - 

Management des 

Einkommenelemente Unternehmens entscheidet Unternehmens 

die Kapitalisierung der entscheidet, dass die 

Kosten mit den Zinsen Zinsen nicht kapitalisiert 

werden 

Die Geschäftsziffer 875.423.000 875.423.000 

Die Variation der Stocks 25.000.000 20.000.000 

Kosten mit Werkstoffen (200.000.000) (200.000.000) 

und verbrauchbare 

Materiallien 

Lohnkosten und dessen 

Beiträge 

(357.000.000) (357.000.000) 

Andere 

Ausbeutungskosten 

(134.425.000) (134.425.000) 

Das Ausbeutungsergebnis 208.998.000 203.998.000 

Kosten mit den Zinsen - (5.000.000) 

Das 

Ergebnis 

buchhaltliche 208.998.000 198.998.000 

Wir bemerken, dass durch die Kapitalisierung der Losten mit den Zinsen eine Distorsion 

des realen Bildes der Gesellschaft vorkommt und das führt zur Vergrößerung des Ergebnisses. 

Wenn die Gesellschaft das Ergebnis vergrößern möchte, dann wird sie die Kosten in 

Kaufkosten einschließen und wenn sie das Ergebnis verkleinern möchte, damm wird sie die 

Kosten von den Kaufkosten ausschließen. 

b) Die Praktika der subjektiven Herabsetzung der Aktiven ermöglicht das Erscheinen von 

Distorsionsphänomene der finanziellen Leistungen des Unternehmens. IAS 36 verlangt bei jeder 

Bilanz die Feststellung jedwelcher Indizien, die zeigen ob die aktiva herangesetzt wurde. Wenn 

der Management des Unternehmens feststellt, dass das rückgewinnbare Wert kleiner als das netto 

Buchhaltungswert ist, dann ist die Aktiva für die Differenz herabgesetzt. In diesem Fall wird das 

Ergebnis durch das Einbuchen eines Amortisationskosten affektiert. Wenn der Management des 

Unternehmens optimistisch dem Ergebnis gegenüber ist, wird er feststellen, dass die Aktiva nicht 

herabgesetzt ist und das Ergebnis wird nicht verkleinert. 

Beispiel 3: In der folgenden Tabelle wird die Art und Weise des Feststellens des 

Benützungswertes eines Aktives dargestellt und das wenn es zwei verschiedene Meinungen von


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zwei Spezialisten des Unternehmens gibt.es geht um das Projektieren der zukünftigen 

Schatzamtströme. 

Die Nicht aktualisierter netto Aktualisierun 

- Lei - 

Aktualisierter netto Cash- 

Übung Cash-Flow 

gskoeffizient Flow 

Variante Variante r =1,0% Variante Variante 

A 

B 

A 

B 

N 75 80 0,90909 68,18 72,72 

N+1 80 85 0,82644 66,11 70,24 

N+2 82 89 0,75131 61,60 66,86 

N+3 85 90 0,68301 58,05 61,47 

N+4 90 97 0,62092 55,88 60,22 

Das aktualisierte Wert der Schatzamtströme 309,82 331,51 

Die Indikatoren Variante A Variante B 

Netto Verkaufspreis 315 315 

Verwendungswert 309,82 331,51 

Rückgewinnbares Wert 315 331,52 

Netto Buchhaltungswert 320 320 

Herabsetzungswert 5 - 

Einfluß auf das Profit- und Das Buchen eines - 

Verlustkonto 

Herabsetzungskostens im 

Wert von 5 Lei, bis zum 

Bringen des Aktivs zu 

einem rückgewinnbares 

Wert in der Bilanz 

- Lei - 

c) Das Provisionenpraktikum ist ein wirksames Instrument, um das Ergebnis zu ebnen. Die 

Gründung der Provisionen in den Jahren in denen das Unternehmen Profit erhaltet, führt zur 

Verkleinerung des Ergebnisses und wenn das Unternehmen Defizit registriert, führt es zur 

Vergrößerung des Ergebnisses. 

Beispiel 4: Im Jahr N gründet die Gesellschaft X eine Risikoprovision. Die Gesellschaft 

stellt zwei Experten an, um die Provision zu bewerten. Die Experten haben folgende 

Bewertungen dargestellt: 

• der Experte A hat die Risikoprovision zu 50 Lei bewertet (Variante I ) 

• der Experte B hat die Risikoprovision zu 75 Lei bewertet (Variante II) 

Der Kontoauszug für Profit und Verlust wird in den zwei Fällen folgender Weise 

dargestellt: 

Indikatoren Variante I Variante II Variante III


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Die Gesellschaft 

möchte das 

Ergebnis 

vergrößern 

Die Gesellschaft 

möchte das 

Ergebnis 

verkleinern 

Ausbeutungseinkommen 7000 7000 7000 

Intermediärer Verbrauch 5500 5500 5500 

Andere 

Ausbeutungskosten 

200 200 200 

Anpassungen für 

Risiko- 

Kostenprovisionen 

und 

• Kosten 

50 

75 

- 

• Einkommen - 

- 

- 

Ausbeutungsergebnis 1250 1225 1300 

Das Vermeiden 

die Risikos zu 

provisionieren 

Wenn der Management des Unternehmens das Ergebnis mit der Hilfe eines 

„Schutzsystems“ durch Provisionen verkleinern möchte, erscheint die Tendenz sie zu 

überschätzen und so wählt man die Bewerbung de Experten B (Variabte II). Das 

Ausbeutungsergebnis ist 1225 Lei wert. 

Wenn der Management das Ergebnis vergrößern möchte, wählt man die bewertung des 

Experten A (Variante I). Das Ausbeutungsergebnis ist 1250 Lei wert. In einigen Fällen, wenn 

man Risikoprovisionen vermeidet, hat die Gesellschaft ein Ausbeutungsergebnis, der 1300 Lei 

wert ist. 

d) Die Wahl der einer oder der anderen Buchhaltungsmethoden der Aufbaukontratke und der 

Übergang von einer Methode zur anderen beeinflusst das Profit- und Verlustkonto. Es sind zwei 

Arten von Aufbaukontrakte international anerkannt: die Prozentsatzmethode für Entgültigung 

und die Methode des abgeschlossenen Kontraktes. Die Wahl einer der zwei Methoden beeinflusst 

folgender Weise das Profit- und Verlustkonto: 

� Im Fall der Methode des abgeschlossenen Kontraktes wird das Ergebnis nur beim 

Abschließen des Kontraktes anerkannt 

� Im Fall der Prozentsaztmethode für Entgültigung wird das Ergebnis während der ganzen 

Zeitspanne des Kontraktes gestaffelt. 

„Einige Unternehmen wählen die Methode der Arbeitsbeendigung, wenn die Ergebnisse 

positiv sind, damit sie vermeiden ein Ergebnis zu zeigen, der auf langer Dauer schwer zu erhalten 

ist. Dafür ist es genug zu sagen, dass wegen Umstandsveränderungen die Kontrakte die 

benötigten Bedingungen für die Verwendung der Prozentsatzmethode nicht mehr befriedigen. 

Diese Veränderung kann unbemerkt bleiben, weil sie nur eine einfache buchhaltliche 

Bewertungsveränderung ist und muss anhand der Veränderungen der Buchhaltungsmethode nicht 

veröffentlicht werden.“ (Malciu, 1999, S.43-44) 

e) Die Amortisationspolitik beeinflusst die Entwicklung des Ergebnisses. Die benötigten 

Parameter sind: die Amortisationsmethode, die Amortisationsdauer und der Restwert. Die Option 

für eine bestimmte Amortisationsmethode beeinflusst das Profit- und Verlustkonto. So haben die 

verschiedenen Amortisationsmethoden verschiedene Einflüsse auf das Ergebnis. 

Verschiedene Optionen in was die nützliche ökonomische Lebensdauer angeht, führt zu 

verschiedene Amortisationskosten und so zu verschiedene Bilder der Ergebnisse. Das Überprüfen


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der nützlichen Lebensdauer führt zum Anpassen der Amortisationskosten an der gegenwärtigen 

Zeitspanne und so zur Steigerung des Übungsergebnisses. 

Beispiel 5: Ein Unternehmen kauft am 01.01.N ein Werkzeug zu einem Kaufpreis von 

50.000 Lei. Der Experte A bewertet die nützliche ökonomische Lebensdauer zu 5 Jahren und der 

Experte B zu 6 Jahren. Die Methode, die am besten dem Verbrauchrhythmus der zukünftigen 

ökonomischen Vorteile entspricht, ist die lineare Methode. 

• Die Amortisationskosten anhand der Bewertung des Experten A sind: 

50. 

000Lei 

A= =10.000 Lei/Jahr 

5Jahre 

6811=2813 10.000 

• Die Amortisationskosten anhand der Bewertung des Experten B sind: 

50. 

000Lei 

A= =8.333,3 Lei/Jahr 

6Jahre 

6811=2813 8.333,3 

Wenn man die Bewertung des Experten B wählt, stellt man kleinere Amortisationskosten, 

ein größeres Ausbeutungsergebnis und größere Haushaltssteuer fest. 

Wenn man die Bewertung des Experten A wählt, stellt man größere Amortisationskosten, 

ein kleineres Ausbeutungsergebnis und kleinere Haushaltskosten fest. 

f) Die Größe des kaufmännischen Fonds ist leicht zu manipulieren. Die Unterschätzung 

der gekauften Aktiven der Gesellschaft führt zur Verkleinerung des kaufmännischen Fonds. 

Die Kapitalisierung des Handelfonds und dessen Amortisation beeibflusst das Ergebnis 

der zukünftigen Übung während der ganzen nützlichen Lebensdauer.(die Amortisationskosten 

des kaufmännischen Fonds führen zur Verkleinerung des Ergebnisses und beeinflussen den Lauf 

der Börseaktien und den Wettbewerb der öffentlichen Kaufangebote). 

Die Inputation des kaufmännischen Fonds auf die eigene Kapitalien führt zu dessen 

verkleinerung und das Ergebnis der zukünftigen Übungen wird nicht von den 

Amortisationskosten des Handefonds beeinflusst. 

Bibliographie 

1. Beltran, L., WorldCom files largest bankruptcy ever, CNN Money, 2002. 

2. Chary, V., Ethics in Accounting. Global Cases and Experiences, ICFAI Univ. Press, 2004. 

3. Coates, J., The Goals and Promise of the Sarbanes-Oxley Act, 21 J. Econ. Persp. 91, 2007. 

4. Glassman C., Sarbanes-Oxley Act and the Idea of Good Governance ICFAI Univ. Press, 2005. 

5. Romano R., The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 

Yale L.J. 1521, 2005. 

6. Swartz, M., Watkins, S., Power Failure: The Inside Story of the Collapse of Enron, Library of 

Congress Cataloging-in-Publication Data , 2003. 

7. Wells, J.T., Corporate Fraud Handbook. Prevention and Detection”, The Association of 

Certified Fraud Examiners Inc., 2004.


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A EUROPEAN PERSPECTIVE ON CLIMATE CHANGE POLICY: 

THE EU ETS 

Ana Bobircă, lecturer, PhD 

Cristiana Cristureanu, professor, PhD 

Paul-Gabriel Miclăuş, associate professor, PhD 

Ştefan Ungureanu, research assistant 

Faculty of International Business and Economics 

Academy of Economic Studies, Bucharest 

ABSTRACT: The EU emissions trading scheme (ETS) was launched in 2005 to cap CO2 emissions from heavy 

industry. Covering almost half of all EU CO2 emissions, it forms the centerpiece of European policy on climate 

change. Trade in these emission allowances gives value to reducing CO2 emissions and has formed a market with an 

asset value worth tens of billions of euros annually. Putting a price on carbon has been an achievement of global 

significance, through the linkages to emission credits generated under the Kyoto mechanisms. 

Against this background, the aim of the paper is to provide an improved understanding of the European 

Emissions Trading Scheme (EU ETS), as the flagship of EU climate change policy; the specific purpose here is to 

give a comprehensive insight into the EU ETS and the climate change regulatory framework, as well as to identify 

the challenges the ETS faces. Market organization, trading practices, and the new financial assets introduced by the 

EU ETS will also be outlined. In the last part of the paper issues related to the climate change policy in Romania will 

be addressed. The paper concludes with a review of the progress towards a single European energy market. 

1. Introduction. Climate change as an energy policy driver 

Climate change, along with ozone depletion, is one of the first truly global environmental 

concerns, and the first with major energy implications. Compared to energy supply security, it 

has emerged relatively recently as an energy policy driver of potentially great importance. The 

accumulation over the course of the ‘70s and ‘80s of scientific evidence pointing towards the 

risks of enhanced climate change due to increasing anthropogenic greenhouse gas emissions led 

to a first international policy response in 1992, with the adoption of the United Nations 

Framework Convention on Climate Change. The Convention’s ultimate objective is to stabilize 

"greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous 

anthropogenic interference with the climate system”. This was subsequently backed in 1997 by 

the Kyoto Protocol to the Convention which sets a timeframe for emission reductions in 

industrialized countries. 

The Protocol entered into force in 2005, imposing emission limits for 2008 to 2012. In the 

negotiations leading up to the Protocol, the US was the leading proponent of international 

emissions trading, with the European Union initially reluctantly agreeing to this inclusion. The 

US withdrawal from the Protocol has greatly changed the nature of the agreement. One 

interesting turn was that the European Union has fully embraced emissions trading, establishing


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in 2003 [2] the Emission Trading Scheme (ETS), which was envisaged to run for the three year 

period of 2005 to 2007, with the intent of helping to prepare its member states to achieve


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compliance with their international commitments in 2008 to 2012, under the Kyoto Protocol. 

This is the first serious effort anywhere in the world to establish a cap and trade system for 

greenhouse gas emissions and the performance of the system is being widely watched. 

The ETS was designed as a test system, and in so doing the goal from the start was to 

establish a relatively mild reduction requirement, so that basic operations, such as establishing 

registries and becoming familiar with the trading instrument could occur while the financial 

stakes were relatively low. Establishing the National Allocation Plans (NAPs) for countries 

has been a difficult process of negotiations between member states and the European 

Commission, which had final approval. Just how binding the allocations would be has only 

gradually come into focus, but based on the estimates of the member states themselves the 

reductions for major countries approved early in the process was on the order of one percent 

below projected reference emissions. Countries whose NAPs were submitted and approved 

later, eventually fell in line with early submitters, sometimes under pressure from the EC to 

reduce allocations where it was argued that initial NAPs would convey unfair competitive 

advantage to firms in some of the member states. 

Accepting the above arguments that energy supply disruptions and climate change can be 

treated as major energy policy drivers, this paper seeks to bring an analytical perspective on 

the particular issue of climate change in the European Union. To this end, it continues by 

concentrating (more specifically) on the European Emissions Trading Scheme (EU ETS), as 

the flagship of EU climate change policy. The purpose here is to give a comprehensive insight 

into the EU ETS and the climate change regulatory framework, as well as to identify the 

challenges the ETS faces and to either explore options and/or to identify the principle policy 

questions that emerge from the current state of the ETS. Market organization, trading 

practices, and the new financial assets introduced by the EU ETS will also be outlined. In the 

last part of the paper issues related to the climate change policy in Romania will be addressed. 

The paper concludes with a review of the progress towards a single European energy market. 

2. The EU Emissions Trading Scheme 

2.1. The carbon market: some conceptual issues 

Carbon transactions are defined as purchase contracts or ERPAs (Emission Reductions 

Purchase Agreements) whereby one party pays another party in return for GHG (greenhouse 

gas) emissions reductions or for the right to release a given amount of GHG emissions that the 

buyer can use to meet its compliance – or corporate citizenship – objectives vis-à-vis climate 

change mitigation [10]. Payment is made using one or more of the following forms: cash, 

equity, debt, convertible debt or warrant, or in-kind contributions such as providing 

technologies to abate GHG emissions. 

There are several types of carbon assets currently traded on the market, created under 

international and national local regimes or through private contracts outside these legal 

frameworks. Most of these carbon assets share a common base – they are usually based on a 

common unit of one t CO2 reduced, or an allowance to emit one t CO2. Emissions trading can 

be simplified to cover the creation and sale of these assets [9]. Carbon assets derive mainly 

from the Kyoto Protocol and the EU ETS; thus they are statutory-based rights gaining their 

existence from statutes or treaties [9] (see table 1). 

Carbon assets, mainly EUAs (European Union allowances), can be traded according to 

five basic financial structures: immediate (spot) settlements, forward contracts, futures 

contracts, option settlements, and swaps. Of these instruments, spot settlements, forwards, and 

futures are the most used at the moment; options and swaps are still in their emerging stage.


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Table 1. Carbon assets under the Kyoto Protocol and the EU ETS 

Carbon asset Description 

Assigned Amount Unit, AAU Units that are issued to Annex I parties to the 

Kyoto Protocol; the amount of AAUs 

determine how much the Party is entitled to 

emit 

Certified Emission Reduction, CER Unit of emissions reductions created through 

CDM projects 

Emission Reduction Unit, ERU Unit of emissions reductions generated 

through JI projects 

European Union Allowance, EUA Units that are issued to liable installations 

under the EU ETS; represent an allowance to 

emit one tonne of carbon dioxide 

Removal Unit, RMU Unit of emissions reductions created through 

investments in sinks (deforestations, 

afforestation etc.) 

Carbon transactions can be grouped into two main categories: 

- Allowance-based transactions, in which the buyer purchases emission allowances created 

and allocated (or auctioned) by regulators under cap-and-trade regimes, such as Assigned 

Amount Units (AAUs) under the Kyoto Protocol, or EUAs under the EU ETS. Such schemes 

combine environmental performance (defined by the actual level of caps set) and flexibility, 

through trading, in order for mandated participants to meet compliance requirements at the 

lowest possible cost; 

- Project-based transactions, in which the buyer purchases emission credits from a project 

that can verifiably demonstrate GHG emission reductions compared with what would have 

happened otherwise. The most notable examples of such activities are under the CDM (clean 

development mechanism) and the JI (joint implementation) mechanisms of the Kyoto 

Protocol, generating CERs (certified emissions reductions) and ERUs (emissions reduction 

units), respectively. 

There are several fragmented carbon markets, encompassing both allowances and project- 

based assets that co-exist with different degrees of interconnectionF 

95 

F. These markets are 

developed to various degrees in different parts of the world, as national and regional policies 

themselves evolve. In 2006 and the first quarter of 2007, there were important regulatory 

developments in North America and Australia with initiatives to manage GHG emissions at 

least at regional levels. 

By size and value, the Kyoto Protocol is the largest potential market and the EU ETS, a 

“tributary” scheme, which has spawned a thriving market in the trade of allowances and for 

the import of project-based reductions. 

Buyers largely engage in carbon transactions because of carbon constraints (current or 

anticipated) at international, national or sub-national levels. 

The main compliance buyers are: European private buyers interested in the EU ETS; 

government buyers interested in Kyoto compliance; Japanese companies with voluntary 

commitments under the Keidanren Voluntary Action Plan; U.S. multinationals operating in 

95 These interconnections arise mainly from competition between these different markets for the same type of 

offset credits (typically, CDM projects may be purchased by installations under the EU ETS, governments facing 

Kyoto commitment or Japanese companies with voluntary commitments under the Keidanren Voluntary Action 

Plan) and to a lesser extent, from trades of compliance instruments across schemes (for some time, EUAs were 

considered as a valid compliance instrument under the Chicago Climate Exchange).


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Japan and Europe or preparing in advance for the Regional Greenhouse Gas Initiative (RGGI) 

in the Northeastern U.S. States; power retailers and large consumers regulated by the New 

South Wales (NSW) market in Australia; and North American companies with voluntary but 

legally binding compliance objectives in the Chicago Climate Exchange (CCX). 

There is also a growing retail carbon segment that sells emission reductions to individuals 

and companies seeking to offset their own carbon emission footprints. 

2.2. The EU ETS as the largest carbon market 

The EU emissions trading scheme was launched on the 1 st of January 2005 in the 25 EU 

member states to cap CO2 emissions from heavy industry. The ETS was established through 

the implementation of the EU Directive 2003/87/EC: “establishing a scheme for greenhouse 

gas emission allowance trading within the Community” [2]. The ETS covers only CO2 

emissions from large emitters in the power and heat generation industry and only selected 

energy-intensive industrial sectors: combustion plants, oil refineries, coke ovens, iron and 

steel plants and factories making cement, glass, lime, bricks, ceramics, pulp and paper. A size 

threshold based on production capacity or output determines whether plants in these sectors 

are included in the ETS. More than 11,400 installations are included, accounting for about 

45% of the CO2 emissions in the EU, or about 30% of its overall greenhouse gas (GHG) 

emissions [3], [4]. The ETS-Directive requires the member states to develop a national 

allocation plan (NAP) stating the total quantity of allowances and how they propose to 

allocate them. 

Covering almost half of all EU CO2 emissions, the EU ETS forms the centerpiece of 

European policy on climate change. Trade in these emission allowances gives value to 

reducing CO2 emissions and has formed a market with an asset value worth tens of billions of 

euros annually. Putting a price on carbon has been an achievement of global significance, 

through the linkages to emission credits generated under the Kyoto mechanisms. 

Like for any market, the key to prices is scarcity, and the price depends on both the 

absolute quantity of allowances available and expectations about the future. The most 

fundamental difference of emissions trading from any normal market is that the amount 

available depends directly on government decisions about allocations; and expectations about 

the future are largely expectations about future emission targets. 

The legal framework of the EU ETS does not specifically regulate how and where the 

trading of carbon assets (mainly EUAs) takes place. There are three basic trading platforms 

through which companies that have obligations under EU ETS can trade their EUAs: bilateral 

trading, commodity exchanges, and over-the-counter (OTC) brokers. Around one fourth of 

the total traded volume of EUAs in 2005, 100 Mt CO2, corresponding to € 1.8bn, was 

estimated to take place in the bilateral market [8]. At the moment, a majority of EUA trading 

takes place in exchanges or through wholesale or retail OTC brokers. The brokered and 

exchange market of EUAs in 2005 totaled to 262 Mt CO2, corresponding to € 5.4bn [8]. 

Wholesale OTC brokers provide mainly EUA forward trading for companies and installations 

with defined contracts, established credit relationships with trading partners, and defined 

delivery dates. Retail OTC brokers, on the other hand, provide more customized transactions 

and flexible structures for buyers who seek to address their compliance shortfall [1]. Over the 

last years, exchange platforms and auctions have increased their popularity over the OTC 

brokers. Exchanges simplify the transactions, reduce risks, and help make the trading prices 

more transparent [1]. Currently six exchange platforms trade EUAs in the EU area. Of these 

exchanges, European Climate Exchange (ECX), Nord Pool, and Powernext have the biggest 

trading volumes, ECX having a share of 63 % of the traded volume [8]. Some of the 

exchanges also trade other commodities such as power (Nord Pool, Powernext), and several 

of the exchanges are preparing to trade CERs [1]. In 2005, 79 % of the traded volume went


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through the OTC brokers, but the share of trading through exchanges was approaching 50 % 

already in 2006 [1], [8]. 

In terms of economic scale, the European emission trading scheme is the biggest such 

scheme in the world by an order of magnitude (i.e. 74% of the volume transacted in the 

carbon market; 87% of the value transacted in the carbon market [1]). 

Actual verified emissions in 2005 were two billion t CO2 – more than 3% below what had 

been allocated to countries that year. While as a whole, the scheme was “long”, six Member 

States (Greece, Austria, Ireland, Italy, Spain, UK) together were “short” by some 180 Mt 

CO2. On a sectoral basis, the power and heat sector was the only one with a shortfall, of about 

35 Mt CO2 [7]. Preliminary verified 2006 emissions data suggested a long market for 2006 as 

well, although less so, since caps were slightly tighter, while 2006 emissions were slightly 

higher than in 2005. This overall surplus together with the no-banking rule (rendering EUAs-I 

worthless beyond compliance year 2007) led to a steady price decline for EUAs-I through 

2006. The decline continued as power and heat installations finished hedging their positions 

for Phase I. 

Given the experience of Phase I, it was expected that the constraints on Phase II emissions 

would be tight, including in those newer members of the EU who enjoy a comfortable 

position vis-a-vis their Kyoto targets. 

Decisions so far taken on 19 NAPs set, on average, the annual cap at 5.8% below 2005 

verified emissions (adjusted for changes in the Phase II perimeter or boundary). Together with 

a tighter constraint, the penalty for non-compliance will rise from €40 currently to €100, and 

this remains on top of the obligation to cover any shortfall in that period. 

One of the major changes in design between Phase I and Phase II is the inclusion of banking – 

which will bring market continuity to the EU ETS and possibly encourage additional 

abatement by installations depending on their current situation and their anticipations of 

future carbon price. In addition, the scope of the EU ETS has been extended with the 

inclusion of further installations by Member States. Another significant evolution is the 

introduction of aviation into the scheme for intra EU-bound flights (from 2011) and for all 

flights leaving or landing in the EU (from 2012). This is expected to reduce up to 183 Mt CO2 

emissions per year by 2020 in the fast-growing sector. 

In 2007, the EU ETS saw over one billion allowances changing hands (1.101 million 

representing a three-fold increase over 2005) for a financial value of US$24.4 billion or €18.7 

billion (also up slightly more than three times from US$7.9 billion in 2005 or €6 billion). This 

despite a drop in average EUA prices (down 10% from US$24.70 in 2005, or €19, to 

US$22.10 in 2006, or €17). 

EUA transactions were mainly struck over-the-counter (with the London Energy Brokers 

Association, or LEBA, accounting for more than half the volumes). Virtually every month 

over the past two years saw an increase, on average, in the number of trades over the previous 

months. A year that saw the geographical scope of the EU ETS widen to include new member 

states of the EU (i.e. Romania and Bulgaria), also saw an increase in the number and type of 

participants (beyond the utilities that were the early players) and more complex transactions 

occurring (including, for example, options on EUAs and swaps between EUAs and CERs). 

The January 27, 2007 announcement by the EU Commission on energy and climate 

change provided greater clarity concerning the future of a climate regime beyond 2012. 

However, many features for Phase III of the EU ETS still need to be drawn up – especially in 

the light of the key recommendations from the review process of the scheme: harmonization 

across member States or sectors (new entrants and exiting installations, allocations to 

installations among others) and linking to other mandatory cape and trade schemes.


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3. The climate change policy in Romania 

Romania’s current political outlook regarding climate change entails a pro-active 

approach, mainly shaped by the recent accession to the EU and the approximation of national 

policy to EU standards. 

Important parts of Romania’s commitment to reduce GHG emissions are already being 

implemented, such as the elaboration of the National Strategy on Climate Change (NSCC) 

adopted in 2005, and the action plan for the implementation of the strategy National Action 

Plan on Climate Change (NAPCC), also adopted in 2005, as well as the development of 

institutional capacity at the national level. Other provisions of the government program 

concerning climate change are under development, as is the Registry for Greenhouse Gases, 

updates of the GHG inventory, forecasts for future emissions, the development of new joint 

implementation (JI) projects, adaptation measures and others (Government program, 2005- 

2008). 

In accordance with the Kyoto Protocol, Romania has committed to reduce GHG emissions 

by 8 percent in the period 2008-2012 compared to the baseline year of 1989. Total GHG 

emissions decreased by 41 percent in the period 1989-2004, and net GHG emissions (taking 

into account CO2 removals) decreased by 47 percent in the same period (see figure 1). 

75BFigure 

1. Total net GHG emissions in CO2 equivalent in the period 1989-2002 

Source: National Inventory Report 2002, Ministry of Environment and Water Management 

and National Research and Development Institute for Environmental Protection, 2004 

According to the provisions of Article 4.6 of the Framework Convention, and of the 

Fifth Session of the Conference of the Parties (COP), the baseline year for Romania for 

monitoring progress on climate change is 1989, which gives a figure of about 262,281.5 

million tonnes of CO2 equivalent. During the first commitment period (2008-2012), Romania 

will have to meet the 8 percent reduction level, meaning that no more than 241,000 tonnes of 

CO2 equivalent can be released. 

Romania has important reserves of AAUs for the period 2008-2012 that could be 

valuated through the Kyoto Protocol mechanisms as well as through the ETS. The trends for 

2020 show an increase in emissions, but all three scenarios are considerably below the level 

of the baseline year (1989). 

With respect to the EU ETS, Romania, as a recent EU member: (1) transposed the EU 

Emission Trading Directive (2003/87/EC) as well as the Linking Directive (2004/1014/EC) 

by June 2006; (2) established a national registry by September 2006, this being one of the 

eligibility criteria for participation in the implementation of the Kyoto Protocol’s flexible 

mechanisms and in the EU ETS. The purpose of the registry is to ensure the accurate 

accounting of the issuing, holding, transfer, acquisition, cancellation and withdrawal of 

assigned amount units (AAUs), removal units (RMUs), emissions reduction units (ERUs),


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96 

and certified emission reductions (CERs), as well as the carry-over of these unitsF 

F. 

Furthermore, the Kyoto Registry should be combined with the EU ETS Registry required by 

the EU ETS Directive, resulting in a unique national registry; (3) prepared and submitted 

national action plans (NAPs) I and II for (informal) EC approval by mid-2006, in order to 

allow the start of trade as of January 1, 2007 and to submit the second NAP (2008-2012) for 

approval as requested by the directive; (4) adopted legislation on monitoring and reporting by 

mid 2006; (5) and adopted accreditation procedures for verifiers and institutional 

arrangements for registration of accredited verifiers by mid-2006. F 

F 

The implementation of the EU ETS would allow a large number of Romanian companies 

in the energy sector and general industry to participate in European emissions trading. Where 

emission reductions are realised, the participating companies can create additional revenues 

by selling surplus allowances on the market. 

4. Concluding remarks 

Market failures are endemic to energy markets, and they are multiple. Energy policy is the 

design of a framework within which a number of different objectives can be met through 

markets, supported by appropriate instruments. For the last two decades of the twentieth 

century, these failures were largely masked by excess supply and low fossil-fuel prices. Since 

2000, this context has gradually changed. 

Energy policy in Europe – as elsewhere – has been chasing to catch up with the agenda of 

the 1980s and 1990s, and liberalization and fostering competition have been the main 

instruments. The latest policy proposals [6] are aimed at completing that agenda. However, 

the world has moved on, and while competition might have many benefits, it cannot alone 

solve the other market failures. The recent growing alarm over climate change has begun to 

shift this complacency. 

Despite these challenges and the interdependency of Europe’s energy market, remarkably 

after a decade and a half of trying to complete the internal energy market, Europe still consists 

of a set of national markets, many with national champions, connected together by a series of 

bilateral links. There is not yet much of a European market at all, and only the rudiments of a 

European electricity grid and pipeline network. This is reflected even in the EU Emissions 

Trading Scheme (EU ETS), which is very much national in its workings. This national, rather 

than European, physical structure of the market is reflected at the policy level too: almost all 

European countries have national energy policies, and indeed almost all are engaged in 

national energy policy reviews. In many of these cases, the European dimension has to date 

received scant attention. A national approach would not matter if the domain of the problems 

confronting energy markets remained national too. But a core characteristic of energy policy 

is that the objectives of security of supply and climate change are now, respectively, European 

and global. The former necessarily requires a European policy response, and the latter 

requires Europe to take the lead in gaining global agreement and reducing its own emissions. 

The other objective of the energy policy - competitiveness – is also better addressed at the 

European level through the economic efficiencies that arise from integrating energy markets 

and their networks. 

96 Carbon assets under the Kyoto Protocol and the EU ETS: Assigned Amount Unit, AAU (units that are issued 

to Annex I parties to the Kyoto Protocol; the amount of AAUs determine how much the Party is entitled to emit); 

Certified Emission Reduction, CER (unit of emissions reductions created through CDM projects); Emission 

Reduction Unit, ERU (unit of emissions reductions generated through JI projects); European Union Allowance, 

EUA (units that are issued to liable installations under the EU ETS; represent an allowance to emit one tonne of 

carbon dioxide); Removal Unit, RMU (unit of emissions reductions created through investments in sinks - 

deforestations, afforestation etc.) 

97 The National Strategy on Climate Change and National Action Plan on Climate Change. 

97

References: 


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[1] Capoor, K. & P. Ambrosi. State and Trends of the Carbon Market 2006. Washington DC, 

USA, 2006 

[2] EU. Directive 2003/87/EC of the European parliament and of the council of 13 October 

2003 establishing a scheme for greenhouse gas emission allowance trading within the 

Community and amending Council Directive 96/61/EC, 2003 

[3] EU. Emissions trading: Commission approves last allocation plan ending NAP marathon. 

Press release 20 June 2005 (IP/05/762), 2005 

[4] EU. EU emissions trading. An open scheme promoting global innovation to combat 

climate change, 2005 

[5] European Commission (EC). EU Action against Climate Change. EU Emissions Trading – 

an Open Scheme Promoting Global Innovation. Brussels, Belgium, 2005 

[6] European Commission (EC). EU Action against Climate Change. The European Climate 

Change Programme. Brussels, Belgium, 2007 

[7] Kettner, C., Köppl, A., Schleicher, S.P., Therius, G. Stringency and distribution in the EU 

Emissions Trading Scheme – the 2005 evidence. Climate Policy 7, 2007 

[8] Point Carbon. Carbon Market Europe, September 23, 2005. A Point Carbon Publication 

(available at: HUhttp://www.pointcarbon.comUH), 2006 

[9] Tang, K. The Finance of Climate Change. A Guide for Governments, Corporations and 

Investors. Risk Books, London, UK, 2005 

[10] The World Bank. State and Trends of the Carbon Market 2006. Washinghton D.C., 2006


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A NEW VISION ON A COMPANY’S PROFESSIONAL TRAINING 

EXPENSES: LONG TERM INVESTMENT OR JUST A COST? 

Cristina Liliana Popa 

Organism Intermediar Regional Program Operaţional Sectorial Dezvoltarea 

Resurselor Umane Sud-Vest Oltenia, Romania 

14BThe 

decision to invest in the human capital has a significant impact on the socio-economic 

level of development of a company. Therefore, this issue has to be approached not just as a 

individual decision, but as a strategic, a very important one. 

In the harsh conditions offered by the Romanian economy, with efficiency and rentability 

becoming the main criteria’s for success, the human element became, too, a very 

important role for any company. The human element is the active, creative, co-ordinating 

ingredient in economic activities. In this present stage, when Romanian economy is more 

and more a functional economy, when increasing the efficiency becomes the main goal in 

all areas, using the human element to it’s full capacity is the way to make the most out of 

the material and financial assets of a company. 

There are some limits when we try to estimate the impact of the professional 

training on the overall economic growth. The increasing quality of the human factor has a 

limited present effect, but a more and more pronounced one as the years pass. So the real 

effects of such an investment, the effects on the productivity of labour should be analysed 

over medium or long intervals, a short time analyse being irrelevant. 

On the other side, the investments in the human capital are, accordingly to technical and 

economical criteria’s, immaterial investments. In this context rises a legitimate question: 

why the investments in the human capital are, from the accountancy’s point of view, 

regarded as current expenses? This aspect is only distorting the apparent rentability of a 

company and creates restrictions for a management driven by cost strategies. 

In other words, the distorted financial situation, the annual financial reports that 

are strong indicators for the company’s managers and share-holders mislead them and 

diminishes the importance of such kind of investments, in the human capital. 

BTherefore, based on the above highlights, but also on the accountancy’s principles, especially 

42 

on the principle of periodicity, I believe that the investments in the human capital should be 

regarded as an immaterial asset that has to be liquidated over a longer than a year period of 

time. 

98 

The present tendency, Romanian and European, in the “triangle of knowledge”F 

F 

makes me forget about a stipulation from IAS 38 “Intangible assets” in which is stated that 

“all the other costs regarding intangible assets are expanses. Those includes: …, professional 

98 “The knowledge triangle” – research, education, inovation – reveals the fact that the well-fare of a society is 

no longer generated exclusively by the goods and services production, but by the quality of the human element 

and it’s capacity to adjust to the new technologies. To exploit the advantages of the so called “knowledge based 

economy”, for a better economical growth, for less unemployment and social cohesion, investments in 

knowledge and human capital are essential.


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99 

training expanses, …” (art. 2.4.2.)F 

F and capture the essence of the IAS because, during the 

years, the role of the intangible assets is more and more important for the prosperity of many 

kinds of businesses, as the “based on knowledge” economy begins to dominate. 

The intangible assets are, by default, assets that have no material support. But 

there can be situations when intangible asset have a kind of material embodiment – for eg. a 

brevet or a certificate – a tangible proof of the asset, although it is not the asset itself; this 

makes the asset identifiable, distinct from other assets. 

In the case that the fixed intangible asset (in our case the professional training) is 

produced in-house, the company must prove its capacity to finish the asset, so it can be put to 

good use; also, its utility for the company must be proved, and the very existence of financial 

and technical resources for its development. 

100 

I disagree with the idea of Barry J. Epstein and Abbas Ali MirzaF 

F who stated: 

“The intangible assets generated by the technical expertise of the employees, by the long-term 

benefits of professional training will have difficulties meeting the identification criteria’s 

despite the expected economical benefits. This is due to the fact that it will be impossible for 

the company to totally control such resources or to prevent others to control them. Even if a 

company makes huge professional training expanses – which is supposed to increase the 

staff’s skills and abilities, the profits expected cannot be controlled, as long as the trained 

employees can quit and continue their careers with other employers. Thus, the professional 

training expanses, no matter how significant, don’t qualify yet as intangible asset” 

This statement of Barry and Mirza is demobilizing and damages not only the 

continuous professional development as a phenomenon, but the professional training on the 

basic level, the one that every major company is developing. It is true that the workforce 

migration is a real thing, the young trained employees will leave form country to country, not 

just from company to company, but is by no means a mass phenomenon. On the other side, 

the professional training itself is a way to discourage the workforce migration, because the 

future benefits are both for the employer as well as for the employee. And even if the Barry’s 

and Mirza’s pessimism would be justified, what is deterring the employers to take active, 

contractual measures to regulate the workforce migration, at least until the intangible asset is 

depreciated? 

In consequence, regarding the professional training’s possible view as a intangible 

asset, asset that in my opinion can be controlled by the company and can generate future 

additional income, I think we can register this element in accountancy as “know-how”, what 

will lead to the enlargement of 205 “Patents, certificates, licenses, brands and other rights and 

similar values” account functions. It’s operations will look like: 

- the « acquisition » of services regarding professional training from other companies 

% = 404 

205 „Contractor for fix assets” 

„ Patents, certificates, licenses, 

brands and other rights and 

similar values” 

4426 

„VAT payable” 

- the depreciation of the intangible asset over 1-3 years 

99 Hennie van Greuning – Standarde Internaţionale de Raportare Financiară, practical guide, authorized 

translation by The World Bank, Editura Irecson, Bucureşti, 2005, pg.186 

100 Barry J.Epstein, Abbas Ali Mirza – Interpretarea şi aplicarea Standardelor Internaţionale de Contabilitate şi 

Raportare Financiară, BMT Publishing House, Bucureşti, 2005, pag.278


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6811 = 2805 

„Current expanses with the 

depreciation of the assets” 

„Depreciation of patents, 

certificates, licenses, brands 

and other rights and similar 

values” 

If the intangible asset is produced in-house (for instance prenticehood, workforce 

recruitment) then 205 account will be balanced by 721 “Income from internal intangible fixed 

assets production”. 

This issue is relevant also for the costs involved. This expenses generates 

beneficial effects over more than one financial exercises, and we can assimilate this to a 

regular depreciation. From the following chart it’s obvious the algorithm after which the cost 

is formed: 

Employee’s expenses 

Current expenses 

Services expense “Human assets” expenses 

Wages for trainers 

The depreciation of the 

investments in the human 

capital 

Hireing 

Recruitment 

Build-up 

Other expenses 

Training 

Aprenticehood 

Experience 

development 

Besides, not even in the management’s area we don’t observe an adequate method 

to manage the intangible assets. We can point out that: 

- there are no officials appointed especially to manage the intangible assets, 

now, when in more developed countries, in top companies there are positions 

like “chief knowledge officer”, “director of intellectual capital” etc. 

- solutions that work are not “stolen”. Some companies (Nokia, Skandia, 

Canadian Imperial Bank of Commerce etc.) really have good results in 

measuring the human capital; 

- not even simpler, less scientific methods and solutions are not copied or 

adapted. 

In this circumstances is possible to loose some advantages over to the competition,


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improper adjustments to the competitor’s pressure on a market can have a big impact on 

the overall national economy and on the quality of its growth; the transformation into a 

economy based on knowledge might be severely disrupted or slowed. 

Acknowledging the investments in the human capital as a fixed asset has, in my 

opinion, the following advantages: 

- because now the managers will have real data to use, not simple suppositions, 

there will be possible to study the dynamics of the investments in the human 

capital; also there will be possible to compute other internal indicators, as well 

as there will be possible to make comparisons with other competitors or other 

economical branches. 

- The human capital will become an important part of the company’s goodwill. 

The goodwill is a term used to reflect the portion of the market value of a 

business entity not directly attributable to its material assets and liabilities that 

normally arises only in case of an acquisition. It reflects the ability of the 

entity to make a higher profit than would be derived from selling the tangible 

assets. Considering the investments in the human capital AS investments, 

rather than current expenses will, in some cases, dramatically increase the 

goodwill of a company. 

The integration of the human capital in the assets of a company will allow a more accurate 

evaluation, but the overall value can increase or decrease, due to the quality of its staff.


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ACCOUNTING OPTIONS AND COMPARATIVE ANALYSIS OF 

SALE AND LEASEBACK TRANSACTIONS 

Nicoleta Asaloş, lect. univ. dr. 

Mariana Mirea, conf. univ. dr. 

,Facultatea de Ştiinţe Economice, Univ. « Ovidius » Constanţa 

ABSTRACT Companies often enter into sale-leaseback transactions in order to obtain cash financing. 

Many sale-leaseback transactions are essentially financing arrangements that enable the seller-lessee to borrow 

money without classifying it as debt on the balance sheet. Sale-leaseback transactions are an alternative method 

for raising capital. A sale-leaseback transaction allows a property to be sold and immediately leased back to the 

seller. After the transaction the seller is able to make use of the property in a more productive way. Saleleaseback 

transactions have a profound effect on a seller-lessee’s balance sheet, income statement and statement 

of cash flows. Since the sale-leaseback is a financing transaction, any gain or loss on the sale will be deferred 

and amortized into the income statement. Additionally, just like traditional debt financing, the sale-leaseback 

will result in increased cash flow in the current period and decreased cash flow in future periods. Sale-leasebacks 

involving capital leases (also called direct-financing leases) are recorded differently from sale-leasebacks 

involving operating leases. In a sale-leaseback with a capital lease, the leased asset remains on the seller-lessee’s 

books (however it is now carried at the sale value), and the seller-lessee records depreciation expense and 

interest expense over the life of the lease. 

A sale-leaseback transaction is an arrangement in which a company sells an asset to a 

buyer and then immediately leases the asset back from the buyer. A sale-leaseback 

arrangement is viewed as a single transaction in which the sale and leaseback are 

interdependent and negotiated together as a package. In these transactions, the company 

selling and leasing back the asset is often referred to as the “seller-lessee,” and the purchaser 

is often called the “buyer-lessor.” 

Sale-leaseback accounting shall be used by a seller-lessee only if a sale-leaseback 

transaction includes all of the following: 

a. A normal leaseback is a lessee-lessor relationship that involves the active use of the 

property by the seller-lessee in consideration for payment of rent, including contingent rentals 

that are based on the future operations of the seller-lessee, and excludes other continuing 

involvement provisions or conditions. The phrase active use of the property by the sellerlessee 

refers to the use of the property during the lease term in the seller-lessee's trade or 

business, provided that subleasing of the leased back 

property is minor. If the present value of a reasonable amount of rental for that portion of the 

leaseback that is subleased is not more than 10% percent of the fair value of the asset sold, the 

leased back property under sublease is considered minor. Active use of the property may 

involve the providing of services where the occupancy of the property is generally transient or 

short-term and is integral to the ancillary services being provided. 

b. Payment terms and provisions that adequately demonstrate the buyer-lessor's initial 

and continuing investment in the property


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c. Payment terms and provisions that transfer all of the other risks and rewards of 

ownership as demonstrated by the absence of any other continuing involvement by the sellerlessee. 

According to IFRSs and IAS 17 a sale and leaseback transaction arises when a vendor 

sells an asset and immediately re-acquires the use of it by entering into a lease with the buyer. 

A feature of sale and leaseback arrangements is that the lease payment and the sale price are 

usually interdependent. The key question is whether the transaction is a genuine sale, where 

all major risks and rewards transfer to the buyer, while the seller continues to use the asset 

exposed to some, but not substantially all, of the risks and rewards. Alternatively, the 

transaction may be effected for financing, tax or some other special purposes only, and in 

substance, the seller/lessee never disposes of the risks and rewards of owning the asset. A sale 

and leaseback transaction is composed of two distinct operations that need to be accounted for 

separrately . The gain on a sale arising in respect of a sale and finance leaseback should be 

deferred and amortised over the lease term. The gain on a sale arising in respect of an 

operating leaseback, however, should be recognised immediately, provided the transaction has 

been conducted at fair value . The following conditions should be fulfilled, in order to classify 

a sale and leaseback transaction as an operating lease : 

a) a sale has genuinely occurred, where all major risks and rewards were transferred to the buyer; 

b) the buyer (lessor) cannot transfer the leased asset back to the seller (lessee); 

c) the lessee has no bargain repurchase option and the lessor assumes the 

exposure to risk that 

the value of the leased asset will fall; 

d)the lessee has no option to prolong the lease agreement at conditions significantly more 

favorable than the market conditions; 

e) the fair value of assets sold and leased is substantially higher than the present value of the 

minimum lease payments; 

f) the lessor is more than simply a lender - the lessor's income and exposure to gain and 

loss is related to property market conditions (for example, rental prices and property values), 

not just interest rates. 

Entities may seek to raise additional finance by selling their freehold or long-term 

leasehold properties to banks and finance companies in exchange for a lease. The 

sellers/lessees often wish to retain an interest in the property in these circumstances, and to 

have the ability to extend the lease period for a very long time, whereas the buyers/lessors 

(lending institutions) try to leave the substantial portion of the ownership risk with the sellers. 

Many of these arrangements are, in substance, collateralised borrowings; consequently, they 

should result in recognition of a loan and an asset (property) on the lessee's balance sheet. A 

common structure of a sale and leaseback transaction involves the transfer and leaseback of 

an asset by a seller (lessee), to a special purpose entity (lessor) that is wholly or partly funded 

by bank borrowings or debt securities, such as commercial paper. Determining the accounting 

treatment of sale and leaseback of transactions involving special purpose entities is complex. 

An entity should consolidate a special purpose entity (SPE) when the substance of the 

relationship between the entity and the SPE indicates that the SPE is controlled by that entity.


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An entity should consolidate a SPE when it is exposed to a majority of the SPE's or its 

asset's risks and rewards.Therefore, it is possible for a seller to derecognise an asset (under 

lease accounting guidance) on the basis that it did not control substantially all the risks and 

rewards of the asset, yet consolidate the SPE when it is exposed to a majority of risks and 

rewards of ownership. Accounting treatment is different for sale-leasebacks that involve a 

capital lease and sale-leasebacks that involve an operating lease. A capital (or salestype) 

lease, which is sometimes referred to as a disguised sale, transfers all the risks and rewards of 

ownership in the leased asset to the lessee. If the risks and rewards of ownership are not 

transferred, the lease is classified as an operating lease. A lessee accounts for a capital lease 

by recording the leased asset on its books and depreciating the asset over the life of the lease. 

Contrarily, in an operating lease, the leased asset is not recorded on the lessee’s books. 

Rather, the lessee simply records rent expense in each period of the lease. Sale-leaseback 

transactions have a profound effect on a seller-lessee’s balance sheet, income statement and 

statement of cash flows. Since the sale-leaseback is a financing transaction, any gain or loss 

on the sale will be deferred and amortized into the income statement. Additionally, just like 

traditional debt financing, the sale-leaseback will result in increased cash flow in the current 

period and decreased cash flow in future periods. Sale-leasebacks involving capital leases 

(also called direct-financing leases) are recorded differently from sale-leasebacks involving 

operating leases. In a sale-leaseback with a capital lease, the leased asset remains on the 

seller-lessee’s books (however it is now carried at the sale value), and the seller-lessee records 

depreciation expense and interest expense over the life of the lease. 

The seller-lessee also amortizes the deferred gain or loss as a part of depreciation 

expense in the same proportion that the leased asset is being depreciated. In a sale-leaseback 

with an operating lease, the leased asset is not carried on the seller-lessee’s books, and the 

seller-lessee only records rent expense over the life of the lease. The deferred gain or loss is 

amortized as a part of rent expense in proportion with each year’s rental payment. If the saleleaseback 

transaction is structured such that the seller-lessee does not retain “substantially all” 

of the rights of use, then a portion of the gain on sale may be recognized as current income 

rather than deferred over the life of the lease. When evaluating the effect of a sale-leaseback 

transaction, analysts should review the relationship between the seller-lessee and the buyerlessor. 

If the buyer-lessor is a related party, such as a special purpose entity, concern should 

be heightened surrounding corporate governance issues. A sale-leaseback transaction could be 

used as a vehicle through which a company funds itself with off-balance sheet debt that was 

borrowed by an unconsolidated special purpose entity . Sale-leaseback transactions are an 

alternative method for raising capital. A sale-leaseback transaction allows a property to be 

sold and immediately leased back to the seller. After the transaction the seller is able to make 

use of the property in a more productive way. Tenants profit from the sale, while retaining full 

operating control of the property. A form of off-balance-sheet financing, the major benefit of 

sale-leaseback financing is unlocking the capital bound. It can be a lucrative option for 

companies: looking to finance growth ; making an acquisition; paying down a debt ; 

reallocating capital into more productive uses 

A sale/leaseback essentially provides 100% financing to the business owner. A 

seller/lessee who already owns the property can unlock the equity in the real estate and turn 

that equity into cash. If properly structured as an “operating lease,” the lease does not add 

short- or long-term debt or the real estate asset to the balance sheet. Thus, certain financial 

ratios, such as the debt-to-equity-ratio, the current-ratio and the return-on-assets-ratio are 

actually improved. Potential Benefits to Users/Sellers that we can consider are: 1. Converts 

a non-liquid real estate asset to cash – which is a very liquid asset – while retaining control 

and utilization of the property; 2. Moves a capital asset at book value from the balance sheet 

and replaces it with cash received from the sale. The lease, if structured properly, goes onto 

the balance sheet as a footnote and not a primary liability. 3. Avoids the cost of conventional


ISSN: 1842-4856 

debt financing or refinancing associated with encumbering the property with debt financing. 

Debt financing also goes on the balance sheet as a primary liability. 4. Allows the user 

to effectively depreciate the land as the lease payments cover the use of land and building(s). 

Sale/leaseback transactions offer corporations an important opportunity to achieve 

financial goals. However, to accomplish these goals, the economic and accounting aspects of 

proposed transactions must be carefully evaluated and structured. The advantages of a sale 

leaseback to the seller/user are: user retains control and utility of the property in a sale 

leaseback; user can effectively "depreciate" the asset involved as the lease payments cover 

the use of the land and building, and are tax deductible; removes a capital asset from the 

balance sheet at book value and replaces it with cash realized from the sale; improves cash 

position thus freeing up cash for other investments. A sale and leaseback transaction involves 

the sale of an asset and the leasing back of the same asset. The lease payment and the sale 

price are usually interdependent because they are negotiated as a package. The accounting 

treatment of a sale and leaseback transaction depends upon the type of lease involved. If a sale 

and leaseback transaction results in a finance lease, any excess of sales proceeds over the 

carrying amount shall not be immediately recognised as income by a seller-lessee. Instead, it 

shall be deferred and amortised over the lease term. If the leaseback is a finance lease, the 

transaction is a means whereby the lessor provides finance to the lessee, with the asset as 

security. For this reason it is not appropriate to regard an excess of sales proceeds over the 

carrying amount as income. Such excess is deferred and amortised over the lease term. If a 

sale and leaseback transaction results in an operating lease, and it is clear that the transaction 

is established at fair value, any profit or loss shall be recognized immediately. If the sale price 

is below fair value, any profit or loss shall be recognised immediately except that, if the loss 

is compensated for by future lease payments at below market price, it shall be deferred and 

amortised in proportion to the lease payments over the period for which the asset is expected 

to be used. If the sale price is above fair value, the excess over fair value shall be deferred and 

amortised over the period for which the asset is expected to be used. If the 

leaseback is an operating lease, and the lease payments and the sale price are at fair value, 

there has in effect been a normal sale transaction and any profit or loss is recognized 

immediately. For operating leases, if the fair value at the time of a sale and leaseback 

transaction is less than the carrying amount of the asset, a loss equal to the amount of the 

difference between the carrying amount and fair value shall be recognised immediately. 

Literature references: 

1. International Accounting Standards Board – International Financial Reporting 

Standards, CECCAR Publishing House, Bucharest, 2006 

2. Feleaga, N. – Accounting Options and Policies, Economica Publishing House, 

Bucharest, 2002 

3. HUwww.fasb.orgU 

4. HUwww.iasb.orgU


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ADDED VALUE IN THE INTERNAL AUDIT ACTIVITY 

Florea Ianc Zaharica Ec. Dr. 

ABSTRACT: 

Par ľévaluation des systémes de direction et de contrôle interieur, sur la base de ľanalyse du risque, la 

vérification intérieure ajoute de la valeur au processus du management en contribuant à ľaccroissement des 

performances de cela. 

Son valeur est la capacité de faire progresses le contrôle interieur des unités ou de ľorganisme qu΄il 

serve. La veification intérieure est donc créateur de valeur par ľintermédiaire des économies qu΄il engendre, des 

opportunietés qu΄il crée et des pertes évitées, une conséquence de son activité. 

Within the field of internal audit, it has been lately spoken more and more on the 

added value created by the efficient use of internal audit structures. 

It is an undoubted reality that, by assessing the management systems and internal 

control, on the basis of the risk analysis, internal audit adds value to the managerial process 

by contributing to increasing its performances. 

Jacques Renard synthesized the elements of capital gain added to the entity by the 

internal audit saying that “Internal audit makes change less risky but also favours it. The 

capital gain of the internal audit is not its report, the latter being just a communication 

method, and not even its recommendations. Its value is the capacity to make the internal 

control of the enterprise or of the organisms it serves make progresses. Therefore, the 

internal audit creates value through the economies it generates, the opportunities it creates 

and the losses avoided due to its activity”F 

101 

F. In our opinion, based on a practice equal to the 

age of audit in our country (7 years), an efficient internal audit creates capital gain in any 

entity it carries its activity, by: 

● reducing the vulnerability of the structure through the pertinence of the 

recommendations; 

● updating the geography of risks associated to the operations developed within public 

entities; 

● increasing the efficiency of the internal control system on the basis of the results of the 

risk analysis indicating weak points, together with the recommendation of some 

additional control filters or improvement of the already existent ones; 

● preventing the producing of patrimony prejudice phenomena; 

● savings accomplished due to the application of the recommendations made; 

● opportunities capitalized by accomplishing and implementing some early warning 

procedures upon the risks trend associated to some very complex operations (public 

acquisitions, rentals, capitalizations, leasing); 

● preventing frauds by providing a transparency of the transactions, operations and 

activities; 

● notifying the authorized internal control organs regarding the significant dysfunctions 

and irregularities, for the purpose making administrative researches and notifying the 

penal pursuit organs if it is the case; 

● observing the way the recommendations and solutions proposed by internal audit are 

implemented; 

101 Renard, J., p. 14


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● increasing the credibility of the performance indicators of the audited entities 

management; 

● establishing a more severe way to approach and quantify performance; 

● transferring the positive knowledge and experience from one entity to another; 

● remaking the patrimony by notifying the authorized penal research organs, through 

The Internal Audit Direction (DAI). 

There is a serious difficulty regarding the assessment of the capital gain created by the 

internal audit. On the international plan, a high number of internal audit structures have used 

and use improved versions of “The synoptic score table”, proposed by Tarlok Teji, partner of 

the Deloitte & Touche, as an assessment method for the organizations internal audit function. 

According to Tarlok Teji, The synoptic score table specific to the managers of the internal 

audit structures should be issued according to the table 1.1 

Internal auditors may use a series of other instruments for assessing the performance 

of the activities they carry, without ever considering closed the process of looking for new 

methods, procedures and instruments to illustrate the way they do their job, because within a 

context of high performance, it is time for internal auditors to do more than making 

appreciations regarding other people's work, and find forms to materialize and quantify the 

performances of their own work. 

A real internal audit structure has to understand what value means in the view of an 

entity leaders, to grade the attributes of this value and permanently communicate the 

performance standards reached in those fields that matter for the respective entity and that 

may mean a range of methods, indicators and financial assessment instruments (value) and 

non-financial (qualitative). 

Table 1.1 – The synoptical score table Source: Internal Auditing &Business Risk 

magazine. 

Perspectives Aims Objectives Indicator 

Client Increasing the 

client’s 

satisfaction 

Financial Increasing the 

financial 

performance 

Internal 

business 

Improving the 

internal 

processes of 

the business 

- decreasing the cashing time; 

- increasing the range of 

deliveries in time; 

- reducing the number of 

clients’ complaints 

- decreasing the costs; 

- increasing the sales 

- increasing the market 

quota 

- decreasing the funds 

rotation time; 

- increasing the quality; 

Increasing the output. 

- the average cashing time 

- the percentage of delivering in 

time; 

The number of clients’ 

complaints 

- the unitary average cost; 

- increasing the sales rate; 

- market quota; 

- the investment profitability 

rate 

- the average time of funds 

rotation; 

- the number of faults and the 

number of fixed articles 

- output/worker.


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BIBLIOGRAPHIE 

I. BOOKS 

● Greceanu-Cocoş V. – “The Audit Investigation for Public Institutions”, 

Adevărul Publishing House, Bucharest, 2001. 

● Comănescu M. – „European Management”, The Economic Publishing House, 

Bucharest, 1999, page 72. 

● Băcanu B. – „Strategic Management”, Teora Publishing House, Bucharest, 

1999, page 111, 122-123. 

● Munteanu A. – “Accounting Information System Audit”, PoJirom Publishing 

House, Iaşi, 2001. 

● Stoian A., Ţurlea E. – “The Financial and Accounting Audit”, Economica 

Publishing House, Bucharest, 2001. 

● Boulescu M., Marcel G., Mareş V. – “Fiscal Control and Financial-Fiscal 

Audit”, CECCAR Publishing House, Bucharest, 2003. 

● Marcel Ghiţă, Ion Pereş, Marian Popescu, Ovidiu Bunget, Ion Croitoru – 

Internal Public Audit – concepts and methodology, Mirton Publishing House, 

Timişoara, 2005. 

● Accounting examination review and the Accountability. Examination and 

Business Audit, collection 1994 – 2006. 

● Cibela Neagu – The firm’s management, Tritonic publishing house, Bucharest, 

2004. 

● Henry Fayol, French (1841-1925), Administration industrielle, Dunod, Paris 

1966. 

● Anghelescu C., Ciucur D., Suciu M.C., Grosu T., Socol C., Pop V., Strategic 

Options of Romanian Economic Development, ASE Printing House, 


II. NORMATIVES 

1. G.O. no. 119/31.08.1999 regarding the internal inspection, internal audit 

and preventive financial control within public institutions, as amended and 

completed by Law no. 301/2002 

2. G.O. no. 75/1999 regarding the activity of financial audit, as amended and 

completed by Law no. 133/2002. 

III. PROFESSIONAL STANDARDS 

1. The Chamber of Auditors – Financial Audit - 2002 

2. The Chamber of Auditors – Minimum Audit Standards - 2001 

IV. Reviews 

1. Accounting, Expertise and Business Audit no. 1-12/2001, CECCAR;


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AIRLINES' FARE-SETTING AND GAME THEORY 

Dobre I. Claudia, lector univ. dr. , 

Universitatea “Ovidius” Constanţa 

Abstract 

Game theory, as applied in the airfare wars, forecasts how competitors will respond when confronted 

with certain competitive situations. When formulating business strategy, no company can afford to ignore how 

competitors will behave. Game theory is based on the premise that in any competitive situation there are factors 

at work which lend themselves to mathematical representation and analysis. In turn, these representations and 

analyses will help explain how a result will occur. The findings of this research indicate that the airfares 

competition gives the appear an application of game theory. 

Introduction 

Many and perhaps most significant innovations in economics have been driven by the 

use of game theory, which provides economists with a language and analytical tools to study 

many economic interactions that older tools, such as price theory, couldn't touch. These 

interactions involve dynamics, private information, small numbers, and non-market 

institutions. Today, these ideas permeate the curriculum of business schools: Subjects that 

were dramatically changed by these innovations include strategic management, human 

resource management, managerial accounting, and business and the environment. 

Using game theoretic models, economists can examine to what extent taking losses in 

entry markets will help the airline build a reputation for toughness that will deter entry by 

competitors. Game theory also can assess so-called "switching costs." For example, airlines 

create frequent flyer programs to make switching costs high for consumers. 

Game theory as is based on the premise that in any competitive situation that the 

airfares competition gives the appearance of the use of playing a zero-sum game in however 

theory. While the airlines at that time were not may be used to explain the competitive 

behavior of air transportation strategic tool. The purpose of this research is to assess a variety 

of arena high rates of inflation economic stagnation oil shocks. 

Prisoner's Dilemma and the airlines 

As companies employ more and more sophisticated public relations methods, 

competition takes place increasingly behind a smokescreen. Appearances have become so 

deceptive that business intelligence itself is now a booming industry. Yet, in the time-honored 

tradition of Kremlin watching, even the best informants and the most plausible leaked 

documents may turn out to be part of a conspiracy ploy. 

Simple game-theory tools can go some way toward restoring common sense. People in 

business may not mean what they say but, unlike the secretive rulers of the old Soviet Union, 

they mostly make sense. Though both Boeing and Airbus engaged in successive puzzling 

activities in the "superjumbo" game, they may reveal in the end a coherent set of motivations: 

With Mr. Hayhurst's announcement, Boeing played a psychological card in a game it 

recognized it could not win.


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At the heart of the scenario is the Developer's Dilemma, a simple way to visualize 

investor choices when the market is unlikely to sustain rival investments. (This is a variation 

of the Prisoner's Dilemma, a game-theory model that has been around since the 1950's.) 

Markets such as the airline industry, where there are a few large players, are known as 

oligopolies. In such markets, the limited number of players mean there’s an opportunity – and 

temptation – for firms to formally or informally agree to increase the prices of the services 

they provide, operating what is known as a cartel. Game theory can help us understand this 

behaviour, and the choices made. 

The Prisoner’s Dilemma is a classic game devised in the late 1940s by John Nash (the 

subject of the movie A Beautiful Mind) to teach the conflict between group and individual 

rationality. Consider a crime drama where two partners are arrested. Both are being separately 

interrogated by a clever inspector who offers them this deal: 

• If one implicates the other, he may get parole while the other will get 20 years in jail 

• If neither implicates the other, both will get two years in jail 

• If both implicate each other, both will get ten years in jail 

Given the consequences of the different choices, and to minimise their individual 

punishment, both partners choose to implicate the other and end up getting ten years in jail. 

Prisoner’s Dilemma is applicable to many walks of life. Consider sports. Imagine a 

contest with two players. Each player’s in a dilemma about whether to take a performanceenhancing 

drug. Rationally, each player may think like this: 

• If I don’t take it and the other one takes it, this increases my chances of losing 

• If I take it and the other one doesn’t take it, this increases my chances of winning 

• If both of us take it, then at least I’m not disadvantaged 

However, cartels aren’t a recent phenomenon. Adam Smith, the father of modern 

economics, warned of such possibilities over three hundred years ago in Wealth of Nations, 

when he wrote, "people of the same trade seldom meet together, even for merriment and 

diversion, but the conversation ends in a conspiracy against the public, or in some contrivance 

to raise prices". 

Fearing this, many countries have created regulators to curb anti-competitive behaviour. 

But would Smith have approved of regulatory interventions to prevent anti-competitive 

practices in a free market? The answer would appear to be no, as he went on to say, "it is 

impossible indeed to prevent such meetings, by any law which either could be executed, or 

would be consistent with liberty and justice". 

Now, let’s get back to the recent story about airlines. In the Developer's Dilemma game, 

each player has two options, to invest in the development of a new product or not to invest. If 

only one of the players decides to develop, he will reap superior profits from unchallenged 

future market dominance. If both players go ahead, the product is likely to generate losses for 

both players. If neither goes ahead, a profitable market remains untapped. 

This appears to be a plausible model of the strategic situation when Boeing and Airbus 

first envisioned jetliners with up to 1,000 seats. Development from scratch was projected at 

$15 billion, with a market capacity estimated to be well below 2,000 aircraft. Unsurprisingly, 

both companies sought to avoid the Developer's Dilemma by entering a strategic alliance 

designed to bundle resources in the development of a Very Large Commercial Transport 

(VLCT), as it became known. By cooperating, both players anticipated a profitable solution, 

reducing the risk that one or both of the companies would fail in the market altogether. 

A joint team was set up in 1993, but several factors made cooperation difficult. With the 

Developer's Dilemma looming in the background, the threat remained that one of the parties 

would acquire the other's crucial technical expertise, develop an advantage and defect, going


ISSN: 1842-4856 

for outright dominance. This is a common problem facing alliances: how to make mutual 

assurances credible. 

Airbus soon suspected that Boeing was not interested in making irreversible 

commitments. The reason was not that Boeing wanted to run away with outright domination 

of a new market, however, but rather that it sought to preserve its monopoly in the older 

market of aircraft with 400-plus seats by employing delay tactics. (Boeing's 30-year-old 747 

jumbo design seats 420 people, while the largest Airbus, the high-technology, state- of-the-art 

A330, has a capacity of only 330.) 

Under this interpretation, Boeing was not caught in the Developer's Dilemma in the first 

place, because an untapped new market meant monopolistic profits in the old. (Boeing makes 

$45 million on each $150 million jumbo it produces.) Airbus even claimed that high profits 

on jumbo sales allowed Boeing to subsidize sales of medium-size jets. In game-theory terms, 

Boeing's payoff for leaving the new market untapped was positive, Airbus's payoff was 

negative. Boeing's best interest was to slow development of other jets in the 400-plus 

category, while Airbus's interest was to end Boeing's jumbo monopoly. 

In 1995, Airbus decided to go it alone. The VLCT was abandoned. Its successor became 

a 550-seat Airbus, called A3XX. Development costs were estimated at about $8 billion. 

Boeing countered by announcing a stretched double-decker jumbo, carrying 600 passengers 

with development costs of a mere $2 billion. 

In game-theory terms, Boeing's response must be viewed as a threat, changing Airbus's 

potential payoff for developing an alternative 400-plus seater: If you (Airbus) go ahead, we 

(Boeing) will undercut you, using our existing designs. However, the threat, in the end, was 

called as a bluff. British Airways and Singapore Airlines, the two carriers relying most on 

overcrowded airports and anxious to add bigger craft to their fleet, rejected the existing 

jumbo's technology as outdated. This forced Boeing to revise its development estimates, first 

to $5 billion, then $7 billion. 

As noted earlier, the consolidation of the jet aircraft industry has left just two major 

players, competing on a global basis. Such a competitive landscape clearly invites gametheory 

modeling, where decisions by one player are dependent on the moves expected of the 

other player. 

Airbus remains a cumbersome consortium involving four parent companies in which 

several European governments, and therefore the taxpayer, have an important stake. This 

makes Airbus particularly vulnerable to psychological attacks (though it may succeed in 

transforming itself into a proper company before the turn of the millennium). 

Boeing realized that if both players chose to develop a superjumbo, it might well lose. It 

therefore tried to change the game. Twice it failed. Delaying VLCT and threatening to 

undercut the A3XX did not deter Airbus's resolve. Last year's cancellation of its development 

project, heavily publicized in the global press and underpinned by elaborate arguments about 

changing consumer demands, may have been Boeing's last attempt. Industry analysts 

immediately put pressure on Airbus's four European partners, expecting the consortium to 

follow by canceling the A3XX. This, game theory predicts, is unlikely to happen. 

In his cancellation announcement, Boeing's Mr. Hayhurst said this: "Airbus is going to 

have to address the same issues we did. What is the size of the market, what are the 

development costs and what is the revenue stream going to look like?" What Mr. Hayhurst 

really meant that day was: "We should not explore a potentially profitable market if that 

destroys us in another" and "We should prevent our competitor from moving into these 

markets." Perfectly good advice.


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Core theory aplied to American airlines 

The US Airline industry is considered highly competitive. However, despite receiving 

$5.0 billion in direct assistance from the U.S. government in 2001, the financial stability of 

the U.S. domestic airline industry remains substantially in doubt. The recent spate of 

bankruptcies filings, first by U.S. Airways and then by United Airlines, leads one to wonder 

whether competition is essentially good for the industry or will ultimately prove destructive. 

Clearly, the terrorist attacks of September 11, 2001 have had a serious impact on the industry. 

However, the industry, particularly the major carriers, was headed toward financial distress 

prior to the terrorist attacks. For the quarter ended June 2001, the industry posted an operating 

loss of $70 million, as compared to an operating profit in excess of $3,000 million the prior 

year. Various explanations, ranging from labor issues to weak business plans have been 

offered as reasons for the current woes of the U.S. Airline industry. 

According to core theory, in some industries, like the airline industry, excess 

competition can lead to an empty core problem or lack of a stable equilibrium. The notion that 

competition may be destructive for the airline industry is further strengthened by what 

happened in the US airline industry immediately after deregulation in the 80's. At that time 

price-cutting in the industry was extreme, most firms in the industry were losing money even 

though buyers wanted the product and were willing to pay higher than prevailing prices. The 

cumulative losses incurred by the industry exceeded the profits previously earned since the 

industry's inception. Several carriers failed and ceased operations including such high profile 

operators as Pan American Airways and Eastern Airlines. 

Specifically, core theory suggests that, under certain conditions, non-competitive 

practices may in fact have an efficiency-enhancing role in the sense of making both producers 

and consumers better off. Core theory also clarifies the notion of efficient competition and 

cooperation--that agents in a market may simultaneously cooperate and compete at the same 

time. 

On the demand side an airline faces seasonal and cyclical demand. In addition, shortterm 

shocks brought about by events like 911, for example, further increases the volatility in 

demand. 

Thus, matching capacity to demand in the airline industry moves it toward an empty 

core, or an unstable equilibrium. Under these conditions imposing competition on this 

industry will only make the situation worse. The next section looks at how the participants in 

the industry have developed noncompetitive solutions to overcome the empty core problem. 

We summarize the theoretical model in a proposition form. 

• Unrestricted contracting among agents can have different effects on efficiency 

depending on whether or not a core exists 

• (Core Exists) When Core exists, competition leads to high efficiency. 

• (Core does not Exist) When Core does not exist, competition leads to low efficiency. 

• Whether or not a Core exists depends on demand and cost conditions 

• If an industry has a finely divisible demand, then the core may not exist. 

• If an industry has large, avoidable costs then core may not exist. 

An important contribution of Core Theory is the means of resolving an empty core. 

When the core is empty, restrictions on contracting are beneficial and can create equilibrium. 

Such an equilibrium may be inefficient compared to a competitive equilibrium, but is an 

improvement over the chaotic situation that will persist if core is left empty.


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Button (1996) differentiates the conditions where collusion or the adoption of cartellike 

characteristics by an industry occurs as a result of rent-seeking behavior (i.e. decreasing 

market efficiency) or resolution of the empty core (i.e. increasing market efficiency and 

stability). The notable differences lie in the elasticity of demand, volatility of supply/demand, 

and barriers to entry. Industries with legal barriers to entry and a smaller number of 

participants have a higher tendency toward collusion for rent seeking purposes. Industries 

which have more inelastic demand, variable supply/demand, and a smaller number of 

participants are more likely to have an empty core, in which case they tend toward collusion 

in order to resolve the empty core, particularly during recessionary periods. 

Many methods exist to resolve the empty core through the implementation of 

restrictions on contracting. We will discuss some attempts in the airline industry to resolve the 

empty core problem. 

First, the U.S. airline industry has adopted certain characteristics similar to cartels. An 

interesting practice among US Airlines is for them to share fare information with one another 

on a nearly real time basis through an intermediary called ATPCO 

(http://www.atpco.net/index2.htm). The ability of US airlines to respond rapidly to fare cuts 

by competitors comes from the data provided in the ATPCO system. Membership in ATPCO 

is voluntary but interestingly, most airlines choose to become members of ATPCO and post 

their fares regularly to ATPCO. ATPCO states that they collect fare information from over 

550 airlines and distribute it to global distribution systems (GDS)such as Sabre, 

Amadeus/System One, Galileo and Worldspan. ATPCO believes that it "creates efficiencies 

in this process by permitting each airline to submit its information via ATPCO, thereby giving 

each CRS/GDS the opportunity for a single source of fare related data." This practice of 

sellers signaling their pricing intentions is somewhat unusual and it may be construed as an 

uncompetitive practice with intent to collude. To the extent that ATPCO is a voluntary body, 

airlines would not have joined the organization unless they thought they were better off. In the 

context of the core theory, this is an attempt by the airline industry to address the problem of 

empty core. 

More recently, the industry has moved toward more direct cooperation amongst 

competitors through the implementation of code-sharing agreements that allow airlines to 

coordinate schedules and capacity. The U.S. Department of Transportation has approved such 

an agreement between United Airlines and US Airways (October, 2002), and Delta, 

Northwest and Continental are pursuing a similar agreement. These agreements potentially 

allow individual airlines to coordinate schedules and capacity, and adopt characteristics of 

cartels further reducing competitive practices within the industry. 

The U.S. airline industry relies heavily on a sophisticated form of price discrimination 

called revenue management. Revenue management systems allow airlines to use historical 

data on load factors on a flight as well as real time load factors to adjust prices for different 

classes of fares. This results in different customers paying different prices based on the time 

and even the channel of purchase, apart from the fare class. While many observers would 

disagree with the practice of an airline seat being sold at widely different prices, many 

researchers argue that airlines cannot be profitable unless they do so. It is also argued that, if 

price discrimination was banned and airlines were forced to offer the same price, many 

airlines might suffer losses and some might even stop flying. If this is true, this may have a 

contrary effect of making consumers, who could have paid higher prices, worse off. This is 

another example of how noncompetitive practices like price discrimination can lead to an 

efficient equilibrium. 

Virtually every major US airline has implemented a frequent flyer program. These 

programs are designed to increase customer loyalty and effectively increase the cost of "recontracting". 

Accordingly, these frequent flyer programs function as a long-term contract 

between the airline and the individual consumer, which contract provides a deferred rebate in


ISSN: 1842-4856 

the form of free flights, upgrades to first class, and enhanced levels of service. The benefits of 

these programs improve with increased purchasing and protect the airlines most valuable 

customers, the frequent traveling business passengers who typically pay a much higher fare 

under the revenue management systems. 

Instances such as these lead us to look at the notion of 'efficiency' from a broader 

perspective. Under the broader perspective, maximizing the total surplus (producer plus 

consumer surplus) may lead to higher efficiency and lower deadweight loss to the society. 

Under some conditions, non-competitive market structures and practices such as monopolies, 

cartels, restrictions on transactions among industry members, deferred rebates, pricediscrimination 

etc. may have an efficiency-enhancing role. 

Conclusion 

Competition in the american airline industry has been fierce since the industry was 

deregulated in 1978. The proponents of deregulation believed that more competition would 

improve efficiency and reduce prices and bring overall benefits to the consumer. In this paper, 

a case is made based on core theory that under certain demand and cost conditions more 

competition can actually lead to harmful consequences for industries like the airline industry, 

or cause an empty core problem. Practices like monopolies, cartels, price discrimination, 

which are considered inefficient allocation of resources in many other industries, can actually 

be beneficial in the case of the airline industry in bringing about an efficient equilibrium. 

In this paper we use core theory to examine the airline industry. Core theory helps explain 

why, for industries with certain cost and demand conditions, a competitive equilibrium may 

not exist. In such cases, a pareto-optimal outcome for all members does not exist, resulting in 

an empty core. Unrestricted contracting, enabled by enforcing competition in industries like 

the airline industry creates more "chaos" when the core is empty. 

Bibliography 

1) Barbara Buell, “Game Theory: A New Tool for Economists”, November 2000, 

HUhttp://www.gsb.stanford.edu/news/research/econ_gametheory.shtmlU 

2) Adam Smith, “An Enquiry into the Nature and Causes of Wealth of Nations”, 

Ed. Academiei Române, vol. 1, Bucuresti, 1962 

3) McAfee R. Preston and McMillan John, "Analyzing the Airwaves Auction," 

Journal of Economic Perspectives 26, Winter 1996 

4) Antoniou Andreas, “The Status of the Core in the Airline Industry: The Case of 

the European Market”, Managerial and Decision Economics, 19(1), 1998 

5) Button Kenneth, “Liberalising European Aviation: Is there an Empty Core 

Problem?” Journal of Air Transport Economics, 30(3), 1996 

6) Damsgaard Jan, “Electronic Markets in Hong Kong's Air Cargo Community: 

Thanks, but no Thanks”, Electronic Markets, 1999 

7) Linenberg Michael J. and Flemming Sandra, “Airline Industry Quarterly Review”, 

June Quarter, 2001 

8) McWilliams Abagail, “Rethinking Horizontal Market Restrictions: in Defense of 

Cooperation in Empty Core Markets” Quarterly Review of Economics and 

Business, 30(3), 1990


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L’ATTRACTION DES INVESTISSEMENTS ETRANGERS EN 

ROUMANIE 

Clipici Emilia, Assistant universitaire doctorant,Université de Piteşti 

Rădulescu Magdalena, Maître assistant docteur, Université de Piteşti 

ABSTRACT: Attracting foreign investments, an important element in the reorganization strategy of an 

economy, can have many advantages in the evolution of economy. Among these, mention can be made of: 

making good use of the resources for regional growth and development, increasing the native competition, 

obtaining advantages as compared to other types of outside financing (see external debt), improving the 

exchange rate of the national currency, influencing welfare, etc. Therefore, my opinion is that an analysis of the 

level of the foreign investments in our country as well as of the strategies of attracting foreign investments would 

be very useful. 

L’attraction des investissements étrangers représente une source importante de 

restructuration efficace des régions, et, implicitement de l’économie nationale. Le capital 

financier, les méthodes de management, l’assurance des marchés de vente, l’habileté de se 

positionner sur le marché européen et mondial sont quelques bénéfices de l’entrée du capital 

étranger. 

Les dernières années, dans tous les pays avancés au point de vue économique, on a 

enregistré un développement explosif des projets qui contrôlent le risque. Beaucoup 

d’instruments ont été introduits ou réévalués pour répondre aux demandes du management 

qui contrôle le risque. En Roumanie ces instruments n’ont pas été utilisés jusqu’en 1997, 

moment où, pour la première fois, ils ont été implémentés à la Bourse Monétaire – 

Financière et de Marchandises de Sibiu. 

La principale fonction des marchés futures est le hedging (le recouvrement du risque). 

Le hedging représente l’achat et la vente des contrats futures, pour compenser le risque 

concernant les changements des prix sur le marché spot. Ce mécanisme de transfert du risque 

a déterminé que les contrats futures seraient indispensables aux compagnies et aux institutions 

financières du monde entier. 

Mais, il semble que la gestion du risque est une attribution non seulement de 

l’entrepreneur, mais aussi de l’État, dont l’intervention aurait dû être la plus équitable 

possible, sans qu’elle implique des désavantages unilatérales (comme il est arrivé, 

malheureusement, pendant les années de la transition économique roumaine). „Pour être 

réformateur, l’État doit s’assumer une partie du risque, dans le but d’assurer la marche en 

avant de la réforme”. 

Dans l’économie roumaine qui traverse encore la transition, les principaux „risques 

auxquels s’exposent les agents économiques sont : les risques causés par l’inflation, par 

l’évolution du cours d’échange et par le blocage économique et financier, c’est à dire le risque 

de non-paiement”. 

Dans les pays européens, qui ont acquis déjà l’expérience de l’économie de marché, 

on a constaté que les entrepreneurs auraient dû être préparés pour des changements 

permanents des formes, dont le risque peut se revêtir. D’ailleurs, dans une étude réalisée par 

la Compagnie Marsh Inc. Sur le sujet des entreprises petites et moyennes de l’Europe 

Occidentale, on mentionne que „au-delà des hasards traditionnels on peut ajouter aussi les 

risques opérationnels, financiers et stratégiques”, causés par une série de facteurs, tels que :


ISSN: 1842-4856 

les changements de la législation, certains standards et codes européens, les risques imposés par 

l’évolution de la Nouvelle Économie, des pressions qui apparaissent grâce à la politique de 

personnel, aux nécessités de la rétechnologie, à l’efficacité des coûts, aux événements 

économiques spontanés (inattendus, non-planifiés). 

La Roumanie dispose d’avantages de locations authentiques pour attirer les investissements 

étrangers, plus précisément : 

- un marché interne qui a des dimensions significatives (quelques 22 millions de 

consommateurs), la deuxième de l’Europe de l’Est, après la Pologne ; 

- une gamme variée de ressources naturelles (du pétrole, du charbon, , différents 

minerais, des forêts, un sol favorable à l’agriculture), mais aussi un potentiel touristique 

considérable, insuffisamment développé ; 

- une position géographique favorable. La Roumanie est située au carrefour des 

routes commerciales traditionnelles, ce qui permet l’accès à un marché qui dépasse deux cents 

millions de consommateurs potentiels, sur une surface de seulement une mille de kilomètres. 

- La Roumanie est traversée par le Corridor no. 4 – pour le transport routier et 

ferroviaire (Berlin-Prague-Budapeste-Arad-Bucarest-Constanţa-Istanbule-Salonic); le Corridor 

no. 7 – pour le transport fluvial (Constanţa-Basarabi-Danube-Main-Rhine) et aussi le Corridor 

no. 9 – pour le transport routier et ferroviaire (Helsinki-Moscow/Kiev-Odessa-Bucarest- 

Constanţa-Alexandroupolis) ; 

- la proximité de certaines routes de navigation maritime et fluviale, ainsi que 

l’existence des aménagements portuaires nécessaires. Le Port de Constanţa est le premier port en 

tant que dimension parmi les ports qui ont issue à la Mer Noire. En outre le Canal Rhin-Main- 

Danube lie directement la Mer Noire de la Mer du Nord ; 

- les coûts relativement baissés de la main d’œuvre, accompagnés par un personnel 

hautement qualifié au domaine technique et de la haute technologie. Grâce aux prévisions 

concernant la croissance du chômage, la continuité de la privatisation et de la restructuration 

économique, nous apprécions que la Roumanie garde l’un des plus réduits coûts de la main 

d’œuvre de tous les pays de la région. 

- La structure industrielle diversifiée, qui permet l’acquisition sur le plan local 

d’une gamme très large de produits intermédiaires ; 

- Un réseau développé de cellulaires et de systèmes GSM ; 

- Des prix compétitifs de transfert des biens entre la Mer Caspique, la Mer Noire et 

l’Ouest de l’Europe ; 

- La présence des subsidiaires et des agences de différentes banques à large 

renommée : City Bank, ABN-AMRO, ING Bank, Chemical Bank, Creditanstalt, etc. ; 

- Des relations diplomatiques avec plus de 176 pays ; 

- À partir de l’année 2003 la Roumanie est membre de l’Organisation de 

l’Atlantique du Nord (NATO) ; 

- À partir de l’année 2007 la Roumanie est devenue État membre de l’Union 

Européenne ; 

- La Roumanie est membre de l’Organisation des Nations Unies, de l’Organisation 

Mondiale du Commerce et d’autres organismes internationaux ; 

- L’amélioration constante du rating de pays, par les plus renommés agences 

internationales de rating: Standard & Poor’s, Fitch Ratings, Moody’s, bien que la Roumanie se 

situe encore parmi les derniers pays qui ont adhéré à l’Union Européenne en mai 2004, situation 

détaillée dans le tableau ci-dessous :


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Pays Rating Moody’s (LTFC) Rating S & P (LTFC) 

Bulgarie Baa3/stable BBB/positif 

Croatie Baa3/stable BBB/stable 

Tchèque A1/stable A-/positif 

Pologne A2/stable BBB+/positif 

Roumanie Ba1/positif BBB-/stable 

Russie Baa2/stable BBB/stable 

Slovaquie A2/positif A/stable 

Turquie Ba3/stable BB-/stable 

Hongrie A1/négatif BBB/stable 

Source : New Europe, Biweekly Monitor, March 1, 2006, Uni Credit 

- Le statut d’économie de marché fonctionnel accordé par le Département d’État des 

Nations Unies en 2003 et par la Commission Européenne, suite au Rapport de Pays pour l’année 

2004 

- L’existence des accords de libre commerce avec : les pays membres de l’Union 

Européenne, de la CEFTA, l’Israël, la Moldavie, la Turquie, la Lituanie, la Macédonie, la Bosnie- 

Herzégovine. L’étendue de la clause de la nation la plus favorisée par les Etats-Unis à terme 

illimité, l’élargissement du régime commercial préférentiel accordé par la Fédération Russe, le 

Belarus et le Kazahstan. 

L’élaboration, la modification et la mise en pratique de certains actes normatifs de date 

récente est un processus naturel, de l’alignement de la législation roumaine à la législation 

communautaire, qui peut être aperçu par les investisseurs étrangers comme un cadre légal 

instable, un empêchement en vue de l’accomplissement du plan d’affaires à long terme. On 

apprécie que la contrainte de la politique de management des investissements étrangers 

directs en Roumanie, du point de vue de la légalité, provienne de l’implémentation et de 

l’interprétation des actes normatifs de date récente ou qu’elle est générée par les 

modifications apportées à celles déjà existantes. 

102 

Dans ce sens, le Conseil des Investisseurs Étrangers de RoumanieF 

F a identifié les mesures 

qui doivent être prises dans les plus brefs délais, dans le but de l’augmentation du capital 

103 

étranger attiré en économie, les domaines visées étantF 

F: 

le système juridique ; 

le régime fiscal ; 

le marché du travail ; 

le secteur bancaire ; 

le gouvernement corporatiste et le marché de capital ; 

le système bancaire ; 

l’environnement ; 

la corruption . 

Conformément au FIC, le numéro des ordonnances d’urgence aurait dû être réduit, la 

législation devrait être publiée chaque fois qu’elle subit des modifications significatives, il 

102 

Le Conseil des Investisseurs Étrangers (FIC) est une association des plus importants investisseurs étrangers de 

Roumanie, qui a pris sa naissance en 1997 et qui, à présent a plus de 95 de compagnies membres, dont les 

investissements cumulés dépassent 2/3 du total des investissements directs dans notre pays 

103 

les solutions immédiates pour la croissance des investissements étrangers directs en Roumanie, le Conseil des 

Investisseurs Étrangers, février 2005, Bucarest


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faudrait initier des consultations préalables concernant toutes les propositions des lois et, 

simultanément à une nouvelle loi, émettre un set initial de normes d’application. Un milieu 

concurrentiel sain présuppose que toutes les compagnies sont soumises aux mêmes obligations 

envers l’État, que les lois existantes sont uniformément appliquées, les règlements en ce qui 

concerne l’octroi des aides d’État doivent être adaptés aux normes de l’Union Européenne et ils 

doivent être appliqués d’une manière transparente dans le domaine des dispenses d’impôt, sous le 

contrôle strict du Conseil de la Concurrence, et les licitations pour octroyer des contrats doivent 

être faits d’une manière transparente, sans exceptions. 

La législation fiscale de Roumanie doit être harmonisée tout de suite à celle de l’Union 

Européenne, il faudrait adopter un code de conduite des inspecteurs fiscaux et la carte du 

contribuable, l’acceptation des déductions fiscales pour la mise en dehors de la gestion des 

stocks/des moyens fixes. Il faudrait introduire des groups fiscaux pour les impôts ainsi que pour 

le taux de la valeur ajoutée, mais aussi l’acceptation des standards internationaux de rapport 

financier. 

Quant aux mesures dans le domaine du marché du travail, FIC recommande : le financement 

du fond de gage pour le paiement des créances salariales, par les assurances de chômage, sans 

des croissances supplémentaires des contributions sociales, la période moyenne de travail doit 

compter quarante-huit heures par an, la résiliation des contrats de travail pendant la période 

d’essai par chaque partie, n’importe quel soit le motif, l’élimination du registre des engagés et 

la création d’une base de données électroniques centralisée, la mise en compte de la 

performance et non pas la qualification professionnelle, la restriction de la protection des 

leaders de syndicat et l’enregistrement seulement des syndicats qui représentent au moins 

50% de la main d’œuvre. 

Dans le domaine bancaire les plus importantes mesures qui auraient dû être adoptées par les 

autorités roumaines compétentes visent : la réduction de la différence entre le taux de l’intérêt 

en lei et en devises, l’amélioration de la communication entre la Banque Nationale Roumaine 

et les autres banques, l’inclusion des éléments extra-bilan dans les règlements concernant 

l’établissement de provisions et l’implémentation des règles comprises dans les standards 

internationaux des rapports financiers pour toutes les banques, jusqu’au premier janvier 2006. 

Il faudrait élaborer et adopter le Code national de gouvernement corporatiste, le Registre 

unique des actionnaires ayant le droit de vote et qui reçoivent des dividendes. On doit éliminer la 

demande que la méthode de vote cumulatif obligatoire soit utilisée pour élire les membres du 

conseil d’administration à la requête d’un nombre „significatif” d’actionnaires, la demande que 

l’Assemblée Générale approuve des transactions aux moyens fixes, si le montant de ceux-ci 

dépasse 20% du total des actives immobilisés sauf les créances. Les obligations qui concernent 

les rapports d’audit auraient dû être éliminées aux standards communautaires et internationaux et 

préciser plus clairement des conditions dans lesquelles le retrait est obligatoire au cas où les 

actionnaires majoritaires élimineraient les actionnaires minoritaires. 

Dans le domaine de la protection de l’environnement il faudrait : offrir des stimulantes pour 

la réalisation des objectifs de récupération et de recyclage des déchets, des mécanismes de 

financement pour la création des installations et des dépôts contrôlés en vue de l’évacuation 

des déchets dangereux ; élaborer un code de conduite pour les autorités du domaine de 

l’environnement ; établir les limites par l’autorité d’environnement pour la qualité des eaux 

résiduelles qui seront déversés ; développer des normes de qualité spécifiques pour les eaux 

résiduelles pour chaque secteur industriel.


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La législation anticorruption aurait dû être appliquée à large échelle et d’une manière 

uniforme, y compris par des moyens supplémentaires pour assurer l’indépendance, l’efficacité et 

la crédibilité du Parquet National Anticorruption. Les mesures à long terme qui s’imposent ont le 

but, dans l’opinion du FIC, d’éliminer la corruption dans l’administration publique. Elles 

concernent l’augmentation des salaires, l’élimination des pouvoirs discrétionnaires excessifs, les 

punitions pour la violation de la loi et la surveillance plus attentive des biens personnels des hauts 

fonctionnaires et des éventuels conflits d’intérêts. En même temps, la Roumanie doit adopter et 

implémenter la Convention OCDE de 1997, pour éviter de graisser la patte parmi les officiers 

publics étrangers, dans les transactions commerciales internationales. 

La Roumanie a ramassé, après 1990, des investissements étrangers plus importants que 

ceux des États baltiques en commun, mais, si nous divisions ce montant au numéro des habitants, 

on va obtenir si peu d’emplois que les Roumains cherchent, individuellement, des patrons à 

l’étranger. 

La Banque Nationale Roumaine a rapporté, pour les premiers quatre mois de l’année 

2007, des investissements étrangers directs (ISD) de 1,6 milliards d’euros, en baisse avec 30,2% 

à la différence de la période similaire de 2006, quand on a enregistré un flux de 2,3 milliards 

d’euros. Presque deux tierces des investissements (plus de 995 millions d’euros) ont représenté 

des participations au capital et du profit réinvesti, pendant que les crédits intra-group se sont 

situés à 609 millions d’euros. Mais, à propos de ce dernier élément, INS a communiqué que la 

baisse avec une tierce des investissements dans le premier trimestre de l’année 2007 a été 

déterminée par la réduction de 60% des crédits des firmes-mère de l’étranger vers les filiales de 

Roumanie. 

La diminution des investissements a déterminé – pendant la période janvier – avril 2007 – 

un recouvrement du déficit de compte courant de seulement 36,1%, à la différence de 91%, 

pendant la même période de 2006. 

On peut détacher deux stades de conduite des investissements étrangers en Roumanie, 

après 1998 : (le premier) celui existant avant 1997, avec des investisseurs pas du tout importants 

et un afflux diminué ; (le deuxième) celui initié en 1997, des „investissements significatifs” 

(investisseurs significatifs) qui valent plus d’un milliard de dollars par an. L’investissements 

étranger en Roumanie accuse encore les symptômes du niveau de vie relativement baissé, 

respectivement de l’instabilité du flux pendant des périodes bien courtes (voire le tableau 

suivant). 

Élément important de la stratégie de restructuration d’une économie, l’attraction des 

investissements étrangers peut entraîner une série d’avantages sur l’évolution de celle-ci, dont on 

peut mentionner : la valorisation des ressources dans le but de l’accroissement et du 

développement régional, la croissance de la concurrence autochtone, les avantages concernant 

d’autres variantes du financement externe (voire l’endettement externe), l’amélioration du cours 

d’échange de la monnaie nationale, les effets sur le bien-être de l’individu, etc. 

Les caractéristiques du flux des investissements externes en Roumanie. Stabilité et instabilité 

STABILITÉ INSTABILITÉ 

L’existence des grandes régions, en tant Déséquilibre territorial à la réception de 

que sources des investissements, avec le l’influx (la région Bucurst – Ilfov est 

placement des pays de l’Union dominante) 

Européenne en tête 

La concentration, dans la zone de la Des symptômes de rééquilibrage territorial,


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capitale de la plus de moitié de l’afflux 

des investissements 

La destination du capital étranger 

prioritaire à l’industrie et aux services 

L’augmentation du degré de 

concentration du capital, en général, avec 

des accents sur l’industrie, services et 

tourisme : confusion dans la zone de 

l’agriculture. 

par des “booms” disparates, au profit de 

quelques départements 

L’intérêt inconstant des investisseurs dans les 

principaux pays de l’Union Européenne et 

des États Unis 

Des fluctuations importantes de niveau du 

flux des investissements externe, pendant de 

différentes périodes de l’année. 

En pratique on constate que les gouvernements utilisent trois types d’activités de 

promotion des investissements (construire l’image, des techniques de génération directe des 

investissements et d’assistance pour les investissements), mais, dans la tentative de promouvoir 

leurs pays en tant que destination pour les partenaires étrangers, ils tentent de concentrer le mixe 

de politiques promotrices vers la construction de l’image et la génération directe des 

investissements. 

Le facteur principal qui influence le mixe de politiques promotrices utilisées par les 

agences est le cycle de développement de celles-ci, l’expérience accumulée, l’ordre et la 

construction de l’image – génératrice directe d’investissements n’étant pas nécessaire. 

À force du fait que la Roumanie n’a pas une image négative en tant que destination pour 

les investisseurs étrangers, et les avantages offerts sont bien connus par le milieu international 

d’affaires, nous considérons que ARIS ne doit pas mettre un accent tout à fait spécial sur les 

éléments qui créent l’image, sans les négliger, car dans l’étape de son fonctionnement elle doit se 

concentrer sur la génération directe d’investissements, l’acceptation d’une stratégie promotrice 

similaire à celle du marketing industriel. 

REFERENCES 

1. Anghelache, Constantin, “Roumanie 2002.L’état économique au début du millénaire”, 

Éd. Économique, Bucarest, 2002 

2. Isărescu Mugur “Réflexions économiques”, L’Académie Roumaine, le Centre Roumain 

d’Économie Comparée et Consensuelle, Bucarest 2001 

3. Perspective of development, The World Bank, 2002 

4. www. aris.ro


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AUDIT APPRAISAL AND FINAL OPINION WORDING 

Cristina Grozea, lect. dr. 

Norina Popovici, lect. dr. 

“Ovidius” University of Constanţa 

Ionel Bostan, prof. dr. 

Alunica Morariu, prof. dr. 


ABSTRACT: Assesement of internal control activity verification of the audited entity signifies more than to 

settle if the internal control system functioned accordingly . In case of a deviation of the internal control system of 

the entity from normal working it is necessary that the auditors to determine the potential effect of the deviation ,to 

evaluate if this one was identified by the entity management and issue conclusions regarding the trust level of the 

control activity of the entity purposing the audit terms. The target of any audit activity is the expression of an 

independent opinion on a certain set of financial statements. In order to form his opinion the auditor has to obtain 

sufficient and relevant audit proofs that will allow him to word an opinion on which the audit will be based on . 

Clue words : audit procedures, control system ,information, proofs, reports 

The goal of financial audit activities is to reduce as much as possible¹ the risk that, by 

application of the audit procedures, auditors don’t have to detect material errors or financial 

deviations in financial situations verifications. This leads to a high level of trust (around 95%) 

that financial situations don’t contain significant errors. 

Audit optimal procedure selection 

In order to select the most proper audit procedures, which have to be used for checking 

every chapter of the account, NAO² auditors use a work tool, named ‘the decision tree’.


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It always starts from the risk evaluation for the audited company on the whole, also for 

the account chapters, too. In case in which auditors have been identified significant errors risks, 

these have to verify the internal controls of the company used for preventing and decreasing 

risks.³ 

The standards concerning the accountant and internal control systems and audit risk 

evaluation stipulate that: ‘Estimated levels of internal and control risks are not enough decreased 

in order to remove the auditors need of using fund procedures in order to verify the account of 

execution chapters and of financial operations categories’’. 

So there is a residual risk element for which approach they have specific audit procedures 

at their disposal. 

Audit procedures application and results evaluation 

Audit procedures determination and application is a process, that belongs to the auditors 

reasoning and professionalism and that presumes the assurance of sufficient and proper audit 

proofs to which audit opinion has to rely on. 

Tests/proofs audit’ represent piece of information that auditor has to obtain in order to 

come to the conclusions, on which they support their report, they consist in explanatory 

documents and in accountable recordings that lie on the basis of the assertions from the financial 

situations and of the information corroborate from other sources. 

Audit proofs are obtained through a proper combination of: 

• Control tests and 

• Fund procedures. 

In some cases, audit proofs can be obtained on the whole only by the fund procedures 

application. 

Control tests represent the tests realised in order to obtain audit tests/proofs concerning 

the efficient functioning of the account and internal control system, and the fund procedures 

represent the tests made in order to obtain audit proofs/tests in order to detect significant 

errors/fakes in financial situations. 

Financial situations include assurances of the company board, under some assertions way, 

as it concerns: 

• existence: an asset or an obligation exists at some date; 

• rights and obligations: an active or an obligation belongs to a company at some time; 

• appearance: an operation and an event concerning the company takes place in the 

reference period; 

• exhaustivity: there are no assets, obligations, operations, unregistered events or 

elements not presented; 

• evaluation: an active and an obligation is registered at the real accountable value; 

• commensurability: an operation or an event that is registered at the right value, and the 

income or expense is allocated to the corresponding period; 

• information conception and presentation: an element is presented, classified and 

described in keeping with the applicable general setting of reference. 

By fund procedures the audit tests obtaining is followed, or for every mentioned above 

assertions, or for more from them, being two types: 

● financial operations and balance detail tests 

● analytical procedures.


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Audit tests appraisal as being sufficient and proper belongs to the auditor reasoning, 

influenced by some factors. 4 

The auditor will follow the audit tests obtaining, which are of different nature or which 

came from more sources, so that in order to rather motivate audit opinion instead of coming to 

some conclusions. 

In coming to an audit opinion process, the auditors usually don’t examine all available 

information, because related to an account balance or to an examined operation, it can be 

advanced an opinion using logical procedures or statistical stamp procedures. 

The audit tests credibility is influenced by a series of circumstances, as their source, 

which can be internal or external, and their nature, according to which audit tests can be visual, 

documented or spoken. 5 

Auditors can obtain audit tests by one or more from these procedures 6 : 

• inspection – consists in records, documents or bodily immobilization examination; 

• observation - consists in a process pursuit or in a procedure made by others; 

• investigation- consists in obtaining information from the people who get it. 

Investigations can vary from the official information requests, in written form, directed 

to a third person, till oral questions, unofficially directed to people from interior of the 

company. Answers to investigations can offer to the auditor information that they held 

previously or information that corroborate with audit tests; 

• confirmation- consists in answer to an investigation for corroborating information held 

in the accountant records; 

• accountancy – consists in verification of arithmetic accuracy of source documents and 

of accountancy records or in making independent accountancies; 

• analytical procedures- consists in indicators and significant tendencies analysis, 

including fluctuations investigation and of relations which do not correspond to other 

significant information or which divert from the expected values ( forecasted). 

Results evaluation 

In order to set up an audit opinion, the auditors have to take into account and to evaluate 

the results of used audit procedures results, including financial situations, on the whole. Also, the 

auditors have to bear larger considerations in mind, as if the audit field/sphere, the existence of 

some potential limitations in audit development, information that complete financial situations. 

Evaluation of verifying the intern control of audit company results is complex. This does 

not reduce to tell if the intern control system has functioned or not, but it supposes a high level of 

auditor professional preparation. In case of a deviation from the normal functioning of the intern 

control system of the company, it is necessary that the auditors to determine the potential effect 

of deviation, to appreciate if this has been identified by the company board and to reach 

conclusions about the level of trust that the company control activity of the company presents. 

Quantitative evaluations of the audit results are realized according to the existent 

standards. Quantitative evaluations enable the calculation of the most probable errors for a 

chapter of the account, by the results of analytical procedures applications and of other fund 

procedures combination. 

Qualitative evaluations of audit results are very complex. Factors that have to take into 

account by the auditors include the link between the financial situations information, possible 

orientations of management, accountant analysis, financial situation of audited company.


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General analysis of financial situations takes into consideration the accounting activity 

evaluation and financial situations presentation in keeping with legislative and professional 

standard requirements. It is necessary also an analytical evaluation of financial situations in order 

to see if these, on the whole, are coherent and coincide to the auditor image upon the company. 

In order to set up an idea, the auditors have to establish the results of all the above 

mentioned evaluations through materiality, not only through its value, but also through its nature 

and context, being very important and also the auditor argument. 

Audit report elaboration and audit opinion statement 

Auditors opinion has to give credibility to financial situations, giving a high level of 

insurance, but not absolute. An absolute level of insurance is impossible to realize in audit, 

especially because of some subjective and objective factors, as it follows: professional argument 

application, tests utility, inherent restraint of any accounting system and intern control. 

In NAO practice, the document containing the report and audit opinion upon financial 

situations is entitled ‘certificate’ 7, which has a size envisaged by SAS 600 audit standard. 

According to this standard, Audit Certificate contains five principal sections, respective: 

Certificate title and this addressee, Introduction, Account Officer and Auditor Responsibilities, 

Audit Opinion Foundation and Opinion. 

Usually, in NAO case, the Certificate is directed to the Parliament (to the House of 

Commons or to both houses), fact that appears especially in the certificate title. 

In Introduction it is presented the audit legal basis and it is mentioned the audit domain, 

respective chapters from financial situations/accounts submitted to certify. There are also 

included, information concerning the elaboration way and the development of accountant 

activities. 

In Account Officer and auditor Responsibilities there are included the audit company 

responsibilities of elaborating financial/accounts situations and preparing them for audit, as well 

as of the auditor’s of auditing and of releasing audit certificates for all accounts. 

Audit opinion foundation includes the way in which the audit has been developed, 

referring to audit standards. There are described the main verifications realized upon the way in 

which the accounts have been elaborated and upon their content. Also, we explain the way in 

which the opinion has been formulated on the basis of the collected proofs. 

Section Opinion contains auditors opinion upon financial/accounts auditing situation and 

contains two parts: standard opinion upon financial/account situations and references to the 

operations regularity reported to financial situations, respective to costs utility for approved 

destinations approved by Parliament. This represents the regularity opinion. 

NOTE 

¹ Advisable – not more than 5%. 

² National Audit Office (Great Britain) 

³ In case in which auditors, following the evaluation, find out that there are not significant risks, 

these have to examine relevant intern controls in order to make sure of a corresponding level of 

trust concerning data content reported by the account. 

4 Between these factors, it appears: nature and inherent risk level auditor evaluation, both at 

the financial situations, both at the account balance level or operations categories; account 

systems nature and of internal control, also the risk control value,


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examined aspect signification threshold; audit procedures results, including embezzlements and 

errors which could be detected; source and credibility of available information. 

5 

In audit tests credibility appreciation, relying on their source and nature, there are using the 

following generalities: audit tests from 

external sources are more credible from those ones obtained from internal sources; audit tests 

obtained from internal sources are more credible when the account and intern control system 

are well planned and functional; audit tests obtained directly from auditors are more credible than 

those produced by the company; audit tests as documents and wrote situations are more credible 

than spoken declarations. 

6 

By these procedures, there are analysed the relations between: a) financial data elements or 

the ones between financial and non financial data of the same period or b) financial 

information comparative to different period ( in order to identify assumed components and 

models) or between significant fluctuations and unforeseeable relations and the results of their 

investigation. 

7 

This is different from other NAO reports in an obvious way, fact that derives from legal 

extrapolation concerning the ‘registered’ financial situations obligation. Certificate distinguishes 

from the audit opinions transmitted for private sector, these ones being expressed in audit reports. 

NAO general politics is the one to comply, under all aspects, with the audit standards (SAS) 

and practice marks 10 and 17 . Practice mark 10 refers to the audit of financial situations of 

central government sector of Great Britain and presents the context and key factors that auditors 

have to take into consideration in auditing financial situation. The mark underlines the necessity 

of obtaining proofs of regularity, objective that devolves from an expressed extrapolation of 

law from 1921 according to which: ‘’ All the execution accounts will be examined by C& AG 

from House of Commons and and, in examination of these accounts, C& AG will ensure himself 

in a satisfying way that the spent money has been utilized in the goal or goals that the Parliament 

has approved the allocations, and the output costs have been made according to legal 

extrapolation. 

8 

Cf. NAO Documentary, FL. Bercea (et.al), CCR, Bucarest,2001: The fact that distinguishes 

fundamental the audit of public sector from the private one is especially this aspect of 

regularity. This comes from the responsibility particular to the Account Officer of insurance that 

funds for which it is responsible have to be used only in limits and for destinations approved by 

Parliament. 

Bibliographie 

3. I. Macovei, I. Bostan, Intern Audit, Corona Publishing House, Iasi, 2002 

4. National Audit Law ( NAO organization and functioning), UK, 1983 

5. NAO documentary, realized by a group of people from the Account Court, coordinated by 

prof. univ. dr. Florin Bercea, lect univ. drd. Ovidiu Ispir and conf..univ.dr Marin Tole, 

published by the Account Court Magazine no. 1/2001 

6. *** Report by the Comptroller and Auditor General HC 531 2006-2007, ISBN: 

9780102946734 

7. HUwww.nao.org.ukU


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CHALLENGES FOR CENTRAL BANKS IN ECONOMIC 

DEVELOPMENT ISSUES 

Ovidiu Stoica, professor, „Alexandru Ioan Cuza” University of Iasi 

Bogdan Căpraru, lecturer, „Alexandru Ioan Cuza” University of Iasi 

ABSTRACT: In the last decades the central banks’ role in the economies has increased. Nowadays, central 

bank has important implications in economic development, but an indirect role. The direct implication of central 

bank in economic development it is not proper, that’s why it has to maintain a favorable framework for economic 

development: price and financial stability. In this study we try to highlight the challenges that central bank have to 

pass over in the economic development issues. 

The Central Bank represents that state institution (authority) which, having a certain 

independence degree, caries out a number of functions, attributions and operations that follow 

from its quality of monetary authority and which has the monopoly of the national coin issue and 

which also has regulation powers and control upon the financial-banking system, too. Thus, its 

main functions in economy are those related with conduct of state’s monetary policy and with 

assuring the stability of the financial-banking system. 

Both in the specialized literature, as well as in practice, there is a polemic in what regards 

the role of the World Bank in the economic growth of a country. The monetary policy, as a 

component of the general economic policy, has to be related with the fiscal-budgetary policies. 

The final objectives of the monetary policy overlap with those of the economic policy. 

These can be: price stability, economic growth, full occupation, external equilibrium. The 

polemic regarding the role of the Central Bank in the economic growth of a country mainly 

transposes in adopting the final objective of the monetary policy. Those who militate in favour of 

an active attitude of the monetary policy are partisans of the objectives regarding the economic 

growth and the full manpower occupation. 

The American researchers Mishkin and Posen invoke four arguments [3] which secure the 

efficiency of considering the price stability as a final objective, in the place of those who consider 

the economic growth or the manpower occupation. 

One of these, grounds on Milton Friedman and Anna Schwartz’s considerations; according 

to them, the monetary policy has effects that show up after a certain period of time that can vary. 

The uncertainty regarding the prognosis and the measuring of the monetary policy’s effects 

determine that the attempt to stabilize the production fluctuations, by the help of some monetary 

policy effects, do not give the anticipated results; moreover, they can be injurious, leading to an 

economic lack of balance, especially when the monetary policy measures are uncertain both for 

the public, as well as for the founders of monetary policy.


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A second premise, for these two American researchers, is that according to which there is 

no precise correlation between inflation and unemployment on a long term. According to 

Phillips’ curve, a small rate of unemployment can be reach by an expansionist monetary policy, a


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promoter of a high inflation only by a short term and empirically. As a follow up of the 

increase of prices, both the public and the enterprises will produce more because nominal 

salaries and profits will rise. But, on a long term, this relation cannot be valuable, because 

inflation will persist in the economy, even after the production growth and unemployment 

decrease, because the expectations as regarding the inflation will be included in the price 

formation. Thus, the favourable effects with a view to the unemployment and production 

which are obtained in the first stage will be annihilated by the injurious consequences of a 

high inflation. 

Another argument brought against an active monetary policy and headed towards 

production growth and manpower occupation, is represented by the phenomenon of temporal 

inconsistency of the monetary policy. This is grounded on the settlement behaviour of 

incomes and prices, which takes into account the expectations regarding the future monetary 

policy. The private sector expectations are settled on the basis of the monetary policy 

decisions and are established at a certain moment. In this case, the World Bank will be 

tempted of leading a much more expansive monetary policy than the intended one. The 

reasons for which this is implied in such measures are varied [4].. 

The most frequent ones refer to: the wish of the monetary authority (or pressures on the 

part of the government) of increasing the level of manpower occupation and of the production 

in a more general perspective; the possibility of obtaining incomes by the help of the 

seniorage, as well as by the erosion of the real value of the public debt in the case of 

generating some inflationist surprises; the inflationist consequences of the devaluation made 

in order to improve the situation of the current account; the use of the monetary policy with 

the purpose of safeguarding the stability of the financial system. 

But, the private sector will recognize the Central Bank’s intentions with a view to the 

monetary policy and will adjust the expectations according to the new situations. This will 

lead to an inflation growth. The private sector will never be put on the wrong track by using 

such strategies of uncertain expansionist monetary policy, and the production will not be 

bigger than the established level; but the inflation will be increased. In this case, the World 

Bank will have to avoid the situations in which the private sector will form its expectations 

with a view to incomes and prices on the basis of an uncertain expansive monetary policy. 

The last argument is represented by the fact that the monetary and price stability leads to 

the formation of an economic system which functions more efficiently and with a much 

higher life standard. A policy meant to contribute at the price stability and stabilization may 

contribute to a redirection of resources towards productive domains [1, p. 88], and thus to 

contribute to the economic growth. 

Carrying on a study referring to the adoption of the final objectives of monetary policy 

by the central bank at the level of 2007 August, one can reach the conclusion that the final 

objective regarding the price stability gains more and more ground. Thus, 60 states, from 

those 128 analyzed countries have at least one declared objective as regarding the price 

stability. Among these, the developed countries (19 states) and the ex-communist countries 

(19 states) are the ones which adopted this objective preponderantly. 

In what regards the objective of economic growth or the existence of the “within the 

scope of the economic growth” syntagm when formulating the objective, 38 countries adopted 

it (Libya is the only examined country that has as a single objective the economic growth), for 

the developing countries’ case – 1 case (Tajikistan), the most common ones being found in 

the case of the developed countries 29 cases. 

The objective of full occupation of manpower is less used, only in four cases: three 

developed countries – Australia, United Kingdom, USA and a developing country – Malawi. 

Among those, UK and USA have as main objective the price stability and as secondary 

objectives the economic growth and the full occupation of manpower.


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The price stability represents the situation when the modification expected by the public 

in the level of prices is sufficiently low in order to not be taken into consideration in 

company’s and individual decisions [2, p. 1]. Thus, the economic growth is insured indirectly 

by the mean of monetary policies, through a favourable monetary climate. 

From the point of view of implementing the monetary policies, it is adopted more and 

more often the strategy of inflation targeting, sustaining the final objective. This kind of 

strategy is a direct one, without interference on intermediary objectives. Of course, this 

approach does not suppose any modification in the Statute of the central bank and thus does 

not change at all the fundamental objective(s). 

The inflation targeting regime it is considered to be the most adequate for achieving the 

objective of price stability. The advantage of this regime is that insures indirectly the 

favourable climate for economic growth, through the control of inflation, the central bank not 

having an active attitude. 

The inflation targeting supposes that the central bank to have as objective the reaching 

of a certain level of inflation (that could be a figure or an interval), the inflation target 

presenting the important advantage that can be easily perceived by the public. 

Thus, it is increasing the transparency of the monetary policy measures, and in what 

concerns the temporal inconsistence, the pressures toward the central banks for promoting an 

expansionist monetary policy, decrease. In the same time, it increases the degree of 

independence of the central banks connected to the monetary policy decisions for facing 

internal or external shocks that could affect the economy [5, p. 337]. 

The inflation can be correlated also with other negative phenomenon [6], respectively 

stagftation (the abbreviated form between inflation and stagnation) – representing the state of 

the economy when the inflation is accompanied by productions’ stagnation (the lack of 

economic growth), that could provoke the increasing unemployment and slumpflation, 

suggesting the existence of an accelerated inflation correlated with a significant decrease in 

the production. 

More and more frequent in the contemporary economies can be noticed such situations, 

stagflation or slumpflation, especially when the inflationist failures are important. If in the 

developed countries the inflation was maintained in the last decades under control and 

consequently could insure at least a decent economic growth, the statistics shows that a lot of 

countries are confronted with economic crisis generated by inflation that affect the economic 

performance generally and lead to recession and unemployment. 

It is also true that another form of monetary disequilibrium, the deflation, has dramatic 

consequences on the real economy. The deflation, the opposite of inflation, it is considered in 

the economic literature at least equal dangerous like inflation, if not more trouble shouter than 

a persistent inflation [7, p. 353]. 

The monetary policy decisions have an obvious impact on the real economy, but also on 

the financial one. If the specialists appreciate that the impact of some monetary policy 

measures could reflect in the price level after months, taking into account the monetary policy 

transmission mechanism, the financial market reacts more rapid to any visible modification in 

the strategies for monetary policy. 

It is not occasionally that the stock exchange it is appreciated to be a real barometer of 

the national economy. The evolution of the stock exchange index it is surveyed by the entire 

economic community, and the increase or decrease in the stock price has direct connection 

with the decisions of monetary policy, mainly those that lead to interest rates modifications. 

More, in the context of financial globalisation, the effects of some monetary policy 

decisions in developed countries with international currencies, has a significant impact not 

only on the global foreign exchange market, but also on the climate of economic growth at 

international level. Especially the measures decided by the American monetary authorities 

(the Federal Reserve System – FED) and European (European Central Bank - ECB) have a


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global impact and does not need to be neglected. This is why, among the supporting or 

inhibiting factors in what concerns the economic growth from different countries, one should 

have in mind not only the monetary orientations of the national central bank, but also the ones 

from the USA or the ones from the level of the EU (ECB). The emotional reactions generated 

by the increase, decrease or on the contrary, by not modifying the interest rate by the FED or 

ECB have a profound and immediate impact in the financial environment, contributing to the 

grounding of some decisions of investment or disinvestment, to investment reorientation 

towards certain sectors or countries, having direct consequences on a long term and even upon 

the living level from different countries. 

The decrease of the reference interest from the US or EU may contribute to the 

revitalization of some own national economies, but it may also re-establish the trust of some 

other markets. Of course, exports or imports of a country can be affected by the currency 

evolution and among other factors, the interest rate weighs very much when determining the 

equilibrium trend of the market. Even in Romania, during the transition period towards the 

market economy, we can meet periods when the decisions of monetary policy had an 

unfavourable impact upon the economic growth. 

In conclusion, the conduct of the monetary policy has a great impact on the whole 

economy. The market is very sensitive to the monetary problems, interest rates or monetary 

expansion and the central bank is responsible for the signals that it gives to the economy and 

the consequences of his measures. 

BIBLIOGRAPHY 

1. Dănilă, N. – Euro. Bipolarizarea monetară, Editura Economică, Bucureşti, 1999; 

2. Greenspan, A. – Opening Remarks on the Federal Reserve Bank of Kansas City 

Symposium „Achieving Price Stability”, august 1996; 

3. Mishkin, F.; Posen, A. – Inflation Targeting: Lessons from Four Countries, Economic 

Policy Review, august 1997; 

4. Popa, C. – Ţintele alternative în orientarea politicii monetare, BNR - Caiet de studii, mai 

2000; 

5. Stoica, O.; Căpraru, B. – România şi trecerea la regimul de ţintire a inflaţiei, Analele 

Universităţii din Oradea, Tom XIV, 2005; 

6. Turliuc, V.; Cocriş, V.; Stoica, O.; Boariu, A.; Dornescu, V.; Chirleşan, D. – Monedă şi 

credit, Editura Economică, Bucureşti, 2005; 

7. Turliuc, V.; Cocriş, V. – Monedă şi credit, Editura Ankarom, Iaşi, 1997.


ISSN: 1842-4856 

Die Kapitalisierungsmethode versus der Ergebnismethode 

Cernuşca Lucian, conf. univ. dr., 

Gomoi Bogdan Cosmin, prep. univ. drd, 


ABSTRACT: Die Internationale Standarde der Buchhaltung erlauben in bestimmten Situationen zwei 

buchhaltliche Verarbeitungen für Umsätze und Ergebnisse derselben Art. Eine der Verarbeitungen wird 

„Informationsverarbeitung “ genannt und die andere „ermächtigte alternative Verarbeitung“ (alternative 

treatment, Engl.). Die Verarbeitungen zeigen wie die buchhaltliche Information in den finanziellen Lagen des 

Unternehmens dergestellt wird. In der Situation in der es internationale Buchhaltungsnormen gibt, welche zwei 

Verarbeitungen für Umsätze und Ergebnisse derselben Art benützen, wird die Buchhaltungspolitik so 

ausgearbeitet, dass es einen freien Auswahl gibt für eine oder die andere Art der Verarbeitung. Das ist sehr 

wichtig für das Entwerfen der Information in Verbindung mit der finanziellen Lage und dem Kreislauf des 

Bargeldes des Unternehmens. 

Auf Grund der neuen rumänischen buchhaltlichen Regelungen, die durch OMFP nr. 94/2001 und durch 

OMFP 306/2002 genehmigt wurden, kann derselbe Fenomen verschieden dargestellt werden und das hängt von 

der Auswahl der Verarbeitung ab. Wenn das Unternehmen die Informationsverarbeitung wählt, dann werden die 

gelieferten Informationen verschieden von den Informationen der alternativen Verarbeitung sein. Als Folge 

verlangt ein vollständiges Kennen der realität die Darstellung der benützten Buchhaltungspolitik. Es gibt 

mehrere zusammensetzende Elemente der Stellungen der finanziellen Lagen, welche sich zwischen der 

Ergebnismethode und der Kapitalisierungsmethode bewegen. Es sind Elemente wie: Anleihenkosten, 

Subventionen für Investitionen, Unterschiede beim Währungswechsel. 

Anleihekosten 

Einige Aktiven brauchen eine längere Zeit bis sie verwendet oder verkauft werden 

können. Das Unternehmen muss Anleihekontrakte machen, um die Fabrikation dieser Aktiven 

zu finanzieren. Derjenige der die Kontos vorbereitet, muss wissen, ob die Zinsen dieser 

Anleihen als Kosten eingetragen werden oder ob sie kapitalisiert werden (sie werden als ein 

Element des Kaufkostes oder des Produktionskostes geschätzt oder als ein Element der Aktiva 

der mit Hilfe von Anleihen finanziert wird). 

Die internationale Norm der Buchhaltung , IAS 23 „Die Schuldkosten“, handelt von 

dem Problem der buchhaltlichen Behandlung der Anleihekosten. IAS 23 nach, können die 

Anleihekosten folgendes einschließen: Kosten mit den Zinsen der Kontos, die keine Deckung 

haben und der Anleihen auf langer und kurter Dauer, entsprechend; die amortisation der 

Emissions- und Rückzahlungsprämien der Kredittitel; die Amortisation der komplementären 

Kosten, welche durchgeführt wurden, um Anleihen zu erhalten; Finanzierungskosten des 

finanziellen Lesings, die von IAS 17 „Leasing“ anerkannt sind; die Differenzen des 

Währungskurses der Anleihen, welche in einer fremden Münze durchgeführt werden und das 

wenn diese als Anpassungskosten mit den Zinsen betrachtet werden. 

IAS 23 spricht deutlich über die sofortigen Einbuchungen, die unter der Form von 

Schuldkosten erscheinen. Die Schuldkosten werden in den Kosten der Übung eingebucht, 

während sie durchgeführt wurden und werden als Kosten der bestimmten Zeitspanne


ISSN: 1842-4856 

betrachtet. Als Folge, werden diese Kosten nicht kapitalisiert und so sind sie nicht als Aktive 

anerkannt. Diese Schuldkosten werden verwendet, um alle Tätigkeiten des Unternehmens zu 

finanzieren und so ist der Zusammenschluß zu einem privaten Gut arbiträr. Diese 

Schuldkosten sind ein element des Kaufkostes oder des Produktionskostes des Aktives und 

sind verschieden von anderen kapitalisierten Kosten. 

Die verfolgten Aktiven sind die, die eine längere Zeit brauchen bis sie bereit sind 

verwendet oder verkauft zu werden. Die Schuldkosten werden nur dann kapitalisiert, wenn 

sie zukünftige ökonomische Gewinne bringen und wenn diese Kosten wirklich festgestellt 

werden können. 

Die kapitalisierung der Schuldkosten ist möglich in der Situation in der man Aktive 

bildet, die eine längere Zeit brauchen, um hergestellt zu werden. Sie ist auch im Fall der 

Stocksproduktion möglich , eine Produktion, die längere Zeit braucht, um erneut zu einem 

bestimmten Zustand zu gelangen, um verkauft zu werden. Folgende Aktive werden nicht 

kapitalisiert: Aktive die schon beim Einkaufen fertig zum verkaufen sind, Aktive die in einer 

altmodischen Weise hergestellt werden, Aktive die in einer kurzen Zeit in großen Mengen 

hergestellt werden. Die Gegner der Kapitalisierung behaupten, dass solch ein Praktikum zu 

einer verschiedennen Bewertung eines Aktives führen würde und das dieses von der Art und 

Weise der Finanzierung, von Anleihen oder eigene Kapitalien abhängt. Eine Ausnahme ist 

es dann, wenn die Remunerierung der eigenen Kapitalien in den Kosten der Güter 

eingeschlossen wird; es ist eine Lösung zu der kein Spezialist Beitrag bringt; das gecshieht im 

Fall der finanziellen Buchhaltungsarbeuten. 

Beispiel 1: Ein Unternehmen schließt ein Kreditvertarag ab, um eine technische 

Betriebsanlage aus Deutschland zu kaufen. Das Kredit ist 80.000 Euro wert. Beim Einkaufen 

ist der Währungskurs 38.000 Lei/ Euro wert. 

a) Das Kaufen der technischen Betriebsanlage aus Deutschland, zum Preis von 80.000 

Euro. Der Währungskurs beim Datum des Kaufes ist 38.000 Lei/ Euro wert. 

2131 = 404 304.000 

„Technische Betriebsanlage“ „Aktiva - Lieferanten“ (80.000 Euro × 

3,8 Lei/Euro) 

b) Das Kontraktieren des Kredites. Der Währungskurs zu diesem Datum ist 38.500 

Lei/ Euro wert. 

5124 = 1612 308.000 

„Bankkontos in Währung“ „Bankkredite von (80.000 Euro × 

Langer Dauer“ 3,85 Lei/ Euro) 

c) Die Bezahlung des fremden Lieferanten. Zu diesem datum ist der Währungskurs 

38.500 Lei/ Euro wert. 

% = 5124 U308.000 

404 „Bankkontos in Währung“ 304.000 

„Aktiva - Lieferanten“ 

665 4.000 

„Kosten mit den Differenzen 

des Währungskurses“ 

d) Das Buchen der Kosten mit den Zinsen im Wert von 8.000 Euro. Zu diesem Datum 

ist der Währungskurs 39.000 Lei/ Euro wert. 

d1) Zinsen werden nicht kapitalisiert. 

(Die Ergebnismethode)


ISSN: 1842-4856 

666 = 1682 31.200 

„Zinsenkosten“ „Zinsen zum langwierigen (8.000 Euro × 

Bankkredite gehörend“ 3,9 Lei/ Euro) 

d2) Zinsen werden kapitalisiert. 

(Die Kapitalisierungsmethode) 

2131 = 1682 31.200 

„Technische Betriebsanlage“ „Zinsen zum langwierigen (8.000 Euro × 

Bankkredite gehörend“ 3,9 Lei/ Euro) 

e) Die Bezahlung der Kreditzinsen im Wert von 8.000 Euro. Der Währungskurs zu 

diesem Datum ist gleich mit dem vom Datum des Einbuchen der Zinsen. 

1682 = 5124 31.200 

„Zinsen zum langwierigen „Bankkontos in Währung“ (8.000 Euro × 

Bankkredite gehörend“ 3,9 Lei/Euro) 

Die internationale regeln der Buchhaltung geben dem Unternehmen die Möglichkeit 

die Zinsenkosten zu kapitalisieren, wenn es um Stocks geht, die eine längere 

Vorbereitungszeit brauchen bevor sie verwendet oder verkauft werden. Nach der 

Kapitalisierung der Zinsenkosten wird das Feststellen der Kosten vermeidet und das Ergebnis 

steigt. 

Beispiel 2: Während der Übung N erzeugt das Unternehmen X einen Stock mit 

Fertigfabrikate her und verkauft sie während der Übung N+1. 

Man kennt folgende Informationen: 

- eigentliche Produktionskosten des Stocks: 50.000 Lei 

- Zinsenkosten zur Produktion des Stocks gehörend: 5.000 Lei 

Das Ausbeutungsergebnis der Übung n wird verschieden sein, es hängt von der 

benützteb Methode an (Kapitalisierungsmethode oder Ergebnismethode). 

Praktikum 

Die 

Behandlung 

der 

Zinsenkosten 

Das Unternehmen möchte das 

Ergebnis der Übung N vergrößern 

Die Kapitalisierung der 

Zinsenkosten (das Vermeiden 

Kosten festzustellen) 

Operationen während der Übung 

N: 

• Man erhält einen Stock mit 

Fertigfabrikate zum Preis 

von 55.000 Lei (Das 

Einschließen der 

Zinsenkosten in 

Produktionskosten) 

345 = 711 55.000 

„Fertig- „Variation 

fabrikate“ der Stocks“ 

Das Unternehmen möchte das 

Ergebnis der Übung N 

verkleinern 

Das Bestimmen des Profit- und 

Verlustkontos durch die 

Anerkennung der Zinsen in den 

Kosten der Übung N 

Operationen während der Übung 

N: 

• Man erhält einen Stock 

mit Fertigfabrikate zum 

Preis von 550.000.000 

Lei 

345 = 711 55.000 

„Fertig- „Variation 

fabrikate“ der Stocks“


ISSN: 1842-4856 

Kontoauszug - Profit und Verlust 

• Die Anerkennung der 

Zinsen in den Kosten der 

Übung N 

666 = 1682 5.000 

„Zinsen- „Zinsen zum 

Kosten“ langwierigen 

Kreditkontos 

gehörend“ 

Übung N Mii Lei 

Indikatoren Kapitalisierungsmethode 

Ergebnismethode 

Geschäftsziffer 300 300 

Variatiob der Stocks 55 50 

Verbrauch von anderen Personen (200) (200) 

Personalkosten (100) (100) 

Amortisationskosten (30) (30) 

Ausbeutungsergebnis 25 20 

Man bemerkt, dass das Buchhaltliche Ergebnis nach der Kapitalisierung der 

Zinsenkosten steigt. 

Die Kapitalisierung der Kosten nachdem das Funktionieren beginnt 

Einige Aktiven brauchen Kosten, um in Funktion gebracht zu werden. Die allgemeine 

Regel ist es solche Kosten zum buchhaltlichen Wert des Aktives hinzuzufügen, aber nur 

wenn die Gesellschaft in der Zukunft größere Gewinne erhalten kann als die , die anfangs 

bestimmt wurden. 

Beispiel 3: Das Unternehmen X renoviert während der Übung N die Fassade eines 

Gebäudes. Am Anfang der Übung N ist der netto buchhaltliche Wert des Gebäudes 

1.000.000.000 Lei. Die geblibebe ökonomische nützliche Lebensdauer ist 10 Jahre. Man 

verwendet die lineare Amortisation. Die Renovierungskosten sind 200.000.000 Lei wert. Das 

Ausbeutungsergebnis hängt von der verwendeten Methode ab. 

Kontoauszug – Profit und Verlust 

Übung N Mii Lei 

Indikatoren Kapitalisierungsmethode 

Ergebnismethode 

Geschäftsziffer 280 280 

Verbrauch von anderen Personen (160) (160) 

Personalkosten (80) (80) 

Amortisationskosten (12)* (10)** 

Renovierungskosten 0 20 

Andere Kosten 5 5 

Ausbeutungsergebnis 23 5

* 

** 


ISSN: 1842-4856 

( 100 + 20. 

000) 

Lei 

= 12.000 Lei/Jahr 

10Jahre 

( 100 + 20. 

000) 

Lei 

= 10.000Lei/Jahr 

10Jahre 

Investitionssubventionen 

Es gibt zwei Arten an buchhaltliche Investitionssubventionen heranzugehen: mit Hilfe 

der Bilanz und mit Hilfe des Profit- und Verlustkontos. 

Im ersten Fall wurden zwei Erkennungsarten der Investitionssubventionen dargestellt. 

So kann die Subvention als ein Einkommen betrachtet werden, den man in Vorschuß 

einbucht, oder sie kann aus dem Konto des Aktives deduziert werden. 

Bevor es buchhaltliche Regeln in Rumänien gab (OMFP Nr. 1752/2005 wurden die 

Investitionssubventionen, anhand der französischen Buchhaltung, als Komponente der 

eigenen Kapitalien betrachtet und sie verwandelten sich während der Amortisation des 

subventionierten Aktives in Gewinne. OMFP Nr. 1752/2005 haben weiter erlaubt, dass diese 

Subventionen in dem Kontoplan in der Klasse 1 - Kapitalkontos – eingetragen werden und 

und in der Bilanz erscheint der Soldo des Kontos 131 „Investitionssubventionen“ in der 

Stellung „Einkommen in Vorschuß“. 

Einschließen der Subventionen in 

Einkommen 

(Ergebnismethode) 

• Subventionen stammen nicht von 

Beiträge der Aktionäre ab und so 

werden diese zu den Ergebnissen 

eingetragen, auf eine oder 

mehrere Zeitspannen, damit diese 

mit den Kosten in Verbindung 

gebracht werden, unter der 

Bedingung eine Garantie zu 

bringen, mit der man zeigen kann 

dass die Bedingungen für die 

Erhaltung der Subventionen 

geachtet werden und dass man sie 

wirklich bekommt. 

Die Methode die Einkommen in 

Vorschuß einzubuchen 

• Die Subvention erscheint als ein 

Gewinn in Vorschuß und jährlich 

amortisiert 

• Der Aktiv wird zu dem rechten 

Wert geschätzt 

Einschließen in eigene Kapitalien 

(Kapitalisierungsmethode) 

• Die Subventionen werden in der 

Bilanz als Ressourcen bleiben, 

weil sie nicht zurückgegeben 

werden können. 

• Subventionen sind für das 

Unternehmen keine Gewinne 

sondern Ansporn, die von der 

regierung gegeben werden 

• Dieses Herangehen ist von IAS 20 

angeeignet 

Die Methode Subventionen aus dem 

Aktivkosten zu deduzieren 

• Die Subvention wird aus dem 

buchhaltlichen Wrt des Aktives 

deduziert, die Amortisation wird 

zum netto Wert gerechnet 

• Der Aktiv wird zu seinem wahren 

Wert eingebucht 

• Lösung von der finanziellen 

analyse vorgecschlagen.


ISSN: 1842-4856 

In dem folgenden Beispiel werden sie zwei Prozeduren für die Anerkennung der 

Investitionssubventionen in der Bilanz dargestellt: das verschobene Einkommen und der netto 

Wert des Aktives. 

Beispiel 4: Am Anfang der Übung N wird eine technische Betriebsanlage im Wert von 

500.000.000 Lei gekauft. Es kann in 5 Jahren amortisiert werden. 40% der Finanzierung 

stammt aus etetmäßige Investitionssubventionen. 

a) Die Ergebnismethode 

• Die Anerkennung des Rechtes die Subvention einzukassieren 

445 = 131 20.000 

„Investitions- „Investitions- 

subventionen“ subventionen“ 

• Kaufen der technischen Betriebsanlage am Anfang der Übung N 

2131 = 404 50.000 

„Technische „Aktiva- 

Betriebsanlagen“ Lieferanten“ 

• Einkassieren der Subventionen 

5121 = 131 20.000 

„Bankkontos „Investitions- 

In Lei“ subventionen“ 

• Man bezahlt dem Lieferanten 

404 = 5121 50.000 

„Aktiva- „Bankkontos 

Lieferanten“ In Lei“ 

• Amortisationskosten am 31.12.N und die Lieferung der Subventionen als 

Einkommen 

6811 = 2813 10.000 

„Amortisations- „Amortisation der 

kosten“ Betriebsanlagen, 

Transportmitte usw.“ 

131 = 7584 4.000 

„Investitions- „Einkommen aus 

subventionen“ Investitions- 

subventionen“ 

Übung Amortisations 

- 

kosten 

Subvention 

im Ergebnis 

berichtet 

Einfluß auf 

das Profit- 

und 

Verlustkont 

o 

Einfluß auf die Bilanz 

Aktiv 

Gebliebene 

Wert der 

Betriebsanl 

age 

N (100) 40 (60) 400 160 

N+1 (100) 40 (60) 300 120 

N+2 (100) 40 (60) 200 80 

N+4 (100) 40 (60) 100 40 

Pasiv 

Gewinne in 

Vorschuß/ 

Investitions 

- 

subventione 

n


ISSN: 1842-4856 

N+5 (100) 40 (60) 0 0 

b) Die Kapitalisierungsmethode 

Die Subvention wird aus dem Kaufkosten des Aktives deduziert, als Folge wird die 

Betriebsanlage zum Preis von 300.000.000 gebucht. 

• Kaufen der technischen Betriebsanlage 

2131 = 404 50.000 



• Einkassieren der Subventionen 

5121 = 2131 20.000 

„Bankkontos „Technische 

In Lei“ Betriebsanlagen“ 

• Amortisationskosten am 31.12.N 

6811 = 2813 6.000 

„Amortisations- „Amortisation der 

kosten“ Betriebsanlagen, 

Transportmitte usw.“ 

Übung Amortisations- 

kosten 

Einfluß auf das 

Profit- und 

Verlustkonto 

N (60) (60) 240 

N+1 (60) (60) 180 

N+2 (60) (60) 120 

N+4 (60) (60) 60 

N+5 (60) (60) 0 

Währungskursdifferenzen 

Einfluß auf die Bilanz 

Aktiv 

Gebliebene Wert der Betriebsanlage 

Die Kapitalisierungsmethode der Währungskursdifferenzen ist von IAS 21-Norm 

vorausgesehen. Wenn diese Differenyen ein Ergebnis der Entwertung oder der Herabsetzung 

sind und wenn man nicht gegen diese Entwertungen machen kann, „müssen sie in den 

buchhaltlichen Wert des Aktives eingeschlossen werden, aber der buchhaltliche angepasste 

Wert muss den Minimalwert zwischen dem Ersetzungskosten und der durch Verkaufen oder 

Verwenden nachholbaren Summe nicht überschreiten“. 

Als Folge der Entwertung oder der Herabsetzung der aktentuierten Münze, erlaubt 

IAS 21 das Einschließen der Währungskursdifferenzen, die aus Schulden hervorgehen, in dem 

buchhaltlichen Wert des Aktives. 

Beispiel 5: Am 01.06.N kauft ein Unternehmen (aus Import) eine technische 

Betriebsanlage zum Preis von 12.000$. Beim Datum des Kaufes ist 1$ = 2,7 Lei. Die Schuld 

wird am 31.12.N bezahlt, wenn dank einer akzentuierten Entwertung der Nationalmünze 1$ = 

3 Lei. 

a) Kaufen der technischen Betriebsanlage am 01.06.N 

2131 = 404 32.400 



(12.000$*2,7Lei/$)


ISSN: 1842-4856 

b) Beim Schließen der Übung N, erscheint als Folge der Entwertung der 

Nationalmünze eine ungüstige Differenz, 12.000$*(3 - 2,7) Lei/$= 3.600 Lei 

IAS nach, wird dieses Verlust kapitalisiert, es wird in den Kaufkosten eingeschlossen, 

wenn diese Kosten nicht größer als der Minimalwert zwischen dem Ersetzungskosten und der 

durch Verkaufen oder Verwenden nachholbaren Summe sind. 

% = 5124 

404 „Bankkontos in Devisen“ 

„Aktiva- 

Lieferanten“ 

2131 

„Technische 

Betriebsanlagen“ 

Wie man bemerken kann, ist die ungüstige Währungskursdifferenz 3.600Lei wert und 

sie beeinflusst das Konto 665 „Ausgaben mit Währungskursdifferenzen“ nicht. Um die 

Kapitalisierung durchzuführen, muss das Unternehmen beweisen, dass es die Schulden nicht 

bezahlen konnte und dass es sich gegen Wechselrisikos nicht versichern konnte. 

OMFP Nr. 1752/2005 sieht im artikel 5,13 vor, dass „die alternative Bechandlung der 

IAS 21 nicht durchgeführt werden kann, weil die Bedingungen der SIC-11 nicht erfüllt 

werden. 

Forschungs- und Entwicklungskosten 

Um die Erkennung der nicht körperkichen Aktiven, die mit eigenen Ressourcen 

erzeugt wurden, zu analysieren, muss man einen Unterschied zwischen der Forschungs- und 

der entwicklungsphase machen. 

Bevor OMFP Nr. 1752/2002 erschienen, wurden die Forschungskosten in den 

körperlichen Aktiven nicht eingeschlossen. 

Nach der Erscheinung dieser Regeln haben sich die Regeln der Forschungskosten 

verändert. Der generale Buchhaltungsplan, der durch OMFP Nr. 1752/2005 genehmigt wurde, 

schließt die Forschungskosten nicht mehr in der Gruppe 20 „Körperliche Aktiven“ ein. 

Ias 38 nach, muss ein Element folgende Bedingungen erfüllen, um ein unkörperliches 

Aktiv zu sein: 

i) Es muss die Definition der unkörperlichen Aktive einhalten „Muss eine 

Münzidentifizierung nicht haben, keine materielle Stütze haben und muss in 

der Produktion oder in der Güterbeschaffung oder in der Lieferung der 

Dienstleistungen für das Vermieten oder für andere administrative Zwecke 

verwendet werden“. 

ii) Der Aktiv kann möglicherweise zukünftige ökonomische Gewinne bringen 

iii) Der Kost des Aktives kann in einer glaubwürdigen Weise gemessen werden 

. 

Bibliographie 

1. Chary, V., Ethics in Accounting. Global Cases and Experiences, ICFAI Univ. Press, 2004. 

2. Coates, J., The Goals and Promise of the Sarbanes-Oxley Act, 21 J. Econ. Persp. 91, 2007. 

3. Glassman C., Sarbanes-Oxley Act and the Idea of Good Governance ICFAI Univ. Press, 

2005. 

4. Swartz, M., Watkins, S., Power Failure: The Inside Story of the Collapse of Enron, Library 

of Congress Cataloging-in-Publication Data , 2003.


ISSN: 1842-4856 

5. Wells, J.T., Corporate Fraud Handbook. Prevention and Detection”, The Association of 

Certified Fraud Examiners Inc., 2004. 

6. OMFP 1752/2005. 

ENTERPRISE’S INVESTMENT DECISION MAKING PROCESS IN 

THE CONTEXT OF EU FISCAL POLICY 

Adina Martin, Assistant Lecturer, 

Faculty Of Economics And Business Administration, 

„Al. I. Cuza” University Of Iaşi 

ABSTRACT 

This paper presents the main issues involving the enterprise’s investment decision making process. 

First of all, we present the criteria used for taking the investment decision: the traditional criteria and 

the criteria based on updating techniques. Secondly, we point out that the decision making process depends on 

several factors and the fiscal policy is one to be taken into account during this process. 

In the context of European integration, the fiscal policy has achieved a greater importance, because the 

fiscal competition can determine the investment’ “delocalization”. The changes of economic environment (the 

free movement of capital, the creation of Single Market and of the Monetary Union) have added a greater 

relevance for fiscal policy in the enterprise’s decision making process. 

Finally, even if the fiscal factor plays an important role in the decision making process of an enterprise 

for establishing the place where it will perform its activity, it must take into consideration also other aspects, as 

the infrastructure, the available labour, the legislation, the quality of the local services, etc. If the enterprise 

decides to establish its activities where the fiscal charge is more reduced and not where the production costs are 

smaller, the production will be less efficient. 

1. Criteria regarding the grounding of the investment decision 

The decision making process of an investment means the identification of the 

distribution modalities and of the way in which the money funds can be used in relation to the 

goals of the financial deciders as administrators of these resources. 

Due to the special importance of the investment decision within a firm, the managers 

need appropriate criteria for the evaluation of the investment opportunities, according to the 

requirements imposed by them. These criteria should promote the objective of maximizing the 

shareholders’ wealth, although the final decision takes into consideration also the priorities 

aimed by the enterprise’s policy within its development strategy. 

The used criteria are the criterion of return on an investment and the criterion of 

liquidity (the period necessary for the investment’s return), these two being considered 

traditional criteria [3, p. 76], as well as the criteria based on the actualization or capitalization 

techniques, such as the net present value (NPV) and the internal rate of return (IRR). 

The criterion of return on an investment means establishing the economic rate of 

return for an investment project and then comparing this rate with similar ones regarding 

other projects. This is due to the fact that in the market economy there is also the problem of 

selecting the best projects, using as efficiently as possible the available capitals. 

As a general rule, the rate of return (R) should be bigger than the costs of the own and 

borrowed capitals (K): R >K.


ISSN: 1842-4856 

From an accountancy point of view, with strong static character, the return is 

highlighted by means of the relation:

AError! Bookmark not defined. 

net benefit 

Rate of return = x 100 

net investment 

(1) 

The indicator can be calculated for each year of the economic life duration of the fixed 

assets resulted from the investment. For eliminating the influence of the net benefits’ annual 

variations, other authors suggest that, for the relation’s numerator, one must take into 

consideration the annual average benefit: 

annual average benefit 

Rate of return = x 100 

(2) 

net investment 

The liquidity criterion aims the return of the investment as soon as possible that means 

that the investor should take the possession of the advanced capital and of the anticipated 

return on an investment on the shortest term possible in order to use it for the initiation of 

other economic operations. 

As a rule, the liquidity is established according to the number of years necessary for 

the advanced capital’s return, putting in balance the initial value of the investment and the 

sum of the positive annual financial fluxes, according to the following below: 

I 

D.r. = (3) 

C.F. a 

Where C.F.a represents the annual average cash flow and D.r. represents the 

investment’s return duration. 

According to this criterion, the best project is the one that allows the fastest return of 

the performed investment. The simplicity of its application makes it easy to be used for 

selecting the projects, but it also has a number of disadvantages, because it doesn’t take into 

consideration the time grading of the cash-flows and the effects that appear after the 

investment’s return and advantages the projects that allow the fast accumulation of the capital 

in comparison with the ones with a longer time process. 

Because in the investment process there if a temporal gap between the period 

necessary for the investment expenditures and the one necessary for obtaining the results, one 

must appeal to actualization techniques and must take into consideration the money value in 

time. 

Theoretically and practically, the most fundamental and lusty selection criterion for 

efficient investment projects is the one of the net present value, NPV, that is the value plus 

that the new investment projects will bring to the existent value of the enterprise. The 

selection of the most operational investment projects will be realized, thus, in relation to the 

NPV’s maximization. 

The net updated value is established that difference between the future cash-flows 

(CFt) and updated to the rate of interest on the market, respectively their present value (V0) on 

the other hand and the invested capital (I0), on the other hand. 

NPV = V0 

- I0 

(4) 

For a year:


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NPV 

(CF + VR ) 

(1+ 

k) 

1 1 

= - I0 

(5) 

For n periods: 

NPV 

CF 

VR 

n 

t 

n 

= V0 

- I0∑ 

+ - I0 

t 

n 

t= 

1 (1+ 

k) (1+ 

k) 

On the supposition of a sure economic medium and of unsaturated monetary market, 

the rate at which the future incomes will be updated from the capital investment is the average 

rate of the interest for this market. Under these circumstances, the conveniences for the 

investments with superior capability or equal to the interest’s rate will be privileged. Beyond 

this level, the marginal rates of return on an investment would be smaller and smaller in 

comparison with the interest’s rate and the respective allocations of capital would establish 

negative NPV and would lead to the diminution of the value of the enterprise that would 

adopt it. 

All projects that will have a positive NPV are preferable for the monetary placement at 

a K market interest. Between more investment projects, the one who present a maximum NPV 

is the best because it will establish the maximum possible growth of the shareholders’ wealth. 

Other criterion is the one of the internal rate of return – IRR that is the rates of return 

specific for each investment project. One should start from the hypothesis that the future cashflows 

(CF1) can be constantly invested at this IRR rate. In this way, the IRR will represent 

that update rate that will annul the NPV (NPV = 0), in the following manner: 

For a period: 

CF1 

+ VR1 

IRR = -1 

(7) 

I0 

For n periods: 

n 

0 = ∑ 

t= 

1 

I 

CFt 

(1+ 

IRR) 

t 

VRn 

+ 

(1+ 

IRR) 

n 

The IRR can be calculated by means of the (8) equation and one can select from here 

the investment projects that will have IRR > k (k = the average rate of interest). 

As a consequence, in a sure environment, there are two criteria that should be taken 

into consideration for the investment decision: 

• The NPV criterion: only the investment projects with NPV > 0 can be 

accepted; 

• The IRR criterion: only the investment projects with IRR > k can be accepted. 

The investment decision is a complex process due to the impossibility of a correct 

evaluation of the cash-flows resulted from the investment’s running and this is the reason why 

one appeals, besides the financial accountings, also to the professional experience 

accumulated by the decider. 

One must also take into consideration the fact that any investment decision is taken 

within a restrictive context [9, p. 574] of the economic environment, characterized by the 

competition’s development and expansion; this is why the investment decision making 

process will be performed not only on the basis of the presented criteria but also by using 

(6) 

(8)


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some information offered by a very good informational system, knowing the limits and 

facilitations offered by the legislative system. 

Under these incertitude and restrictive circumstances of the investment process, 

instead of looking for an optimal criterion it is often preferable to select the decision that 

satisfies the best a certain number of minimal criteria that means that a multi-criteria decision 

can come much closer to the reality than a decision based on one criterion or the other. 

2. The impact of fiscal policy on the enterprise’s investment decision making process 

The enterprise’s investment decisions are influenced by a series of factors, among 

which one should mention the fiscal policy, described in our study in a restrictive sense as a 

tax policy. 

In the investment decision making process of an enterprise, one cannot neglect this 

factor. In this respect, on the one hand, in the moment in which the decisional authorities 

establish the dimension of the obligatory prevailing from the enterprises, one must take care 

of the fact that over a certain level, limiting the possibilities of performing the investments 

can have negative effects over the economic growth. 

On the other hand, although the enterprise makes independently the financial 

decisions, it must comply itself with the existent juridical framework imposed through the 

decisions of public authorities, materialized in the fiscal legislation existent at a given time. 

The taxes’ impact over the investments is established also by the investment behaviour 

of the enterprisers. The savings represent the necessary, but not sufficient condition of capital 

accumulation; the investors must be willing to invest, standing the inherent risks, so that the 

savings should be transformed in investments. 

The economic theory isn’t unitary in this respect: there are many types of investor’s 

behaviours, among which one can specially observe the following: 

• The investments are determined by the net rate, separate from the investment 

projects’ return; 

• The investments are determined by the past variations of the turnover and by 

the present production capacity; 

• The investments are determined by the dimensions of the internal financial 

resources of the investments, through capital depreciations and undistributed 

profit. 

Being familiar with the factors that determine the investment behaviour it is essential 

to conceive and apply measures for influencing the investments by means of taxes. Thus, if 

the investment behaviour belongs to the first model that reflects the goal of profit’s 

maximization, it should be admitted the fact that the investments would be limited to the level 

at which the present updated value of the future income fluxes is equal to the costs. Until 

reaching that level one should expect the investments to grow, and after this to reduce 

themselves. 

From this point of view it must be admitted the fact that the income tax can establish 

the modification of the investments through the impact exercised over the net return and, 

consequently, over the investments’ threshold. 

But if the investment behaviour would be established by the second model, that 

reflects the accelerator’s principle, it is admitted the fact that the investment will grow when 

the production grows under the impact of the sales’ growth from the anterior period. As a 

result, an increased role for the investments’ adjustment will be played by the sales taxes and 

not by the income taxes. 

Ultimately, if we admit the fact that the investments depend on the availability of the 

own resources, according to the third model, the income tax is again the instrument with a


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significant impact over the investments, through the regime of fiscal capital depreciation, the 

treatment of the profit depending on the destinations and taxing quotes. 

In this context we consider that from the assembly of fiscal policy instruments, the 

income tax plays an important role in adjusting the investments, through the impact that it has 

over the capital’s costs. In this respect, we assume that the investors will invest as long as the 

economic earning capacity of an investment (Re) will be equal to the capital’s cost, 

determined by summing up the interest’s rate (i) and the depreciation quote (a), according to 

the relation: 

Re = i + a (9) 

If we introduce in this relation also the income tax, with a proportional “t” rate, the 

condition is the following: 

tax. 

Re – te = I + d – tc, (10) 

te = Re x t – ta (11) 

Where tc is the fiscal credit for investments; 

te – the effective tax rate, determined by reducing it from the tax that would 

have been paid in the absence of the capital depreciation (Re x t) of the tax 

economy (ta) due to the capital depreciation’s reduction from the calculus of 

the taxed profit. The taxing economy depends on the taxation quote and the 

capital depreciation rate “a”. From this equation we can find out the return rate 

in the following manner: 

i + d - ta 

- tc 

Re 

= (12) 

1- 

t 

Where the term from the right expresses the capital’s cost under the conditions of the 

From this relation we can inference the fact that the investments would grow if the “t” 

taxing rate will reduce itself or if the tc fiscal credit and/or the capital depreciation rate that 

can be fiscally deduced will grow. Although under mathematical terms the same result can be 

obtained through correspondingly modifications of the three variables, from an economic 

point of view their impact is not the same: 

• The capital depreciation regime and the fiscal credit are more flexible, 

applicable only to new investments, while the taxation rate is more rigid and 

with undifferentiated action both over the new investments and on the old 

ones; 

• The fiscal credit advantages the short term investments, while the capital 

depreciation regime can be advantageous for the long term investments; 

• A rise of the fiscal credit determines immediate income losses for the public 

budget that are bigger than in the case of raising the fiscal capital depreciation 

rate. 

Starting from these aspects, but also from the imperfect character of the credit’s 

market and the investors’ preference for financing the investments from internal resources, [5, 

p. 68] we think that one can choose an initial fiscal credit in order to stimulate the short term 

investments, correlated with an advantageous capital depreciation regime and with a more


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reduced taxation quote also for the stimulation of the investments that need longer periods of 

time for their realization. 

In Romania, the fiscal legislation has been characterized by instability and continuous 

changes, aspect towards which the enterprises didn’t remain indifferent, but, on the contrary 

the financial decisions made by the enterprises had to be adopted in the existent legislative 

framework, so that their decisions allow the accomplishment of the strategic objectives aimed 

by the enterprise under the conditions imposed by law. Not taking into consideration the fiscal 

policy at the moment of an investment decision making, can lead to financial problems for the 

enterprise’s activity. The economic theory and practice admit the existence of a close 

relationship between the activity of the economic agents and the taxation, including the 

process of the investment financial decisions. Thus, under the aspect of the relationship 

between the economic activity – profit – taxes, a taxation system is appropriate when it 

ensures the activation of the economic processes and the growth of the efficiency. 

3. The European Context 

Fiscal policy is a symbol of national sovereignty [10] and part of a country’s overall 

economic policy, helping finance public spending and redistribute income. In the European 

Union, responsibility for fiscal policy mainly lies with the member states, who may delegate 

some of it from central to regional or local level, depending on the constitutional or 

administrative structure of government. 

The changes of economic environment (the free movement of capital, the creation of 

Single Market and of the Monetary Union) have added a greater relevance for fiscal policy in 

the decision making process of the enterprises, becoming the cause of the distortions which 

affects the fiscal neutrality and which prevent the efficient allocation of resources. 

Due to the number increase of the European Union member states, the disparities 

between the fiscal systems seem to influence more and more the decisions connected to the 

allocation of funds in the different member states and their agreements for the administration 

of trading activities, although in the event of an investment, the decision to place it in a 

location or from the European Union should be as less distortional as possible from the fiscal 

policy. This will take place because the coordination of the economic policy will allow the 

member states to make use of their fiscal regulations in order to influence the decisions 

regarding the localization of the investments and of the resources from European Union. 

According to the European Commissioner for the fiscal and customs field, László 

Kovács [6] the persistent significant disparities between the direct taxation systems of the 

member states rise the danger of creating barriers against the integration process of the 

market in the disfavour of the European economy’s competitiveness. 

The differences between the existent fiscal systems of the member states, regarding 

the direct taxes, make the taxation be a differentiation element with a major influence over the 

decisions for establishing the economic activities’ location; this increases the risk of 

“harmful” fiscal competition. In such situations, the income taxes should be neutral and this 

means that the dimension of the effective tax rate over the different forms of incomes 

generated by the capital (profit, dividends, interests) to be almost the same. This can be 

achieved through a higher level of fiscal harmonization. 

In this respect it was adopted The Code of Conduct for Business Taxation that 

identifies a number of measures for the firms’ taxation field that can have a considerable 

influence over the localization of the economic activity within the European Union. There are 

legislative or administrative measures that establish an effective taxation level inferior to the 

one usually practiced in the respective member state. 

The fiscal competition is considered harmful if it influences or may influence the 

activity’s “localization” of an enterprise. The main criteria taken into consideration for the


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identification of the “harmful” competition papers through taxes in restraint of the following 

aspects: 

• If the fiscal advantages are given only to the non-resident taxpayers or for the 

operations performed with non-residents; 

• If the advantages are isolated by the national economy and do not affect the 

taxable national income; 

• If the advantages are given even when there is no real economic activity or 

substantial economic presence in the member state that offers those fiscal 

advantages; 

• If the determination of the imposable profit realized by the multinational 

companies is performed according to other criteria than those accepted at an 

international level (OECD); 

• If the fiscal measures lack transparency and especially if the legal 

dispositions apply at the administrative level with high risk and without 

transparency. 

By applying this Code one is trying to avoid or eliminate these “harmful” measures 

that exist at the European level of the income tax and that have an incidence over the 

localization of the economic activities. 

This Code of Conduct represents actually a political compromise made by the 

governments of the member states for eliminating the fiscal measures that bring prejudices 

due to the low taxation rate that influences the enterprisers in their decision regarding the 

location where they will perform the activity, as well as the compromise not to introduce new 

measures of this type. 

The application of this Code was necessary due to the fact that the fiscal competition 

(manifested through the introduction by the member states of fiscal facilitations or through the 

reduction of the taxation rate, being aimed the attraction of foreign investments) generated 

negative effects in the sense of influencing the decisions of the economic agents over the 

location where they should perform their activity. But this Code aims punctual aspects in 

respect to the direct taxation and it never imposes the intense coordination of the direct taxes, 

maintaining thus the option for fiscal competition. 

Even if the fiscal factor plays an important role in the decision making process of an 

enterprise for establishing the place where it will perform its activity, its investments; it must 

take into consideration also other aspects, as the infrastructure, the available labour, the 

legislation, the quality of the local services, etc. If the enterprise decides to establish its 

activities where the fiscal charge is more reduced and not where the production costs are 

smaller, the production will be less efficient. The investment decision making process it’s 

good to be based on efficiency criteria, because otherwise exist the risk that the enterprise 

establish it’s investment in a place with major costs because of the financial facilities 

provided by the authorities. 

REFERENCES 

1. Abrudan, L. C., Rolul impozitului pe profit în impulsionarea dezvoltării economice în 

UE, in Annals of Oradea University, Series of Economic Science, TomXV, Oradea 

University Publ. H., 2006 

2. Brezeanu, P., Fiscalitate europeană, Economic Publ. House, Bucharest, 2005 

3. Bucătaru, D., Gestiunea financiară a întreprinderii, Junimea Publ. House, Iaşi, 2004


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4. Dobrotă, G., Fundamentarea deciziei de investiţii la nivel microeconomic, in 

„Economics and Globalization”, Universitaria Publ. H., Craiova, 2007 

5. Filip, Gh., Onofrei, M., Politici financiare, Sedcom Libris Publ. H., Iaşi, 2000 

6. Kovács, L., The future of Europe and the role of taxation and customs policy, in 

HUwww.europa.eu.int/comm/commission_barroso/kovacs/speeches/speach_amcham.pdfU 

7. Minea, M. Ş., Costaş, C. F., Fiscalitatea în Europa la începutul mileniului III, Rosetti 

Publ. H., Bucharest, 2006 

8. Onofrei, M., Management financiar, C. H. Beck Publ. H., Bucharest, 2006 

9. Stancu, I., Finanţe, Economic Publ. House, Bucharest, 2002 

10. European Commission, Tax Policy in the European Union. Acces from: 

 

11. European Commission, Tax Policy in the European Union. Access from: 

 

12. European Commission, Activities of the European Union (EU) in the Tax Field in 

2006. Access from: < 

HUhttp://ec.europa.eu/taxation_customs/taxation/gen_info/info_docs/tax_reports/index_e 

n.htmUH >


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FINANCIAL IMPLICATIONS CONCERNING THE BENEFITS OF THE 

EMPLOYEES 

Dumitru Mihaela Iuliana 

Asist.drd., Universitatea din Piteşti 

ABSTRACT: The percentage from the actuarial profits and losses, acknowledged for each determined 

benefits plan is given by the previously determined surplus, divided by the predicted average of the work 

period until retirement for the employees who participate in that plan. However, an entity can apply any 

systematic method which has a result a more rapid recognition of actuarial profits and losses, provided that 

the very same basis is applied both to profits and losses in a consistent manner, from a period to another. An 

entity can apply such systematic methods for actuarial profits and losses, even if they are within the 

limitations previously mentioned. 

When an employee provides a service for an entity during an accountancy period, that 

entity has to acknowledge the non updated value of the short time benefits of the 

employees, specified to be paid for that precise service: 

- as a liability (implied expense), after the deduction of any previous paid value. If the 

already paid value exceeds the non updated value of the benefits, an entity has to 

acknowledge that excess as being an asset (previously paid expense) to the extent that the 

anticipatory payment leads for example, to a reduction of the future costs or to a cash 

repayment; 

- as expense, excepting the case when demanded or benefits are permitted to be 

introduced in the cost of an asset; 

The entity will have to acknowledge the predicted cost of the short time benefits of the 

employees in the form of compensated absences, as follows: 

- in the case of accumulation of compensated absences, when the employees perform a 

service which gives them the right to future compensated absences; 

- in the case compensated absences without accumulation, when they occur. 

An entity can compensate the employees in case of absences in a number of situations 

such as vacations, when unavailable on short time, in case of illness, maternity or 

paternity, when a member in a jury or when in military service. The right to compensated 

absences divides in two categories: accumulated or without accumulation. 

Compensated accumulated absences are those which are carried forward and can be used 

in the future, in case the right due to the current period is not completely used. 

Compensated accumulated absences can be legitimate (in other words the employees have 

the right to cash payment for the unused right at departure). When the employees perform 

a service which increases their right to future compensated absences, there comes an 

obligation. Obligation exists and is acknowledged even if the compensated absences are 

illegitimate, although the possibility for the employees to leave before using an 

illegitimate accumulated right affects the evaluation of the respective obligation. 

An entity has to acknowledge the predicted cost of the participation in profit and of the 

due premiums, then and only then, when:


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- the entity has a legal or implicit obligation to make such payments as a result of the previous 

events; 

- a safe appreciation of the obligation can be done. 

An actualized obligation exists then and only then, when the entity has no other realistic 

alternative but to make these payments. 

Based on some plans of participation to profit, the employees receive parts of profit only if 

they remained in the entity for a specified period. Such plans determine an implicit obligation 

as well as the service performed by the employees, a service which increases the amount to be 

paid in case the employees remain in service till the end of the specified period. The 

assessment of such implicit obligations reflects the possibility for some employees to leave 

the entity without receiving percentage from profit. 

Post employment benefits can include: 

- retirement benefits such as pensions; 

- other post employment benefits, such as post employment life insurance and medical 

assistance. 

An entity has to classify a plan with more employers as a plan of determined taxation or a 

plan of determined benefits under the provisions of the plan (including any implicit obligation 

that exceeds the official provisions). Then when a plan with more employers is a plan of 

determined benefits, an entity has to: 

- to account for its share in the obligation with respect to the determined beneficiary from 

the assets of the plan and from the cost incurred in the plan, in the same manner as for any other 

plan of determined benefits; 

- to present the necessary information for a good understanding of the issue. 

An entity can pay insurance premiums in order to finance a plan of benefits post employment. 

The entity has to deal with such a plan in the same manner as with a plan of determined 

taxation, excepting the case when the entity has (directly or indirectly, due to the plan) an 

implicit or legal obligation: 

- to pay the benefits of the employees directly when needed; 

- to pay additional amounts if the insurer does not cover all the future benefits of the 

employees depending on his/her current or previous services. 

If the entity holds such a legal or implicit obligation it will deal with the plan as a plan of 

determined benefits. If an employee had performed a service for an entity during a period of 

time, the entity would have to acknowledge the taxation to be paid within a determined plan 

of taxation in exchange of that service: 

- as liability (implied expense), after the deduction of any taxation which is already paid. In 

case the already paid taxation exceeds the due taxation for a service previous to the balance, an 

entity has to acknowledge that surplus as an asset (anticipated expense), to the extent that the 

anticipated payment leads, for example, to reduction in future payments or to a cash repayment; 

- as expense, excepting the case when it is required or there is allowance to include the 

taxation in the cost of an asset. 

When the taxation to a determined taxation plan is not completely due within twelve months 

from the end of the period during which the employees perform that precise service, it has to 

be actualized using the actualization rate. The actualization rate is based on the market 

efficiency at the date of the balance and any asset of the plan is evaluated at its real value.


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The assessment of medical benefits post employment requires hypothesis concerning the 

level and the frequency of future demands and also of the cost for the accomplishments of 

such requirements. An entity estimates the future medical costs based on past data and on its 

own experience, supplementing them when necessary with past information about other 

entities: insurance companies, medical services suppliers or other sources. The estimation of 

future medical costs takes into account the technologic progress, the changes in medical 

assistance or the modalities of offering such services and also the changes in health of the 

participants in the respective plan. 

In the assessment of the obligation concerning the determined benefits, an entity has to 

acknowledge a percentage of the actuarial profits and losses as being income or expense, in 

the case in which the actuarial profits and losses that are cumulated, not acknowledged and 

net at the end of the period of previous report and when they exceed the highest value of: 

- 10% of the actualized value of the obligation with respect to the determined benefit at 

the given date (before the deduction of the plan’s assets); 

- 10% of the real value of any assets of the plan at the given date. 

These limits will be calculated and applied separately for each plan of determined benefits. 

The percentage from the actuarial profits and losses that is to be acknowledged for each plan 

of determined benefits is given by the previously determined surplus, divided to the predicted 

average of the work period left until retirement for the employees who participate in that plan. 

However, an entity can adopt any systematic method which has as a result a more rapid 

recognition of the actuarial profits and losses, provided that the very same basis is applied 

both to profits and losses in a consistent manner, from a period to another. An entity can 

apply such systematic methods for actuarial profits and losses, even if they are within the 

limitations previously mentioned. 

The actuarial profits and losses separately acknowledged from profit and loss will be 

presented in a report dealing with the change in its own capital knows as “acknowledged 

income and expenses report”. The entity will not present the actuarial profits or losses in 

report of changes in its own capital, neither in column format or in any other format which 

would include the necessary elements for a good informing. 

An entity will acknowledge the benefits for the ending of the work agreement as a liability 

and expenses then and only then, when the entity is demonstratively engaged in: ending the 

work agreement of an employee or of a group of employees before the normal date of 

retirement or the supplying of benefits for the ending of the work agreement as a result of an 

offer intended to encourage the voluntary unemployment. 

An entity is in a demonstrative manner engaged in a work agreement ending if and only if, 

the entity had an official, detailed plan for ending the work agreement and if it didn’t have 

any realistic possibility for abandoning it. The detailed official plan has to include at least: 

- location, the position and the approximate number of employees whose work agreements 

are to be ended; 

- the benefits for ending the work agreement for each classified list of jobs and positions; 

- the date at which the plan is to be implemented. The implementation will begin as soon as 

possible and the period of time until it becomes complete will not give probable hints of the 

significant changes in the plan. 

IASB agreed that the proposed requirements for group plans were too complex. IASB also


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concluded that it would be better to deal with group plans separately from the plans with 

more employers and this because of the differences in available information on participants: 

within a group plan, the information concerning the plan as a whole, generally, has to be 

available. IASB also mentioned the fact that if the parent company wishes to comply with the 

IFRS for its financial situation or if it wishes its subsidiaries to comply with the IFRS within 

their individual financial situations, then, at least, this has to obtain and supply the necessary 

information in order to present information. 

IASB noticed the fact that if there was a contractual agreement or a declared policy at 

charging the determined, net costs and benefits in the accountancy of group entities, then that 

agreement or policy would determine the cost for each entity. If there wasn’t any such 

contractual agreement or declared policy, the entity or the sponsor employer automatically is 

liable for the risk that comes with the plan. Thus, IASB concluded that a group plan must be 

allocated to the individual entities within the group in conformity with any contractual 

agreement or declared policy. If there isn’t such an agreement or policy, the cost of the 

determined, net benefits is allocated to the sponsor employer. The other entities of the group 

acknowledge a cost equal to any other taxation collected by the sponsor employer. 

The participants in a group plan represent a transaction with affiliated parties. An entity has to 

present information regarding the nature of the relation with the affiliated party, as well as 

information regarding transactions and remaining balances, necessary for understanding the 

potential effects of this relation on financial situations. It has been noticed that it was 

necessary that each policy of charging benefits costs, current taxation and each statute of the 

plan as a whole, to offer an explanation of the potential effects of the participation in the 

group plan upon financial situations, separated or individual, of the entity. 

The council analyzed five methods for accounting the actuarial benefits and losses: 

- the postponed acknowledgement both in balance and in the account for profit and loss 

within the average period remained from the service of the respective employees; 

- immediate acknowledgement of its own capital both in the balance and outside the 

account for profit and loss; 

- a “corridor” type approach, with the immediate acknowledgement in the balance and in 

the account for profit and loss, in the case of the amount outside the “corridor”; 

- a modified approach of the “corridor” type with postponed acknowledgement of the 

elements within the “corridor” and with the immediate acknowledgement of the amounts outside 

the “corridor”; 

- the postponed acknowledgement of the amounts outside the “corridor”. 

The arguments in favor of an immediate acknowledgement are the following: 

- the postponed acknowledgement and the “corridor ”type approach are complex, artificial 

and hard to be understood. They imply additional costs through complex book-keeping for the 

entity. They also require complex legal provisions bound to reductions, deductions and transitory 

problems. Moreover, because such approaches are not used for other assets and uncertain 

liabilities, it’s not clear why should they be applied in the case of benefits after the ending of the 

work agreement; 

- it needs less specification, because all the actuarial profits and losses are acknowledged; 

- it offers a clear image of the financial situation of the entity. The entity will report 

an asset only when the plan registers a surplus and a liability only when the plan is on deficit. 

Within the general framework it is stated that applying the principle of connecting costs to


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income does not allow the acknowledgement, within the balance, of the elements which do not 

correspond to the definition of the assets or of liabilities. The postponed actuarial losses do not 

represent future benefits and thus they don’t match the definition of an asset given in the general 

framework, even if compensated with an analogue liability. Similarly, the postponed actuarial 

profits do not match the definition of a liability given in the general framework; 

- the treatment in the balance is in accordance with the proposals of the Document 

of Discussion of the permanent Committee on issues of financial instruments, dated March 1997- 

The Accountancy of the Assets and Financial Liabilities; 

- it generates income and expenses which are not arbitrary and which have 

informational content; 

- the hypothesis that all the actuarial profits and losses will reciprocally compensate 

in the following years is not reasonable; on the contrary, if the initial actuarial hypotheses remain 

valid, the variations in the future will reciprocally compensate, on an average, and thus the past 

variations will not compensate; 

- the immediate acknowledgement is consistent with the IAS& Accounting Policies, 

changes in the accounting estimations and errors. According to this IAS, the influence of the 

variation of the accounting estimations must be included in the profit or the lost of that period, if 

this variation influences only the current period and not the following one as well. The actuarial 

profits and losses do not represent estimations of future events, but they result from events past to 

the date of balance and which clarify a previous estimation (adjustments on facts) or they result 

from changes in the estimated cost of the service performed by the employee, changes which 

were operate before the date of the balance (changes of the actuarial hypotheses); 

- any period of liquidation (or the length of the “corridor”) is arbitrary. Moreover, 

the value of the benefit remained at a previous date cannot be objectively determined and it 

makes it difficult to apply a depreciation test on any postponed expenses; 

- in some cases even the supporters of liquidation or of the “corridor” prefer the 

immediate acknowledgement (the assets of the plan are stolen, a major change of the tax for the 

pensions plan- elimination of the credits afferent to the tax on dividends for the pensions funds). 

However, even if a common agreement can be reached at in extreme cases, it would be difficult 

to establish objective and non-arbitrary criteria for identifying such cases. 

IASB agrees that the actuarial profits and losses are elements of income and expenses. 

However, it states that it would be too soon to solicit their immediate acknowledgement in 

profit or loss before a comprehensive revision both of post employment accountancy of 

benefits and also before the report of the comprehensive income. The requirement that both 

actuarial profits and losses which are acknowledged outside the profit and loss, to be 

acknowledged within a situation of income acknowledged income and expenses, does not 

represent a prejudice concerning the discussions IASB has to issue concerning the report of 

the comprehensive income. Actually IASB allows an accounting treatment currently accepted 

by a national standard rate-setter which is to continue until the comprehensive revision of 

post employment accountancy of benefits and until a comprehensive report of income. 

Bibliography: 

1. Feleagă N., Duţescu A. şi colectiv – „Standardele Internaţionale de Raportare Financiară 

(IFRS) incluzând Standardele Internaţionale de Contabilitate (IAS) şi interpretările lor la 1 

ianuarie 2006” Editura CECCAR, Bucureşti, 2006 

2. Epstein B., Mirza A. - Interpretarea şi aplicarea Standardelor Internaţionale de Contabilitate şi 

Raportare Financiară, BMT Publishing House, Bucureşti, 2005


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3. Pleşoianu G. - Diagnosticul şi strategia firmei, Editura Universităţii din Piteşti, Piteşti, 2005 

4. Şerbănescu L., Planificarea resurselor întreprinderii, articol publicat în volumul Sesiunii 

Internaţionale de Comunicări Ştiinţifice - Integrare Europeană în contextul Globalizării 

Economice, Piteşti, 17 – 18 mai 2003 

4. *** - HUwww.business-edu.ro/arhivaU 

5. *** - HUwww.avocatnet.ro/NouaUH fiscalitate


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GENERAL AND SPECIFIC CHALLENGES OF GLOBALIZATION FOR 

ROMANIAN FISCAL POLICY 

Alina Cristina NUŢĂ, PhD Student FEAA, 

“Alexandru Ioan Cuza” University of Iaşi 

ABSTRACT: 

We are agree that the actual globalization issue determine a number of changes in the government 

politics perspective because the global framework make more intensive the competitiveness process over countries 

that requires rethinking of decision making process. Globalization has an important impact on the fiscal decision of 

policy makers in capital and labor movement which means tax bases. In other words the rate of taxation of another 

state became a variable that influence the welfare system of a country. In this paper we discuss about what is named 

in economic literature fiscal termites, and what it means for Romanian economy. 

The globalization it’s a continue process, and implies important structural changes in 

the economical framework, because of the multiplication of the variables that may be complete 

the dependent area. Globalization is a process that is impacting profoundly the lives of workers 

everywhere. Globalization brings problems as well as benefits, and these problems run deeper 

104 

than just the fact that there are winners and losersF 

F. Globalization is just the logical extension to 

the international economy of processes that have long operated within our own domestic 

economy for over one hundred years. 

Countries will be forced to compete for mobile capital with artificially low tax rates 

when corporations face few barriers to locating in the lowest tax jurisdiction. . In an era of 

105 

“globalization”F 

F the implication is that governments may find themselves drawn into an 

internecine “race the bottom” in capital taxation, undermining the financing of the welfare state 

and the provision of public goods generally. Further, taxes must then come to fall unduly on 

immobile factors, specifically labour, exacerbating labour market rigidities and unemployment. 

OECD and EU took up the issue of “harmful tax competition,” concluding that 

international cooperation was needed to prevent the erosion of corporate tax revenues and the 

106 

introduction of distortions to the international allocation of capitalF 

F. Even if governments 

continued to levy corporate income taxes, the incidence would fall on labor in the form of lower 

wages. The claim that economic globalization undermined the taxing capacity of national 

governments became a staple of the critical scholarly literature on economic globalization in the 

1990s. 

Some authors have recently explored a number of possibilities for how nations may 

differ in the bundles of characteristics they offer. For example, drawing on models of trade and 

104 Thomas I. Palley, The Economics of Globalization: A Labor View, 24th Annual AAAS Colloquium on Science 

and Technology Policy, April 14–16, 1999, Washington, DC 

105 Kenneth G. Stewart, Michael C. Webb - Capital Taxation, Globalization, and International Tax Competition 

Department of Economics University of Victoria Working Paper EWP0301, January 31, 2003 

106 OECD Harmful Tax Competition: An Emerging Global Issue (Paris: OECD, 1998).

107 

economic geography, Baldwin and KrugmanF 

F show 

that agglomeration economies can 

result in differential rates of capital taxation. 

Examinations of the political economists about the comparative economic 

performance of governments expressed that high taxes will not discourage investment if those 

taxes are matched with good government services that improve the business environment. In 

this view, investors will be willing to pay high taxes in return for being able to take advantage 

of good infrastructure and social stability financed by government spending, including 

spending on redistributive social welfare policies. This dynamic could lead to rising tax 

burdens, because economic globalization “has increased the importance of economic, 

108 

political, and social stability to the investment decisions of mobile asset holders.”F 

In other studies the authors argue that international tax competition could be 

having economic effects even if it does not cause downward convergence in tax revenues. 

109 

Gropp and KostialF 

F find that tax rates have a systematic impact on flows of foreign direct 

investment, with lower tax rates being associated with larger net inflows. 

Some economists think that even if economic globalization is raising the costs 

associated with high corporate tax rates, this does not mean that governments have the 

domestic political freedom to cut those rates. Partisan politics and deficit pressures could 

interfere with any smooth adjustment to a changed international economic context though 

over an extended period continued outflows of investment presumably would shrink the tax 

base enough to reduce corporate tax revenues even without a formal policy change. 

The competition among states in the globalization framework must by viewed by 

the perspective of countries’ capacity to raise taxes. The literature argued that globalization 

makes it more difficult for countries to continue raising high tax levels. Vito Tanzi presents 

110 

the “fiscal termites”F 

F, gnawing away at the foundations of the industrial countries tax 

systems. One of this termites is represented by the e-commerce, that has been growing at very 

high rates, witch implies hat some states may consequently lose some percent of their sales 

tax revenues, which may leave less identifiable traces and will become increasingly difficult 

to define a "permanent establishment" for tax purposes and which may leave less identifiable 

traces. 

The second termite is electronic money -that lack of an audit trail would pose a 

risk to both value-added tax and income tax collections. This problem will be compounded if 

it becomes possible to have payments in e-cash delivered over the Internet. The next termite is 

trade within multinational corporations with operations in different countries. . Such trade 

creates problems for national tax authorities owing to the potential abuse of "transfer prices" 

by the multinationals, and there is evidence that some enterprises manipulate prices to move 

profits from high-tax jurisdictions to those with low tax rates. 

The fourth termite is represented by the offshore financial centres and tax havens 

stimulated by the flow of digital information, which allows money and knowledge to be 

moved easily and cheaply in real time, and by the regulatory arrangements of several 

countries. Next termite is derivatives and hedge funds, in this case, with respect to the 

earnings from derivative instruments, there are huge problems in identifying individual 

beneficiaries, transactions, or jurisdictions. The sixth fiscal termite is the growing inability of 

countries to tax financial capital and the incomes of persons with highly tradable skills. High 

tax rates in one country only serve as incentives to taxpayers to move capital abroad to 

107 

Baldwin, R., and P. Krugman, “Agglomeration, Integration, and Tax Harmonization,”CEPR Discussion Paper 

no. 2630 (2000). 

108 

Garrett, G., Partisan Politics in the Global Economy (Cambridge, UK: Cambridge University 

Press, 1998). 

109 

Gropp, R., and K. Kostial, “The Disappearing Tax Base: Is Foreign Direct Investment (FDI) 

Eroding Corporate Income Taxes?” IMF Working Paper WP/00/173 (2000). 

110 

Tanzi Vito, Globalization and the Work of Fiscal Termites, Finance & Development, A quarterly magazine of 

the IMF March 2001, Volume 38, Number 1


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jurisdictions that tax it lightly or to take up residence abroad. Other termite is represented by 

the growing foreign activities, witch make more and more possible to avoid paying taxes. 

Foreign shopping reduces the degree of freedom that countries have in imposing excise taxes 

on easily transported products. 

A fundamental change may be to shift from global income taxation toward 

explicitly schedular taxes that tax different types of incomes (wages, rents, interest, and 

dividends) differently. Such an approach would make it possible to lower tax rates on mobile 

income tax bases. This might raise questions about the fairness of the tax system, but would 

allow countries to minimize potential revenue losses from capital flight and emigration 

induced by high tax rates. These fiscal termites may have negative impact for tax 

administration in the globalised future. “It is difficult to separate the impact of these fiscal 

termites from that of changes in economic activities or from intentional, policy-determined 

tax reductions. All of these affect tax revenues.”F 

Markets globalization doesn’t have the same effect among all the elasticity of the 

tax base. A strong effect of the internationalization will determine big distortions for the 

differences among effective fiscal rate of the different states and a country that maintains the 

rates of taxations over de medium level will have high costs. 

Figure nr.1: Globalisation effects towards tax base elasticity 

Sourse: Tanzi V., 1995, p.13 

It is about a net welfare losses (FCE) in the country that practice a tax rate bigger 

that the others states; plus, in this case, the immobile factors receive DEA, government gets 

BFED and the capital that migrated take K1K2CF. Second, although the tax was for the 

capital, the immobile factor supports the net losses. 

For Romanian country this fiscal termites can represent a problem, if the tax 

administration don’t adopt some specific rules and don’t adapt to the challenges of the 

globalisation. The most important sustain for the development of this new actors are the 

integration of the ITC in the commune life. 

References: 

111 Tanzi, V. – The Coming Fiscal Crisis? Financial Times, Comment section, August, 12, 2003 

111


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1. Thomas I. Palley, The Economics of Globalization: A Labor View, 24th Annual 

AAAS Colloquium on Science and Technology Policy, April 14–16, 1999, 

Washington, DC 

2. Kenneth G. Stewart, Michael C. Webb - Capital Taxation, Globalization, and 

International Tax Competition Department of Economics University of Victoria 

Working Paper EWP0301, January 31, 2003 

3. OECD Harmful Tax Competition: An Emerging Global Issue (Paris: OECD, 1998). 

4. Baldwin, R., and P. Krugman, “Agglomeration, Integration, and Tax 

Harmonization,”CEPR Discussion Paper no. 2630 (2000). 

5. Garrett, G., Partisan Politics in the Global Economy (Cambridge, UK: Cambridge 

University Press, 1998). 

6. Gropp, R., and K. Kostial, “The Disappearing Tax Base: Is Foreign Direct Investment 

(FDI) Eroding Corporate Income Taxes?” IMF Working Paper WP/00/173 (2000). 

7. Tanzi Vito, Globalization and the Work of Fiscal Termites, Finance & Development, 

A quarterly magazine of the IMF March 2001, Volume 38, Number 1


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HARMONIZATION, CONVERGENCE, CONFORMITY AND 

DEVELOPMENT - COMMUNE 

LANGUAGE IN THE FUTURE ACCOUNTING 

Gabriela Buşan, lect. univ. dr. 

Alina Georgiana Holt, prep. univ. 

“Constantin Brâncuşi” University of Tg-Jiu 

ABSTRACT: 

The globalization process is the biggest challenge of the actual period. Despite of the efforts of the 

supporters to promote the global economy this can not be realized on short term due to the major cultural and 

social discrepancies in the world. Between the unsolved problems of globalization is the heterogeneous culture 

of the different civilizations, which have great impact in the economical environment of the different countries. 

Being accepted that the accounting is the language of the business, the penetration of the international 

accounting standards IFRS, or of the US GAAP in the occidental economies goes well until now due to the fact 

that the fundamentals of the cultures were similar, or the countries which adopted the international standards 

have the same cultural background the occidental one and the same economical society: capitalist free market 

ones. The problem will appear when other countries will enter in the field of globalization and their culture is 

completely different then the occidental one or the economical organization is not a capitalist free market one. In 

that moment there are two solutions: either the country is adopting the occidental culture and is changing the 

economical organization with the capitalist free market either the culture is remaining the same but the 

occidental ethics is adopted in stead of the local one together with a changing in the economy to a capitalist free 

market organization. 

That’s why a common ethical attitude behind religion requesting, based on the 

occidental ethics will insure that the globalization process will allowed those countries to 

integrate their self in the global economy. The well functioning of the global economy will be 

realized only with a common ethical background in the society and using same standardized 

rules by the main fields of the economy. In this process the accounting has its place and our 

target of the accountants are to insure that we are committed to produce a reliable and feasible 

set of standards for the general use in the global economy . 

Accounting is in essence the quantitative expression of a company’s results and 

financial position in a monetary unit, in accordance with uniform methods that ensure the 

comparability of information across companies. Accounting standards stem from the need for 

comparable, transparent and consistent financial data to serve as the basis for efficient capital 

allocation. 

Harmonization of accounting standards has been worked on for 26 years by IASC 

now know as the IASB. International Accounting Standards (IASs) are developed by the 

International Accounting Standards Committee (IASC), whose purpose is to develop a single 

set of global accounting standards. Further to the restructuring of the IASC, the new Board on 

1 April 2001, as one of its first decisions, renamed the IASC as the International Accounting 

Standards Board (IASB) and, as far as future international accounting standards are 

concerned, renamed IAS as International Financial Reporting Standards (IFRS). These 

standards should, wherever possible and provided that they ensure a high degree of 

transparency and comparability for financial reporting in the Community, be made obligatory 

for use by all publicly traded Community companies.


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Harmonization can be considered to be a waste of time and money if there is no 

benefit for the accounting user groups. There are several benefits associated with 

harmonization as follows: 

• Cost and money savings accruing to multinational companies. Countries with 

limited resources will provide low cost financial accounting standards. 

• Comprehensiveness and comparability of cross-national financial reports and 

international financial information. 

• Widespread dissemination of high quality accounting standards and practices. The 

tendency for accounting standards throughout the world will be raised to the highest possible 

level and to be consistent with local economic, legal and social conditions. 

• Enhancing common financial reporting language so that financial statements will 

give the same message on both sides of the Pacific and the Atlantic. 

In 2001, the Australian Accounting Standards Board (AASB) issued an exposure draft 

concerning International Convergence and Harmonisation Policy for comment. The main 

benefit of Convergence and Harmonization according to this exposure draft is: 

• Increasing comparability of financial reports prepared in different countries and 

providing participants in international capital markets with better quality information on 

which to base investment and credit decisions ... 

• Removing barriers to international capital flows by reducing differences in 

financial reporting requirements for participants in international capital markets... 

• Reducing financial reporting costs for Australian multinational companies and 

foreign companies. 

• Facilitating more meaningful comparisons of the financial performance and 

financial position and improving the quality of financial reporting 

In assessing the importance of accounting differences, they conclude that where the 

economic environments are dissimilar, as it’s likely in the case of international investments, 

diversity may well be justified. According to them, this is relevant when the sources of such 

diversity are for example, in the company law, tax regulation, sources of finance, business 

customs, accounting cultures, etc. Thus, in this particular case they argue that harmonization 

would be useless. They are also of the opinion that if the world exhibits diversity, then it may 

also be necessary for the accounting principles to reflect the diversity. Subverting various 

national accounting practices away from the optimal ones for domestic purposes, particularly 

given that most companies are private and raise no international finance, would be 

disadvantages. The obstacles against accounting harmonization give an insight into what a 

complex issue this is and an appreciation of the problems facing the development of 

international accounting. Therefore, it is very important to understand the obstacles when 

studying international accounting harmonization. 

The different user groups require different information. Investors need information 

that is relevant to investment decisions. The tax authorities require information produced in 

line with the tax regulation. Governments need information produced with national 

standardized planning in mind. Employees need information of social type and management 

need information to manage and control companies. It is difficult to accomplish all these 

different financial reporting requirements within a certain standard without many alternatives 

and flexibility in the application of the standard. 

Legal situations that vary among countries also become an obstacle for the 

harmonization. It is impossible for all laws to fit all nations. Therefore, certain standards may 

not be in the best interest of some nations, especially those who are not very influential in the 

standard setting process. The duty of standard setting is surrendered to a foreign institution 

instead of the elected representatives. This is, in a way, a threat to the independence of the


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nation in question. The legal system has a direct impact on accounting. Laws contain detailed 

accounting regulations specifying comprehensive accounting rules and procedures. In certain 

countries, accounting is directly dependant on legislative requirements because the 

government determines and enforces these requirements (Lawrence, 1996). In some cases, 

harmonization in financial reporting would require changes in the legislation. 

The development of accounting must be considered since the historical development 

of accounting in each country is different. Therefore, the starting point to get into the 

harmonization process is also different. For countries who have a history of using accounting 

standards produced by independent private sector bodies, it may be easier to use international 

accounting standards rather than countries that use governmental guidelines. The 

development of a professional accounting body plays an important role in the process of 

accounting harmonization in a country. It is difficult, therefore, for countries that lack such 

body to pursue the harmonization process. Organizations, both public- and private-sector, 

influence the process of accounting harmonization even though they have different goals and 

ambitions. 

Each of them has different expectations as to suitable accounting practices and 

necessary financial disclosure. The process of accounting harmonization is very time 

consuming. To accomplish an international standard at least months or years are needed, and 

it will also take time for a standard to be applied. As globalization is speeding up, it will 

clearly be difficult as well as costly to keep the standards and the due process up to date. The 

competition between countries in order to attract investors can lead to quick movements, 

where changes can happen many times in a short term. The business environments have a 

short time focus, and in short time the costs of harmonization may seem to be high. 

Governments often have a shorter time focus, since they rely on voters for a limited period of 

time. The benefits of harmonization might not be visible during their reign. Should the 

political environment in the country not accept the international rules, for accounting or 

others, the “punishment” such as trade wars may be costly, not only in monetary terms but 

also in human suffering. 

Harmonization tends to assume that all countries are at the same level in terms of 

economic development. In fact, there are great differences between countries. The world has 

globally accepted that countries vary very much in many aspects. Harmonization assumes the 

idea that all can apply one set of rules. Within the industrialized world, the benefits may 

exceed the cost of harmonization. They already have professional bodies, strong economies, 

and good education. But in the underdeveloped world, adoption of the standards may not be 

possible. The cost to hire professional accountants can instead be invested in lower level 

education that will give the country a better starting point. The investments in harmonization 

will only be costly. A critically important element in the solution to this problem is the 

convergence of US GAAP and IFRS, a process now under way at an early stage. Will 

convergence rise to the challenge of meeting those needs? The goal, in brief, is an improved 

reporting model built on principle-based standards that can be applied in a cost-effective 

manner. 

The convergence of accounting standards is a matter of decisive strategic importance 

to the future of global capital markets. Highquality information is essential to highquality 

markets. All stakeholders who rely on high-quality markets need to understand the issues 

surrounding convergence, form a point of view and take the time needed to participate in the 

global debate. The debate will have several phases. Currently the uppermost issue is the 

process for achieving high-quality converged standards, which will be substantially equivalent 

although not uniform in every detail. Later the issue is likely to be the possibility of achieving 

a single set of global high-quality standards and a single global standard setter. The


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harmonization and the convergence which is the method choused by the harmonization to 

fulfill its goals it will be realized slowly but steady. 

In the last few decades, development policy has become increasingly complex. It is, 

in a way, haunted by a recurring reputation for unachieved results. It was initially conceived 

as a way to achieve economic growth, but other goals were progressively added – such as 

social development, sustainable development, good governance etc. – providing a more 

accurate and complete roadmap of the conditions needed for development. 

Other factors have also been identified as essential requirements and useful tools for 

development: 

• The importance of good governance and solid public institutions; 

• The role of education, innovation and technology in helping developing 

countries catch up with their more prosperous neighbours; 

• The crucial role of employment as a major force for empowering people and a 

driver for social inclusion and economic sustainability; 

• The possibilities for updating international fiscal policy to take greater account 

of the realities of the modern world; 

• The need for increasing levels of convergence between international institutions 

and donors both in methods and practice; 

• The importance of involving the corporate sector and civil society organisations 

in a more coordinated manner, etc. 

In the context of the changing world described above, the structure and delivery of 

development policy often impedes, rather than promotes, its likely chances of success. The 

challenges ahead are immense: from the demographic timebomb to environmental concerns, 

and a huge array of issues relating to energy, security concerns, diseases, etc. As was stated at 

the outset, development policy is a phenomenally complicated area, because it calls for the 

implementation of a huge volume of measures touching on virtually every policy area – from 

agriculture to research and development. In addition to this, those measures need to be applied 

in very diverse conditions. This task becomes even more complicated when it is framed 

within the strict logic of programmes, projects or bilateral relations with third countries. The 

latter is particularly sensitive, as development policy can all too easily become a tool to be 

adapted to more “strategic” goals in bilateral relations. This is just one of the many different 

“methodological” obstacles which development policy encounters as it strives to achieve its 

objectives. 

Financial procedures, administrative mechanisms, inter-institutional agreements, etc. 

all too often impede the achievement of development policy objectives in general, and aid in 

particular. There is, of course, a clear need for rules and accountable procedures, but it is 

crucial to strike a clear balance between means and ends, and to avoid being swallowed up by 

the rationale of bureaucratic methods. In addition, development policy tends to operate within 

a world of its own, with a notable accumulation of expertise but not always with the necessary 

capacity to look beyond this particular area of study, take account of the contradictions that 

frequently arise between theory and practice, and make the necessary linkages with other 

changes in the global environment. 

In today's world of global economic interdependence and rapidly changing 

technology, accounting has come to play a major role. As the accounting discipline is 

evolving into a dynamic mechanism and the corporate sector all over the world is contributing 

to this process through its varied demands and pressures, corporate financial reporting in India 

is now at the center stage of reform. The last two decades have witnessed many dramatic 

development in the world economic environment. The rapid growth of international trade and 

internationalization of firms, the developments of new communication technologies, the


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emergence of international competitive forces is perturbing the financial environment to a 

great extent. Under this global business scenario, the residents of the business community are 

in badly need of a common accounting language that should be spoken by all of them across 

the globe. A financial reporting system of global standard is a pre-requisite for attracting 

foreign as well as present and prospective investors at home like that should be achieved 

through harmonization of accounting standards. 

Accounting Standards are the policy documents (authoritative estatements of best 

accounting practice) issued by recognized expert accountancy bodies relating to various 

aspects of measurement, treatment and disclosure of accounting transactions and events. 

These are stated to be norms of accounting policies and practices by way of codes or 

guidelines to direct as to how the items which go to make up the financial statements should 

be dealt with in accounts and presented in the annual accounts. The aim of setting standards is 

to bring about a uniformity in financial reporting and to ensure consistency and comparability 

in the data published by enterprises. Accounting standards are being established both at 

national and international levels. But the variety of accounting standards and principles 

among the nations of the world has been a sustainable problem for the globalize business 

environment. Adoption of different accounting standards causes difficulties in making relative 

evaluation of performance of companies. This phenomenon hinders the valuation and 

consequently the decision making process. Accounting harmonization is not an end by itself, 

but it is a means to an end. The ultimate objective of harmonizing accounting practices among 

countries is to foster international comparability of accounts. There are several standard 

setting bodies and organizations that are now actively involved in the process of 

harmonization of accounting practices. The most remarkable phenomenon in the sphere of 

promoting global harmonization process in accounting is the emergence of international 

accounting standards. The International Accounting Committee (IASC), now International 

Accounting Standards Board (IASB) was formed on 29th June 1973, by the recognized 

professional accounting bodies in Canada, Australia, France, Japan, Germany, Mexico, 

Netherlands, the United Kingdom and the United States of America, with its secretariat and 

head quarters in London. 

Now that the Financial Accounting Standards Board (FASB) and the International 

Accounting Standards Board (IASB) have jointly set out on the path of convergence, the 

scope and nature of accounting and reporting standards will be gradually altered. Two 

accounting, regulatory and legal ‘cultures’ – the US and all territories now following IFRS – 

will need to come into a new and closer relationship if the convergence process is to succeed. 

All major stakeholders have the opportunity to influence this challenging process in positive 

ways that reflect both their business interests and their commitment to sound global capital 

markets. 

The global convergence of accounting standards is a very positive development. The 

convergence of financial reporting and accounting standards is a valuable process that 

contributes to the free flow of global investment and achieves substantial benefits for all 

capital markets stakeholders. It improves the ability of investors to compare investments on a 

global basis and thus lowers their risk of errors of judgment. It facilitates accounting and 

reporting for companies with global operations and eliminates some costly requirements. It 

has the potential to create a new standard of accountability and greater transparency, which 

are values of importance to all market participants including regulators. It reduces operational 

challenges for accounting firms and focuses their value and expertise around an increasingly 

unified set of standards. It creates an unprecedented opportunity for standard setters and other 

stakeholders to improve the reporting model. 

Convergence is a long-term process. While it may take years to reach the important


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goal of a single set of standards, progress has already been achieved. In the near term, there 

will be two standard setters and a mix of standards, some prepared and issued jointly, others 

prepared and issued independently within the framework of convergence. Variations in 

standards are likely to remain for some time, particularly in guidance that predates the effort 

to converge. The global convergence of accounting and financial reporting standards presents 

opportunities, challenges, and issues for the profession, financial markets, and regulators. 

Accounting is often referred to as the language of business. And because this global 

marketplace affects both large and small U.S. public companies, there is a need for a common 

business language–a common set of accounting standards. 

In today’s global economy, that one common accounting language will benefit all 

participants in the capital markets. It will benefit investors because it will facilitate the 

comparison of financial results of reporting entities domiciled in different countries. It will 

benefit public companies that have subsidiaries in multiple jurisdictions because it will allow 

them to use one accounting language company-wide. It will allow them to present their 

financial statements in the same language as their competitors. And it will benefit our 

members in public practice because it would allow them to simplify their training of auditors 

of public companies by allowing them to focus on one core set of accounting standards, rather 

than multiple accounting standards. 

But still the harmonization process has a long way to go. Many standard setting bodies 

and regulators of different nations are ardent protectors of their local standards, they are in no 

mood to allow their job being taken over by a foreign entity, Thus winning the consent of 

these bodies is vital for international accounting standards to don the mantle of common 

accounting code, harmonization of common accounting standards, that will make 

implementing countries more competitive internationally. There are various factors that are 

responsible for this. Some of the important factors are legal structure, sources of corporate 

finance, maturity of accounting profession, degree of conformity of financial accounts, 

government participation in accounting and degree of exposure to international market. 

Diversity in accounting standards mnot only means additional cost of financial reporting but 

can cause difficulties to multinational groups in the manner in which they undertake 

transactions. It is quite possible for a transaction to give rise to a profit under the accounting 

standards of one country where as it may require a deferral under the standards of another. 

When a multinational company (MNC) has to report under the standards of both the countries 

it might lead to some extremely odd results. 

Although there are different solutions that have been suggested to resolve the 

problems associated with filling financial statements across national boundaries like 

reciprocity and reconciliation, but they not free from limitations. International accounting 

standards serves the purpose of reducing diversity in accounting practices but invites 

qualititative differences of financial accounting and reporting systems. Again these 

qualititative differences may Be removed if a single set of internationally accepted standards 

can be used for all cross-border listed financial statements. These differences may be reduced 

if a happy marriage between the national and international accounting standards are arranged 

by the recognized professional accounting bodies of the world. 

It would be desirable for developing countries to act more forcefully in the area of 

standards and conformity assessment in a number of areas. Firstly, in the area of adoption of 

standards, a more active and concerted participation in the committee work of the 

international standardizing bodies would ensure that new international standards which are 

adopted would more closely reflect developing-country needs and would reduce the 

predominantly European influence found at present in the new standards which are agreed.


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For the adoption of national standards in the case where no international standard 

exists, there is little economic rationale for developing countries to invest in the elaboration of 

their own standards in the case of traded products.


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INFLATION’S PRESENCE IN ADMINISTRATION CONTROL 

Bojincă Simona - student 

Full Professor Phd. Dobrotă Gabriela , Coordinating 

“Constantin Brâncuşi” University – Faculty of Economic Science 

ABSTRACT: These works suppose a detailed studying at the influence of inflation from administration 

control. In inflation circumstances, the information in historic costs distorts the decisions regarding the 

depreciation politics of enterprise. Inflation affects both the information supplied by the balance sheet, implicitly, 

the financial situation of the enterprise and the information from profit and loss account and performance 

measured in profitability terms. 

The managers’ implement in which they follow their present actions, that guide to 

accomplishing strategical objectives of an economical organization is the administration 

control, through the information’s regarding the costs the budgetary system, the instrument 

panel and other information. 

The accounting information (which is the most important component of the decision 

system) is made on a certain convention namely historical cost, assumption based on 

transactions and events of a firm are booked on the value from the moment they have 

happened, without tacking into account the variation of money’s purchasing power. 

This evaluation base corresponds to useful information on taken decisions as long as a 

relative stability of general economy’s prices level exists and, implicitly, an individual prices 

stability with which the enterprise operates. There are situations when enterprises carry on 

their activity into an economical environment marked by currency instability, with important 

prices increasing, sometimes with states of hyperinflation. In this case, the information based 

on historic cost hypothesis provides a disoriented image of reality, that alter, generally, the 

quality of administration decisions and the enterprise’s behaviour. So, in inflation terms, the 

information on historic costs is missed of pertinence because is not enough useful on taking 

the decisionsF 

112 

F. 

a) The inflation impact over enterprise administration 

Practising administration control of an organization into an inflationary environment 

must heed both correcting the information about operations and past events, under inflation 

incidence, and taking into account the inflation, when it is elaborating information’s with 

preview’s character (budgets and instrument panels). 

Usually, when inflation become superior to the rate of 10% per year, in a lasting way, 

the information in historic costs losses every economical signification, and decisions took 

based on it are irrelevantF 

113 

F. To see which the inflation’s are consequence over the decisions 

took by managers, it impose to analyse inflation impact over the information in historic costs 

supplied by financial situations. 

112 About financial communicationin hyperinflationary economies, that refers to accountancy informations 

supplied to the third party, see Niculae Feleagă şi Ion Ionaşcu, Treaty of financial accountancy, vol. ll, Editura 

Economică, 1998, p. 533-564. 

113 Pierre Lauzel, Robert Teller, Contrôle de gestion et budgets, 7e édition, Editions Dalloz, 1994, p. 328.


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So, inflation affects both the information supplied by the balance sheet, implicitly, the 

financial situation of the enterprise and the information from profit and loss account and 

performance measured in profitability terms. 

Regarding inflation impact over the bookkeeping information showed into the balance 

sheet, the situation presents itself as: the enterprise capital assets, that includes the equipment 

of production’s value (property, plant and equipment), is valuated into historic costs (of 

production or HUacquirementUH), that made it to be presented at an underestimated value. This 

undervaluation of the capital assets lure a correlative underestimation of personal assets and 

provokes a false increase of Personal assets/ Debts report, that diminish or block the 

enterprise possibility of obligation on long terms (as a rule, the bankers refuse granting new 

loans to enterprises who have a higher rate of obligation). In stock’s case, just increasing their 

rotation speed may lead to an undervaluation less obvious. Holding currency assets as a form 

of debt-customers, bank reserves, cash, receivable commercial effects etc., generate a loss of 

their purchasing power, because inflation involves transfers of values from debtor to creditor 

and reverse. 

Because the balance assets, in historic costs, is underestimated, the inflation makes 

114 

that the circulating fundsF 

F necessary to the enterprise for a proper function to be 

underestimated, situation that affects even the continuity of the enterprise activity. 

Regarding the information from profit and loss account, presented in historic costs, the 

inflation has the following consequences: 

♦ both stocks expenses (raw materials, materials and goods for resale...) and the 

depreciation expenses are under valuated; 

♦ the undervaluation of some HUconsumptionUHs lure an apparent „grow” of the income, 

that generate the charging of a HUfictitiousUH income (actually, a tax on price increasing, that is 

equivalent to a patrimony social essence’s lack, meaning from assets) and allocation of 

HUfictitiousUH dividends; 

♦ a distortion of the value added allocation in to the enterprise’s detriment: the salaries 

are, based on a price index and not on a HUlabourUH HUproductivityUH; 

♦ Significant increase of interest expense due to HUexcessiveUH short-time loans, on 

interest’s rates that follow the inflation rate. 

The inflation causes monetary illusion’s effects, that leads to administration errors 

regarding the performances HUassessmentUH, the depreciation politics, the loans politics and the 

HUtreasuryUH previews. 

The real performances of enterprise are HUmisledUH measured, meaning that they are 

overestimated if it reports an overvalueted income at unevaluated proper assets. HUAccordinglyUH, 

the financial performance (income/proper assets) HUappreciateUHd on the balance sheet in historic 

costs is HUmisstateUH by inflation impact. 

In inflation circumstances, the information in historic costs distorts the decisions 

regarding the depreciation politics of enterprise. The function of the depreciation 

reinvestments is very much altered because the inflation generate the increase of investments 

prices in fixed assets, and an unevaluated depreciation involves a financial resources of 

investments. Only the regressive and accelerated depreciation practicing can diminish the 

inflation’s denudation over the assets recovered through depreciation. 

Regarding the enterprise loaning, this has not a positiv effect over the proper assets 

HUprofitablenessUH through the lever effect unless the real rate of invested assets profitableness is 

115 

superior to loan’s costF 

F. However, generally, the cost of loan assets follows the inflation 

114 Calculated as a difference between permanent assets and active assets or current assets minus current debts. 

115 Pierre Lauzel, Robert Teller, Contrôle de gestion et budgets, 7e édition, Editions Dalloz, 1994, p. 331.


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rate, and the real profitableness rate evolves in HUtheUH HUoppositeUH HUdirectionUH, often in periods of 

relative economical stagnation. 

The inflation states of economy alter the decisions about the enterprise treasury 

administration. So, the underestimation of circulating funds on treasury previews makes that 

the enterprise to be surprise by the need of cash. 

To hold up the always increasing treasury needs, enterprises are tempted to maintain 

in to the pay office large sums, which involves serious losses from holding monetary assets 

because the current coin is loosing the purchasing power. Into an inflationary environment, 

the decisions about the enterprise treasury administration must take in consideration the 

change of discount conditions: the clients tend to honour their payments with delay, the 

suppliers want payment with lower terms, and the banks are limitation the granted credit (this 

situation generates financial blockings). 

b) Handling the accounting information into inflation conditions 

Because the inflation alter the accounting information’s quality used in the act of 

decision, into the specialized literature and into enterprise practice from the countries who 

have pasted through (hyper)inflation are presented two big families of ways to treat inflation 

into the accountancy: 

_ methods that take into consideration the evolution of general prices level, being, in 

fact, increased historic costs, also named as methods based on conversion or on accountancy 

in constant purchasing power; 

_ Methods that take into consideration the evolution of specific prices, also named as 

methods based on evaluation or accountancy in actual values. 

The application of those accounting methods of inflation has the meaning to assure 

both the maintain of financial assets (of proper assets) and material capital (the ability of 

efficiently, expressed in material unities made) of the enterprise and the supply of an 

accounting information which is useful into administration decisions. 

Methods based on conversion (increased historic costs) 

This method consists in correcting the accounting information based on an unique 

price index, with the purpose to present the accounting dates into a monetary unity with the 

same purchasing power as the one from the budgetary year closing. The conversion of 

original cost (acquisition cost or production cost, after case) in to monetary units with general 

purchasing power at the budgetary year closing is made through original cost with a 

conversion factor (or conversion coefficient), defined as: 

The conversion factor = Price index at budgetary year closing / Price index at the 

moment of goods acquisition. 

I p1 

F C = 

I p0 

Because there is not a single index to reflect de currency depreciation, it will choose a 

price index which most affects the enterprise activity (they can use consumption price index, 

en-gross sales price index etc.). 

The inflation causes simultaneous, at the same enterprise level, a loss of cash and un 

increased debts purchasing power and a gain due to un increased debts, meaning enterprise 

support an inflationary gain or loss. The increased accountancy follows the quantification of 

currency depreciation consequences over the enterprise under the form of inflationary gain or 

loss and their attachment, totally, to the exercise result. In determination the inflationary gain 

or loss a prominent part has the distinction between monetary and non monetary posts of the 

balance sheet, as it follows:


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• Monetary assets are assets elements that can be used for acquisition of goods and 

services and have the form of: debts-clients, receivable commercial effects and monetary 

reserves; 

• Non monetary assets are represented by tangible assets (property, plant and 

equipment and stocks) and by some intangibles (patents, trade-marks etc.); 

• monetary liabilities are enterprise debts that can be liquidated by payment with 

monetary assets and not by handing goods or HUcarryingUH HUoutUH services and have the form of a 

middle and long-term loans, suppliers, payable commercial effects and short-term loans; 

• Non monetary liabilities are liabilities that can not be liquidated by handing goods or 

HUcarryingUH HUoutUH services and includes the enterprise’s proper assets. 

Comparing monetary due with monetary liabilities allows the indicator determination 

„net monetary situation” of enterprise, according: 

Net monetary situation = monetary assets – monetary liabilities 

If the net monetary situation is positive, meaning that monetary assets are superior to 

debts, the increase of prices generate a loss of purchasing power, namely a loss from inflation, 

because the diminish of cash value and debts due to inflation is superior to debts diminished. 

But, monetary situation is negative (monetary liability is superior to monetary assets), the 

enterprise obtains an income from inflation, because there is a income from some loans 

reimbursements, contracted in the past, into a depreciated currency. 

For the assets which are not usually transitioned or for those which are not reference 

prices, replacement cost can be determinates through accounting net value multiplication of 

the good with a specific price index to that sort of goods. 

The accountancy methods in current cost suppose the use of some specific price index, 

for the correction of different assets values, the depreciation and the sales costs. 

Application as an evaluation base of current costs has as a consequence finding two 

types of possession gaining: 

• achieved gaining, that represent „economy” obtained by the enterprise through the 

evaluation of sales cost and the depreciations of exercise at historic cost; 

• Unachieved gaining, that represent the plus of value afferent to non monetary assets 

of enterprise. 

The gaining from holding, achieved and unachieved, do the difference from 

revaluation coming from the use of current costs as an evaluation base. These gaining from 

holding have as a result increasing the enterprise value and they are included into the proper 

assets. 

Under utility in formations report in to decisional act, it is considered that the 

evaluation in current costs has a better answer for administration needs then the evaluation in 

increased historic costs. So, based on the evaluation of current costs it is easier to appreciate 

the performance of enterprise management, the gain relieved over the depreciation can be 

analysed as a performance norm. Also, the evaluation in current costs allows a better preview 

of future cash flows of the enterprise. 

c) Administration control adapting to an inflationary environment 

The inflation has as a consequence the increase of enterprise’s vulnerability, 

specially the smalls and middles, through the „financial scissors”, that can be defined based 

on the following relationsF 

116 

F: 

• Insufficiency of proper funds + excessive debt + increase of needs in circulating 

funds = financial lack of balance + treasury problems + financial costs. 

• Decrease of real performants + increase of needs in circulating funds = insufficient 

cash-flow for resolving the treasury problems = weakness on short term. 

116 Pierre Lauzel, Robert Teller, op. cit., p. 333.


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• Decrease of real performants + increase of financial costs = insufficient selffinancing 

for restoring the financial balance and replacement of fixed assets = weakness on 

long-term. 

Concretely, into inflation conditions and increasing turbulence of business 

environment the administrator must have in consideration the following administration 

problems of enterprise: 

� Supervision of operating and treasury flows, if is possible, on each product or activity. 

So, starting with general accountancy dates, it can be build an informational flow to serve 

current decisions and enterprise guideless, having in sight the performances indicators 

measured in profit and cash terms. 

� Pursuing the inflation incidence over the costs. Into inflation conditions, the 

information regarding costs, obtained on historic values, is distortionated in reply with reality, 

which makes it less useful to administration decisions. That is why, to provide a pertinent 

cost, and so useful in taking the decisions, must be quantificated the inflation incidence, 

through the use of some increased historic values at inflation or current costs. 

If the enterprise management does not use an evaluation base that take into account 

the inflation, continuing to apply the historic costs, the inflation’s effects can be introduced in 

costs by applying of some methods of evaluation adjusted to an inflationary environment. So, 

into increasing price conditions, the evaluation of stocks evaluation (by consumption of raw 

materials, materials or by saling HUmerchandiseUH) ) will be done according to the method „last in 

– first out: LIFO” that has the effect to register some maximal costs, closed to the current 

values, profit diminution and income taxes. In this way, the increase of prices is integrating in 

cost and is ensuring the maintaining of HUphysicalUH assets purchasing power. In absence of fixed 

assets revaluation, the inflation’s effects over erosion of depreciation purchasing power, 

which is a source of investments financing (we depreciate so we can reinvest), are decreased 

through depreciation practice in digressive and/or accelerate way. Even these evaluation 

methods have the effect of costs increasing and result diminution, they represent an 

accountancy solution in which enterprise integrates in cost the increase of prices, ensuring the 

maintaining of HUphysicalUH assets purchasing power. Another problem that rises up into 

inflationary environment is the ensuring of information comparability regarding costs, to take 

some right decisions regarding enterprise performances. So, if it wants the costs comparing of 

some paid or collected stocks in two consecutives exercises, must be considerate the 

conversion of those costs into monetary units with constant purchasing power, for ensuring 

the comparability. 

� The supervision of pluriannual financial flows. The administrator must proceed at real 

performances measuring generated by each product, measured in cash and profitableness 

terms, keeping in mind the inflation incident, on a longer period of time, even pluriannual, to 

integrate the inflation’s effects into the strategically analyse of enterprise. This aspect is more 

then necessary into a persistent inflation’s conditions on many years and with a significant 

rate, more then 10 % per year. 

Following the inflation’s effects on a longer period of time over costs, reserve quota 

and treasury flows allows the identification of many vulnerability grades of products to 

inflation and taking some adequate strategically decisions. So, a product considered as a 

„dilemma” from financial point of view (has a lower profitableness and a cash deficit), may 

evolve, according of weakness to inflation, either to a profitableness diminish and cash deficit 

accentuation, or to maintain a lower profitableness but with an increasing cash flows. 

Pluriannual supervision of those financial flows, that must include even the inflation 

incidence, allows the formulation of some strategically decisions. In first case, they establish 

financial performances deterioration because of inflation, the strategically decision will have 

to hint at renunciation of making this product or production reconversion. In exchange, if


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pluriannual flows analyse allows the administrator to find an improvement of financial 

product performances, he can propose to management many decision’s variants, regarding 

HUeffectuationUH of HUinvestmentUHs that assure the continuation of increasing product performances. 

Bibliography 

- Niculae Feleagă and Ion Ionaşcu, Treatise from financial contability vol. ll, 

Economics Edition, 1998, Bucharest 

- Anton Filipascu Methods and techics fiscal, Economics Edition, 1995,Bucharest 

- 

Pierre Lauzel, Robert Teller, Contrôle de gestion et budgets, 7e édition, Editions 

Dalloz, 1994


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INTEGRATION’S ACCENTUATION OF THE INTERNATIONAL 

MARKETS-COORDINATE OF THE ECONOMIC GLOBALIZATION 

Toboşaru Irina, Asist.univ.drd., Universitatea Creştină „Dimitrie 

Cantemir”, Bucureşti 

Abstract: A partir des derniers décennies du XX ème, les problèmes économiques du monde et l’économie du 

type globale ont ocupé larges éspaces dans les débats internationaux, y compris dans ceux politiques. Çela est 

dûe à une transformation importante: le passage d’un nombre du plus en plus grand d’économies au sytème 

èconomique du marché. L’intégration des marchés au niveau global se manifeste, premièrement, sur le marché 

des marchandises (surtout en ce qui concerne les produits industriels intermédiaires). Les deux tendances qui 

caractèrisent la globalisation des marchés des marchandises sont: a) l’homogénisation des préférences des 

consumateurs sur certains segments de la demande; b) l’apparition des sociétés transnationales sur les marchés 

nationaux, et l’attraction de ceux-ci dans les réseaux globaux. 

Beginning with the last decades of the XXth century, the humanity’s economical 

problems and the global economy had occupied wide areas in the international debates, 

including the political ones. This fact is due to an important transformation: more and more 

economies changed the economic market system instead of the one dominated by the state. 

The fact that the market achieved a global importance is corroborated by the increase of goods 

flux, services, capital at national level, the drastic decrease of transportation and 

telecommunication costs, by the falling of the scheduled economy and by the triumph of the 

economic liberalism’s ideology. Starting from the economic dimension of the globalisation, 

we can surprise the trends through which the process got shape. Therefore, some coordinates 

are specific to it:a)the expansion of the international fluxes of commerce with freight and 

services, of the capital fluxes and of those of persons; b) the trans-nationalisation determined 

by the multinational companies;c)the increase of the global market’s integration. 

The coordinated that are specific to the contemporary process of globalisation cannot 

be dissociated from the increasing tendency of integration of the freight markets, financial 

services etc. Some specialists consider that what differentiates the previous process of 

internationalisation from globalisation is the integration of the markets at a global level. At 

the basis of this integration seem to stay two important supports, identified in: direct foreign 

investments and alliances based on technologic criteria. Under the ISD aspect, whose 

achieved level is not a an awesome phenomenon, what is specific is their “multilateral 

character” and “the concentration on some areas that are privileged by the capital 

movements”.[3] The explosion the commercial fluxes and the interfering of more and more 

companies on the internal markets of other countries has determined an increase of the 

concurrence. On one side there is emulation between the economic agents that activate on the 

national market. On the other side, the concurrence has extended, from their level to the level 

of the national public authorities. Those last, in order to attract foreign investments, strive to 

build a much more attractive business environment.


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In this scope, they offer facilities and try to promote politic stability and trust. The ways 

through which the public national authorities may compete on a global level consist in: a 

simplified legislation that guarantees the right for property, a simple and stable fiscality, a 

reformed labour market. 

At its turn, the extension of the concurrencies space from a national level to a global level 

determines “a consolidation tendency of oligopoly structures on certain global freight markets.” 

This concretises in the focus of the activities from certain industry sectors in the service of a 

small number of firms. The example can be met most often in technology, pharmaceutical 

industry etc. Relieving the evolution and the intensity of the concurrence in time, Jagdish 

Bhagwati underlines the lack of preoccupation that the tropical countries cultivators of oranges 

had more than two centuries ago towards the concurrence of the producers from Glasgow, as the 

difference of price was so big that the former felt safe, holding the advantage in the 

competition.[2] 

In the age of contemporary globalisation, the technology changes the dates, being present 

all over the world and in any domain, the advantage slowly decreasing and the competition 

escalating towards the top. The spreading of high-tech at the beginning of the XXIst century 

inducts the promise that all states could benefit on it. The last technologic conquer are in the 

middle of competitivity and of the power of the nations, and therefore the fight for occupying the 

leadership in the development and exploitation of revolutionary technologies is harsh. 

The amplification of the global concurrence generated anti-concurrencies behaviour: 

separation of certain market sectors, excluding the foreign firms from the internal market, 

increase of the number of the fusions, incorrect commercial practice and trans-national 

acquisitions. In the domain of concurrence, the national governments policy is different from one 

country to another and it includes specific rules for: cartels, fusions, incorrect commercial 

practice, transparency of the national firms, fact that seldom slows the countries’ will to invest or 

export in a country. The disappearance of the concept according to what “a certain concurrent 

benefits of an undeserved advantage” reclaims an important step for the harmonisation of the 

rules between the countries, the basic element of the international commercial negotiations. This 

necessity got important dimensions together with the increase of the degree of interdependence 

and of integration between commerce and ISD. 

Another example of integration at a global level constitutes the financial markets. On the 

opinion of Henri Bourguinat the financial globalization has on its basis the “three D”:a) 

deregulation, realized by the states, that eliminating the barriers in the way of the capital fluxes 

allowed the creation of new placing and liberalized the financial transactions; 

b)dezintermediation that allowes the agenmts to participate directly on the financial markets in 

order to obtain financiation without asking for credits; c)decompartmentalize of the markets, 

consisting in eliminating the barriers between different monetary and financial markets from the 

country and in the exteriorisation of the national capital markets.[1] On Robert Gilpin’ opinion, 

international finance from the beginning of the XXIst century are not governed by any 

mechanism. Even though the global economy deal with serious financial crises in the ‘90s, 

efficient regulations that should bring order to the international capital fluxes and in the financial 

markets have not yet been elaborated, but the belief is that these markets will find an equilibrium. 

There are multiple proposals: the Tobin tax on financial speculations, creation of a central 

international bank with creditor role of ultimate instance (George Soros).[4]


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BIBLIOGRAFIE: 

1. Bourguinat, H.; Finance internationale, PUF, 1995 

2. Bhagwati, Jagdish; Elogio della globalizzazione, Editori Laterza, Bari, 2005 

3. Crozet, Y.; Abdelmalki, L.; Dufourt, D.; Sandretto, R.; Les Grandes Questions de l’économie 

internationale, Editions Nathan, Paris, 2ème édition, 2001 

4. Gilpin, R.; Economie mondială în secolul XXI. Provocarea capitalismului global, Editura 

Polirom, Iaşi, 2004


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International commercial negotiation 

LAPADUSI MIHAELA LOREDANA 

ASSISTANT LECTURER, PHD. STUDENT 

UNIVERSITY “CONSTANTIN BRANCUSI” 

ABSTRACT 

Complexity of socio-economic life, diversity of relationships and activities taking place throughtout internal and 

international business negotiation help negotiation assert itself as one of the most precious attributes of 

economic life. 

The practice of international business environment highlights a great variety of types of negotiations, variety 

triggered by a series of factors, the most important of which being: the socio-economic environment which 

comprises the pricess of negotiation, the objectives taken into consideration, the purpose of negotiation, the level 

of progress, the number of participants, the modality and the various stages of progress, etc. 

Negotiation plays a very important role in the international commercial transactions. If in 

matter of reduced value business contracts are finished frequently with the distance (“between the 

absents”), through the commercial letters or other modalities, in the raised value business, as well 

as when is about on new markets or products, the partners meeting and negotiation of the contract 

represent the rule in businesses. 

In the negotiation process of the different contracts of international commerce an 

important role reverts to the logic, psychology, the art of communication, knowing the partner’s 

language occupying a special role. The complete international negotiation is an organized process 

of communication between the enterprises, which propose the progressive accommodation of 

their interests related to the negotiation object for realizing a business agreement mutually 

acceptable, materialized in the international contract.[1] 

As a large sense, negotiation appears as a concentrated and interactive form of interhuman 

communication where two or many parts being in a disagreement intend to reach an agreement 

that solves a common issue or reaches a common purpose. Negotiation is inseparable from the 

interhuman communication, and, inevitably is based on a dialogue. To negotiate is to 

communicate hoping to reach to an agreement. A business negotiation is a particular form of 

negotiation, centered on a product existence or on a service, on one side, and of some need for 

satisfying, on the other. The agreement has a commercial character and may materialize in a 

commerce act, a convention, order, a sailing-buying contract, a partnership, a leasing etc or just 

in the modification of some clauses, of some price levels, some quality conditions or delivery, 

transporting etc. 

In a larger approaching of the international commercial negotiation this represents the 

following characteristics: 

� negotiation as a communication form between the parts, that means through the mutual 

transfer of information through which is established the negotiation status that allows the 

different interests harmonization of the partners for realizing a common business;


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� commercial negotiation has as an objective the getting of some agreement, 

respectively a earning; the etymology itself of the term (in Latin: negotiari) expresses the 

commerce desire, of transaction of some parts that want to realize a business together; 

� negotiation supposes the existence of an intercultural character, in the that part belongs 

to some different cultures, and the finish and developing of the business is realized in an 

intercultural context. As such, the communication and harmonization process of interests is 

complex and influenced by a diversity of factors of socio-cultural nature, politic, ideological, 

juridical, etc [2] 

Business negotiations of international commerce are governed by some specific 

principles, as it follows: 

1.the reciprocity principle- has a very important role because fate to face are 

the business partners, both parts follow the realization of some profit, and the best results are 

registered in those transactions where there were developed co-operation relations and mutual 

trust, between the parts. 

2.the legacy principle- the implied partners in negotiations belong to the rule of 

different juridical systems, and in the case of appearing new conflicts of laws are obliged to 

clarify the law problem applicable to the contract, this being governed by the law chosen by 

the parts. Partners have equal rights in promoting and determination of the contract applicable 

law, at worldwide level deposing efforts for that in the majority of the commercial 

international transactions to be adopted the Equable Rules, to avoid the law conflicts. 

3.the morality principle- must be correlated to the principle of the good faith, 

that constitutes the fundaments of the International Commerce Right, so that to respect the 

partner and to take into account his interests, without abandoning the own interests pertains to 

the negotiation essence. 

The negotiation preparatory represents the essential condition for the success of 

the international commercial negotiations and supposes the elaboration of some detailed 

work program that contains: establishment of the negotiation objectives, knowing the 

commercial partners, documentation and information, establishing the strategies, elaboration 

of the preparatory works, the analyze of the possible solutions, the operation integration in 

the general background, studding the perspectives. 

The negotiations team is established in report to the proposed objectives, depending on 

the transaction nature and complexity taking into account the general conditions where are 

going to be the negotiations. Negotiators are characterized through: their position in the 

negotiation (taking the decision, professional competence, the role in the negotiators team), 

personality features, needs and activity objectives, cultural dowry: values, faiths, options etc. 

As well they must know the legislation and commercial usage, settlements of the commercial 

politics, the financial-exchange and their incidents. The partners in negotiation are in a certain 

force reports, one or another being able to have an ascendant upon the other. The force report 

between the negotiators is determined of many factors: 

� the relative power of the enterprises (parts) employed in the negotiations (size and 

enterprises performances, the position on the market, the image in the business worlds, etc); 

� the position of the negotiator in the company, its hierarchic authority; 

� the negotiator’s competence, the professional expertise and experience in 

negotiations; 

� the natural ascendant of the negotiator, its influence capacity, personal 

charisma. 

One of the complexity resources of the negotiation process consists in the personality 

specific to the negotiators, in their communication capacity and professional competence, as 

well as in the objective and subjective motivations that animate them. The negotiation process 

has a series of successive phases:


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� pre-negotiations- the first discussion or communication when both sides let to be 

understood that are interested in approaching some problem; 

� the actual negotiation- has as a starting point the official declaration of the part 

interest of solving in common a problem, to realize certain objectives, materializing in an 

agreement closure, usually written, that contains the foresights and measures that must be 

undertaken for realizing the common objective; 

� post-negotiation-begins in the moment of adopting the agreement and includes the 

whole assembly of objectives that aims at realizing its foresights; 

� proto-negotiation- consists in developing in parallel with the negotiation of some 

sustained activity and permanent of tacit harmonization of interests, of the point of view. It is 

manifested through unilateral acts that may be taken into account by partners as encouraging 

signals, respectively discouraging. 

It may be done a distinction between the three fundamental types of negotiations: 

distributive negotiation (winner/looser or victory/defeat); integrative negotiation 

(winner/winner or victory/victory) or the rational negotiation, a type of negotiation that does 

not put in cause a part position or their subjective interests. 

The distributive negotiation is the one or/or type, that choose only between 

victory/defeat. Is the one that corresponds to a game with a null sum and takes the form of a 

transaction where it is not possible for a part to win, without the other one to loose. Each 

concession made to the partner comes to damage the other one and mutual. 

The negotiation objective will be an agreement that will not take into account the 

partner’s interests and will be that better that it will strike harder the opposite side. In such a 

negotiation, the result will be determined decisively by the force report between the partners, 

meaning the negotiation power being in conflict. The worst consequence of a closed 

agreement in such conditions is that the disadvantaged parts are not disposed to respect it. 

They will try to recover the hindrance, or to revenge. 

The tactics and negotiation techniques used in the distributive negotiations are harsh and 

tensions. In the usual tactics, may be remembered: the polemic used through permanent 

contradictions and through systematic deviations from the subject, attack and intimidation, 

rhetorical maneuvers based on dissimilation, through masking the intention, hiding the truth 

and on guilt the adversary, disqualification through dishonesty, person attack and through 

falling into ridiculous. This type of negotiation is possible when the interests’ opposition is 

strong, and the force lack of balance is significant. [3] 

The integrative negotiation (victory-victory) is that when are respected the aspirations 

and interests of the partner, even if they come against the own ones. Is based on the mutual 

respect and on the difference toleration of aspiration and opinions. 

The advantages of this type of negotiation are those that it leads to better solutions, more 

lasting, the part are feeling comfortable, and their relations are consolidated. Both sides win 

and both sustain the solution and the closed treaty. The integrative negotiation creates solves 

and consolidates the interhuman relations, on a long term. This negotiation optic avoids the 

conflict statuses. The specific tactics are based on the concession reciprocity (delivery terms 

are shorter against some immediate payments, foe example). 

The rational negotiation is that where the parts do not propose only to make or to 

obtain concessions, consented on subjective negotiation positions, but try to solve the base 

litigations from an objective position, other than one or another position between them. 

It begins with the problems formulation that must be solved, as answers to the 

questions as: What does not work? Where is evil? How this manifests? Which are the facts 

that contravene to the desired situation? It continues with a diagnostic of the existent 

situation, insisting upon the causes that oppose yi the problems solving. Then, theoretical


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solutions are searched and are established together the measures that, at least one of these, 

may be practiced. 

The rationality algorithm means: problems defining, diagnosing the causes in search 

of the solutions. The negotiator searches to understand the stake given by the partner, to know 

its feelings, motivations and preoccupations. 

The conflicts that remain unsolved are settled through the recourse at objective 

criteria, as well as the scientific references, legal norms, moral norms or through The 

Understatement as an interhuman process of communication, the commercial negotiation 

conducts a series of aspects and characteristics that particularize it. 

BIBLIOGRAFIE: 

[1] COBZARU I.: “INTERNATIONAL ECONOMICAL RELATIONS”, PUBLISHER 

ECONOMICA, BUCHAREST, 2000; 

[2] POPA I.: „INTERNATIONAL COMMERCIAL NEGOTIATION”, PUBLISHER 

ECONOMICA, BUCHAREST, 2006; 

[3] SHELL G.R.: „THE NEGOTIATION IN ADVANTAGE: NEGOTIATION 

STRATEGIES FOR REASONABLE PEOPLE”, PUBLISHER CODECS, BUCHAREST, 

2005.


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INVESTMENT IN PROPERTY, PLANT AND EQUIPMENT - 

AN ACCOUNTING POINT OF VIEW 

Gomoi Bogdan Cosmin, prep. univ. drd. 


Cernuşca Lucian, conf. univ. dr. 


ABSTRACT: Long - term operating assets provide an infrastructure in which to conduct operating 

activities. The category of property, plant and equipment refers to tangible, long - lived assets such as land and 

equipment. Long - term operating assets have value because they help companies generate future cash - flows. 

The decision to acquire a long - term operating asset involves comparing the cost of the asset to the value of the 

expected cash inflows, after adjusting for the time value of money. An asset’s value can decline or disappear if 

events cause a decrease in the expected future cash flows generated by the asset. 

When property, plant and equipment assets are purchased, they are recorded at cost, which includes all 

expenditures associated with acquiring and getting them ready for their intended use, such as sales tax, shipping 

and installation. Sometimes assets are acquired by lease rather than purchase. A lease may be a short - term 

rental agreement, called an operating lease or it may be substantially the same as a purchase transaction. When 

an asset’s value declines after it is purchased, it is said to be impaired. Recording an impairment loss is a two - 

step process. First, the recorded book value of the asset is compared with the sum of future cash flows expected 

to be generated by the asset. Second, if the book value is lower, then a loss is recognized in an amount equal to 

the difference between the book value of the asset and its fair value. 

Businesses make money by selling products and services. A company needs an 

infrastructure of long-term operating assets in order to profitably produce and distribute these 

products and services. Property, plant and equipment refer to tangible, long-lived assets 

acquired for use in business operations. This category includes land, buildings, machinery, 

equipment and furniture. Intangible assets are long-lived assets that are used in the operation 

of a business, but do not have physical substance. In most cases, they provide their owners 

with competitive advantages over other firms. Typical intangible assets are patents, licenses, 

franchises and goodwill. Long-term operating assets are acquired to be used over the course 

of several years. The decision to acquire a long-term asset depends on whether the future cash 

flows generated by the assets are expected to be large enough to justify the asset cost. The 

process of evaluating a long-term project is called capital budgeting and the concept that 

money received now are worth more than money received far in the future is called the time 

value of money. 

Acquisition of Property, Plant and Equipment 

Like all other assets, property, plant and equipment are initially recorded at cost. The 

cost of an asset includes not only the purchase price but also any other costs incurred in 

acquiring the asset and getting it ready for its intended use. Examples of these other costs 

include shipping, installation and sales taxes. The items that should be included in the 

acquisition cost of various types of property, plant and equipment are outlined in Table 1:


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Land Purchase price, commissions, legal fees, escrow 

fees, surveying fees, clearing and grading costs 

Land improvements Cost of improvements, including expenditures for 

materials, labor and overhead 

Buildings Purchase price, commissions, reconditioning 

costs. 

Equipment Purchase price, taxes, freight, insurance, 

installation and any expenditure incurred in 

preparing the asset for its intended use. 

Table 1: Items included in the Acquisition Cost of Property, Plant and Equipment 

Property, plant and equipment are usually acquired by purchase. In some cases, assets 

are acquired by leasing, but are accounted for as assets in much the same way as purchased 

assets. Plant and equipment can also be constructed by a business for its own use. Also, a 

company can in one transaction purchase several different assets or even another entire 

company. 

Assets Acquired by Purchase 

A company can purchase an asset by paying cash, incurring a liability, exchanging 

another asset or by combination of these methods. When one long-term operating asset is 

acquired in exchange for another, the cost of the new asset is usually set equal to the market 

value of the asset given up in exchange. 

Assets Acquired by Leasing 

Leases are often short-term rental agreements in which one party, the lessee, is granted 

the right to use property owned by another party, the lessor. Classifying leases, they have two 

types and namely operating lease, that is accounted for as a simple rental, on one hand and 

capital lease, that is accounted for as a purchase of the leased asset. Because the accounting 

treatment of a lease can have a major impact on the financial statements, the accounting 

profession has established criteria for determining whether a lease should be classified as an 

operating or a capital lease. 

15BAssets 

Acquired by Self-Construction 

Sometimes buildings or equipment are constructed by a company for its own use. This 

may be done to save on construction costs, to utilize idle facilities or idle workers, or to meet 

special set of technical specifications. Self-constructed assets, like purchased assets, are 

recorded at cost, including all expenditures incurred to build the asset and make it ready for 

this intended use. These costs include the materials used to build the asset, the construction 

labor, and some reasonable share of the general company overhead (electricity, insurance, 

supervisor’s salaries, etc.) during the time of construction. 

Another cost that is included in the cost of a self-constructed asset is the interest cost 

associated with money borrowed to finance the construction project. Just as the cost to rent a 

crane to be used to construct a building would be included in the cost of the building, the cost 

to “rent” money to finance the construction project should also be included in the building 

cost. Interest that is recorded as part of the cost of a self-constructed asset is capitalized


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interest. The amount of interest that should be capitalized is the amount that could have been 

saved if the money used on the construction project had instead been used to repay loans. 

16BAcquisition 

of Several Assets at Once 

A basket purchase occurs when two or more assets are acquired together at a single 

price. A typical basket purchase of a building along with the land on which the building sits. 

Because there are differences in the accounting for land and buildings, the purchase price 

must be allocated between the two assets on some reasonable basis. The relative fair market 

values of the assets are usually used to determine the respective costs to be assigned to the 

land and the building. 

The second major accounting issue associated with the purchase of an entire company 

is the recording of goodwill. Goodwill represents all the special competitive advantages 

enjoyed by a company, such as a trained staff, good credit rating, reputation for superior 

products and services, and an established network of suppliers and customers. These factors 

allow an established business to earn more profits than would a new business, even though the 

new business might have the same type of building, the same equipment, and the same type of 

production process. When one company purchases another established business, the excess of 

the purchase price over the value of the identifiable net assets is assumed to represent the 

purchase of goodwill. 

17BCalculating 

and Recording Depreciation Expense 

The second element in accounting for plant and equipment is the allocation of an 

asset’s cost over its useful life. The matching principle requires that this cost be assigned to 

expense in the periods benefited from the use of the asset. The allocation procedure is called 

depreciation, and the allocated amount, recorded in a period-ending adjusting entry, is an 

expense that is deducted from revenues in order to determine income. It should be noted that 

the asset “plant” normally refers to buildings only; land is recorded as a separate asset and is 

not depreciated because it is usually assumed to have unlimited useful life. 

Accounting for depreciation is often confusing because students tend to think that 

depreciation expenses reflect the decline in an asset’s value. The concept of depreciation is 

nothing more than a systematic write-off the original cost of an asset. The undepreciated cost 

is referred to as book value, which represents that portion of the original cost not yet assigned 

to the income statement as an expense. A company never claims that an asset’s recorded book 

value is equal to its market value. In fact market values of assets could increase at the same 

time that depreciation expense is being recorded. 

To calculate depreciation expense for an asset, you need to know its original cost, its 

estimated useful life, and its estimated salvage, or residual value. Salvage value is the amount 

expected to be received when the asset is sold at the end of its useful life. When an asset is 

purchased, its actual life and salvage value are obviously unknown. They must be estimated 

as realistically as is feasible, usually on the basis of experience with similar assets. In some 

cases, an asset will have little or no salvage value. If the salvage value is not significant, it is 

usually ignored in computing depreciation. 

Several methods can be used for depreciating costs of assets for financial reporting. In 

the main part of this chapter, we describe two: straight-line and unit-of-production. In the 

expanded material section of this chapter, we describe two more depreciation methods: sumof-the-year’s-digits 

and declining-balance. 

The straight-line depreciation method assumes that an asset will benefit all periods 

equally and that the cost of the asset should be assigned on a uniform basis for all accounting


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periods. If an asset’s benefits are thought to be related to its productive output (miles driven in 

an automobile, for example), the units-of-production method is usually appropriate. 

18BStraight-Line 

Method of Depreciation 

The straight-line depreciation method is the simplest depreciation method. It assumes 

that an asset’s cost should be assigned equally to all periods benefited. The formula for 

calculating annual straight-line depreciation is: 

(Cost – Salvage value) / Estimated useful life (years)= Annual depreciation expense 

(1) 

When the depreciation expense for an asset has been calculated, a schedule showing 

annual depreciation expense, the total accumulated depreciation, and the asset’s book value 

(undepreciated cost) for each year can be prepared. Depreciation Expense is reported on the 

income statement. Accumulated Depreciation is a contra-asset account that is offset against 

the cost of the asset account balance, minus the credit balance in the credit balance in the 

accumulated depreciation account. 

19BUnits-of-Production 

Method of Depreciation 

The units-of-production depreciation method allocates an asset’s cost on the basis of 

use rather than time. This method is used primarily when a company expects that asset usage 

will vary significantly from year to year. If the asset’s usage pattern is uniform from year to 

year, the units-of-production method will produce the same depreciation pattern as the 

straight-line method. Assets with varying usage patterns for which this method of 

depreciation may be appropriate include automobiles and other vehicles whose life is 

estimated in terms of number of miles driven. It is also used for certain machines whose life is 

estimated in terms of number of units produced or number of hours of operating life. The 

formula for calculating the units-of-production depreciating for the year is: 

(Cost - Salvage value) / Total estimated life in units, hours, or miles × Number of units 

produced, hours used, or miles driven during the year = Current year’s depreciation expense 

(2) 

20BRepairing 

and Improving Plant, Property and Equipment 

Sometimes during its useful life, an asset will probably need to be repaired or 

improved. The accounting issue associated with these postaquisition expenditures is whether 

they should be immediately recognized as an expense or be added to the cost of the asset 

(capitalized). An expenditure should be capitalized if it is expected to have an identifiable 

benefit in the future periods. 

Two types of expenditures can be made on existing assets. The first is ordinary 

expenditures for repairs, maintenance, and minor improvements. The second type is an 

expenditure that lengthens an asset’s useful life, increases its capacity, or changes its use. 

These expenditures are capitalized; that is, they are added to the asset’s cost instead of being 

expensed in the current period. 

Another example of a capital expenditure is the cost of land improvements. Certain 

improvements are considered permanent, such as moving earth to change the land contour. 

Such expenditures would be capitalized as part of the land account. Other expenditures may 

have a limited life, such as those incurred in building a road, a sidewalk, or a fence. These


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expenditures would be capitalized in a separate land improvements account and be 

depreciated over their useful lives. 

It is often difficult to determine whether a given expenditure should be capitalized or 

expensed. The two procedures produce a different net income, however, so it is extremely 

important that such expenditures be properly classified. When in doubt, accepted practice is to 

record an expenditure as an expense to ensure that the asset is not reported at an amount that 

exceeds its future benefit. 

21BRecording 

Impairments of Assets’ Value 

As mentioned earlier, the value of a long-term asset depends on the future cash-flow 

expected to be generated by the asset. Occasionally, events occur after the purchase of an 

asset that significantly reduces its value. Accountants call this impairment. When an asset is 

impaired, the event should be recognized in the financial statements, both as a reduction in the 

reported value of the asset in the balance sheet and a loss in the income statement. 

22BDisposal 

of Property, Plant and Equipment 

Plant and equipment eventually become worthless or are sold. When a company 

removes one of these assets from service, it has to eliminate the asset’s cost and accumulated 

depreciation from the accounting records. There are basically three ways to dispose of an 

asset: discard or scrap it, sell it, or exchange it for another asset. 

23BDiscarding 

Property, Plant and Equipment 

When an asset becomes worthless and must be scrapped, its cost and its accumulated 

depreciation balance should be removed from the accounting records. If the asset’s total cost 

has been depreciated, there is no loss on the disposal. If, on the other hand, the cost is not 

completely depreciated, the undepreciated cost represents a loss on disposal. 

24BSelling 


A second way of disposing of property, plant and equipment is to sell it. If the sales 

price of the asset exceed its book value (the original cost less accumulated depreciation), there 

is a gain on the sale. Conversely, if the sales price is less than the book value, there is a loss. 

25BExchanging 


A third of disposing of property, plant and equipment is to exchange it for another 

asset. Such exchanges occur regularly with cars, trucks, machines, and other types of large 

equipment. When dissimilar assets are exchanged, such as a truck for a computer, the 

transaction is accounted for exactly as outlined previously: the acquired asset is recorded in 

the books as its fair market value, and a gain or loss may be recognized depending on the 

difference between this market value and the book value of the asset that was disposed of. 

Accounting for exchanges of similar assets can be more complicated and therefore is not 

discussed in this text.


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References 

1. Harrison W., Horngren, C., Financial Accounting Second Edition, Editura Prentice Hall, 

2005. 

2. Nobes, C.W., Parker, R., Comparative International Accounting, Editura Prentice Hall, 

2000. 

3. Albrecht, S., Stice, J., Stice, E., Skousen, F., Accounting Concepts and Applications 

Edition 8, South-Western, Thomson Learning, 2000. 

4. Brigham, E., Fundamentals of Financial Management, The Dryden Press, 1995. 

5. *** Consilier Management Financiar, Editura Rentrop & Straton, 2005. 

6. *** Standardele Internaţionale de Raportare Financiară (IFRS), Editura CECCAR, 2005. 

7. *** OMFP 1752/2005 pentru aprobarea reglementărilor contabile conforme cu 

directivele europene


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L’ÉVASION FISCALE VIS-ÀVIS DE L’ÉVASION FISCALE LÉGALE 

Dascălu Maria Nicoleta Asist univ drd, 


ABSTRACT: This article presents a new form of the fiscal evasion, the deliberate evasion, analyzed 

from the tax-payer point of view and also from the one of the legislator. The two first forms of the evasion, the 

legal and the illegal ones, are analyzed depending on the position of the low. In such situations we may take into 

consideration the fact that the low offers purposely some ways out which permit the possibility to interpret and 

to manipulate the low. The purpose of these deliberate lacks is to encourage certain classes or interest groups. 

Sur l’économie de marché, les organismes fiscaux se confrontent à un 

phénomène d’évasion fiscale qui se développe de plus en plus à cause du fait qu’on a 

tendance à soustraire de l’incidence de la loi des revenus imposables substantiels. 

Le dictionnaire explicatif de la langue roumaine définit l’évasion fiscale de la 

manière suivante: « dérobade aux obligations fiscales ». L’évasion fiscale représente le 

résultat logique des défauts et des inadvertances d’une législation imparfaite, des méthodes 

défectueuses de mise en pratique, tout comme de l’imprudence et de l’incompétence du 

législatif dont la fiscalité excessive est fautive, tout comme ceux qui provoquent l’évasion. 

On doit reconnaître le droit de chaque contribuable d’éviter par des moyens 

légitimes le paiement des impôts, ce qui suppose souvent le recours à des paradis fiscaux, 

mais en même temps ces paradis fiscaux peuvent être utilisés pour la réalisation de certaines 

opérations qui impliquent l’évasion fiscale. 

Les entreprises off-shore sont des sociétés qui n’ont pas le droit d’effectuer des 

transactions qu’à l’étranger, donc elles ne peuvent pas entrer en contact avec les agents 

économiques autochtones. L’évasion fiscale de ce type est pratiquée de la manière suivante : 

l’exportateur effectue un impôt à prix diminué ; la différence réelle de prix est encaissée dans 

le compte de l’entreprise off-shore par le biais de la réexportation à sa vraie valeur. Cette 

différence n’est pas soumise à l’impôt d’aucune manière dans le pays paradis fiscal, pouvant 

être transférée dans le pays exportateur, dans un compte personnel sans payer aucun impôt sur 

le revenu obtenu suite à cette importation. 

L’impôt sur le profit zéro ou très petit, les déclarations fiscales annuelles 

simples ou inexistantes, les coûts de réalisation et d’utilisation et l’impôt réduit ou presque 

nul sur les dividendes – ce sont quelques aspects offerts par les compagnes off-shore. 

Ceux qui recourent au paradis fiscal dans des buts illégaux se regroupent dans 

deux catégories importantes: 

- ceux qui ont pour objectif l’évasion fiscale 

- ceux qui cachent des profits résultés de la violation de la législation fiscale 

comme suite à l’évasion fiscale. 

En Roumanie, il y a beaucoup de compagnies de type off-shore. De plus en plus, les 

hommes d’affaires roumains se rendent compte qu’il est nécessaire de faire appel à une 

restructuration des affaires qu’ils déploient, afin de maintenir leur compétitivité tant sur le 

marché interne (c’est le cas des opérations d’importation de produits) que sur le marché


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international (c’est le cas des opérations d’exportation de produits, know-how, la 

consultance). 

Pourtant, pendant l’année 2006 et le début de l’année 2007, une certaine stagnation a 

eu lieu en ce qui concerne la création des compagnies off-shore grâce au fait qu’en 2007 la 

Roumanie est devenue membre de l’UE et les hommes d’affaires ont préféré d’attendre ce 

moment afin de savoir si cet événement pouvait affecter leurs affaires ou non et afin de voir 

quelles étaient les modifications qui puissent apparaître. 

L’entreprise off-shore est une compagnie enregistrée dans un paradis fiscal, ce qui 

signifie que l’impôt est très réduit. Par conséquent, si on n’est pas résident de la région où on 

institue l’entreprise et si on ne déploie l’activité sur le territoire de la juridiction, on ne paye 

pas d’impôt, sauf la taxe fixe établie par l’État respectif. 

La plupart des pays considérés comme paradis fiscaux n’imposent aucun impôt sur le 

revenu ou ils imposent des impôts seulement sur certaines catégories de revenus, soit ils 

imposent un impôt réduit, à la différence des impôts imposés par les pays d’origine de ceux 

qui utilisent les paradis fiscaux respectifs. Ce type de pays assure une certaine protection de 

l’information bancaire ou commerciale. 

Mais, on connaît déjà le fait qu’il n’existe aucun paradis fiscal qui contente tout le 

monde. Certaines zones se sont spécialisées dans les activités bancaires, d’autres servent les 

intérêts multinationaux pendant que les autres réunissent sur leurs ailes protectrices les riches 

du monde. 

Les entreprises off-shore se sont implémentées dans des domaines stratégiques. Cela 

montre le fait que les entreprises off-shore ne se sont plus instaurées dans le portefeuille des 

compagnies qui se trouvent dans la propriété de l’État. Les dernières années cela n’a pas été 

possible. Elles se sont implémentées dans la zone privée de l’économie, là où leur présence ne 

créait pas de suspicions, tout en intervenant dans la masse des compagnies qui déploient de 

petites ou grandes affaires. C’est ainsi que les entreprises off-shore ont réussi à prendre des 

paquets significatifs ou même le contrôle de certaines compagnies privées qui se trouvaient 

peut-être dans des domaines -clef ou dans des industries stratégiques. Par conséquent, 

l’expansion des entreprises off-shore a provoqué le souci au cœur même de l’Europe. On a 

proposé ainsi d’intensifier le contrôle exercé en ce qui concerne les compagnies présentant 

des unités enregistrées dans des paradis fiscaux. Les commissaires européens ont alors 

apprécié que les scandales consécutifs vont conduire à l’établissement des marchés financiers 

et ils ont ajouté que les entreprises de l’Union Européenne seront obligées de dévoiler 

entièrement leurs activités. Dans les zones où le contrôle est insuffisant, un groupe d’audit va 

réaliser une vérification stricte. Les commissaires ont précisé devant le Parlement Européen 

qu’on devrait renforcer le rôle du contrôle dans le cadre des centres off-shore. 

Les dimensions de ce segment de crime organisé, par leurs effets, modifient le cours 

des reformes économique et sociales, visent les fondements démocratiques de l’État, mettent 

en péril la sécurité du citoyen et frappent les intérêts nationaux fondamentaux. L’ampleur des 

opérations au comptant (tout en entraînant un grand montant), la création et le fonctionnement 

des entreprises fantôme, tout en violant les prévisions légales, les difficultés existantes dans la 

surveillance des préoccupations des citoyens étrangers et celles relatives au contrôle de ces 

entreprises, les vulnérabilités du système finacier-bancaire, la maintenance au plan 

international des paradis fiscaux, etc. contribuent à la facilitation des transferts illégaux de 

devises en dehors du pays et encouragent la contrebande et la grande évasion fiscale. La 

conclusion en est l’une des plus dures : ces affaires illégales affectent la sûreté nationale de 

l’État, par la sape de l’économie nationale. 

L’économie roumaine se confronte à un nouveau type d’ingénierie fiscale déployée 

par les entreprises off –shore. Les hommes d’affaires qui accumulent des dettes immenses aux 

entreprises qu’ils contrôlent sortent d’embarras en utilisant une méthode très simple. Ils 

vendent leurs sociétés en faillite à une entreprise off-shore qui ne répond pas devant la loi ou


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devant le Fisc de Roumanie. Par conséquent, les patrons ou les administrateurs dévalisent 

leurs propres sociétés et ne restituent plus les sommes soustraites, pendant que les 

« parasites » off-shore gagnent eux aussi 10-20 % de la valeur de ces dettes, y ajoutant 

d’autres commissions provenant de la récupération des créances de l’entreprise en question. 

L’un et l’autre, ils gagnent beaucoup. Les seuls qui perdent sont les créditeurs, soit qu’il s’agit 

de personnes physiques ou juridiques, soit qu’il s’agit de l’État roumain. La loi ne peut pas 

empêcher la prise d’une SRL ou d’une SA par une entreprise off-shore. De même, la loi ne 

peut pas obliger le représentant d’une entreprise off-shore de dévoiler le nom de l’actionnaire, 

ce qui rend impossible une éventuelle action de récupération de toutes les obligations 

financières. L’ingénierie est possible à cause du fait que la loi permet à une entreprise offshore 

de prendre tant les actions d’une société roumaine, que son administration, en facilitant 

de cette manière, dans certains cas, l’escroquerie sous n’importe quelle forme. 

On va donner de suite quelques exemples comparatifs : 

Tableaux no. 1 – Exemples des avantages et désavantages fiscales 

Pays Avantages Désavantages 

- l’impôt sur le profit est - la publication des rapports 

petit (4,25%) ; 

au Registre du Commerce 

Chypre 

- il y a des accords 

concernant l’évitement de la 

double imposition, signés 

avec 25 pays 

- les entreprises ne sont pas - de grandes taxes 

obligées de tenir et de d’enregistrement 

conserver des 

New York 

enregistrements 

comptables ; 

- les rapports périodiques ne 

sont pas nécessaires 

Bahamas - le manque d’une - la publication des rapports 

surveillance stricte au Registre du Commerce 

Lichtenstein - le secret bancaire absolu ; - de grandes taxes 

- un climat politique stable d’enregistrement 

- une infrastructure - le manager doit être 

développée ; 

- taxes annuelles de 12 

résident de Singapore 

Singapore 

USD ; 

- l’anonymat des 

actionnaires 

- des taxes entre 2,4 et 6 % ; - le manager doit être 

Les Antilles Hollandaises - l’obligation de rédiger des 

rapports d’audit n’existe pas 

résident 

- il n’y a pas de taxes sur le - il est interdit de déployer 

profit ; 

des activités commerciales 

- l’obligation de rédiger des dans les îles ; 

Bermudes- UK 

rapports financiers n’existe - on ne peut pas détenir des 

pas ; 

propriétés là-bas ; 

- les managers peuvent être - il n’y a pas d’accords en 

représentés aussi par des ce qui concerne l’évitement 

personnes non résidentes de la double imposition


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Bibliographie : 

1. Brezeanu P., Marinescu I., Finante publice si fiscalitate – Ed. Fundatiei „Romania de 

maine”, Bucuresti 1998 

2. Dauphin C., Ghidul cu adevarat practic al paradisurilor fiscale Grupul de edituri Tribuna 

1999 

3. Dăianu D., Vrânceanu R., Romania si Uniunea Europeana - editura Polirom 2002 

4. Hoanţă N., Evaziunea fiscala editura Tribuna Economica Bucuresti 1997 

5. Mrejeru T., Andreiu D., Florescu P., Safta D., Safta M., Evaziunea fiscala –, editura 

Tribuna Economica 2000 

6. Rühl C., Dăianu D., Tranzitia economica in Romania - trecut, prezent si viitor - Bucuresti 

1999 

7. Şaguna Drosu D., Tratat de drept financiar si fiscal, editura All Beck SA 2001 

8. Revista Finante publice si contabilitate – nr.3/ 2003, nr.1/2002, editata de Ministerul 

Finantelor Publice


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L’impact des facteurs interculturels sur les investissements étrangers dans 

les économies en cours de transition 

BARNA FLAVIA, Lecteur, Université de l’Ouest Timişoara 

DIMA BOGDAN, Conferencier, Université de l’Ouest Timişoara 

NACHESCU MIRUNA, Assistante, Université de l’Ouest Timişoara 

RESUME: 

Les facteurs interculturels exercent un impact durable sur les diverses composantes de la croissance du 

niveau économique, par l’influence exercée sur les comportements à long terme des sujets économiques, sur le 

mode de structuration et fonctionnement du système économique. 

Ce travail se propose d’esquisser un cadre analytique de cette vaste problématique et il est focalisé sur 

un aspect particulier, celui de la mise en évidence des effets que les divers paradigmes culturels spécifiques aux 

économies en transition ont sur la dynamique des flux des investissements étrangers. 

La conclusion des fondements théorétiques et pratiques présentes est celle qu’il y a une relation 

directement proportionnelle entre le degré de „tolérance culturelle” et l’effet bénéfique des investissements 

étrangers, de leur capacité de contribuer á l’amorçage d’une élévation du niveau économique. 

I. 26BIntroduction 

L’ouverture vers l’extérieur des économies en cours de transition a lieu dans le cadre 

d’un processus plus ample, de transformation structurelle de l’économie mondiale. Une des 

caractéristiques essentielles de ce processus est la transformation des mouvements de 

capitaux en une des principales forces de dynamisation des relations économiques 

internationales. Évidemment, au début de la transition, les pays du Centre et de l’Est de 

l’Europe manquaient le capital physique et financier qui aurait pu aider la restructuration et 

stimuler la croissance économique. 

Même si les investissements étrangers ne représentent pas la clef de la croissance 

économique nationale mais plutôt un catalyseur de ce processus, leur extension pendant la 

dernière décennie peut avoir un impact positif majeur sur les économies nationales, si ces 

investissements sont accompagnés par le développement d’un milieu institutionnel stable, 

simple, transparent et fonctionnel. 

En élargeant l’analyse concernant l’aire de manifestation des intérêts et des rapports 

qu’ils créent entre les investisseurs étrangers et les Roumains, nous nous posons plusieurs 

questions, comme : Quelle est la relation entre ces intérêts au niveau microéconomique ? 

Comment se manifestent les intérêts investitionnels et quelle est leur relation au niveau 

macroéconomique ? Comment se manifestent ces intérêts entre la relation des pays 

développés et les pays en cours de transition ? Comment se manifestent ces intérêts sur le 

plan intern des économies nationales des pays développées ? etc. 

L’idée centrale de l‘analyse proposée dans cette présentation est que, pour une période 

courte, les facteurs interculturels et le milieu institutionnel peuvent déterminer l’attraction 

d’un volume plus grand d’investissements étrangers qui entraîneront, à long terme, un impact 

profond sur la mentalité de la société-hôte sur ses valeurs socioculturelles et éducationnelles.


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II. 43BLes 

caractéristiques des investissements étrangers directs dans les pays de 

l’Europe Centrale et de l’Est 

Dans le processus de transformation structurelle et fonctionnelle des économies en 

cours de transition de l’ECE, les investissements jouent un rôle extrêmement important 

comme facteur de croissance économique, d’innovation de la technologie et de 

restructuration des entreprises. 

Pour les stratégies de transition une composante essentielle devient juste l’attraction 

et le bon orientement des investissements étrangers vers des buts majeurs : 

� Relancer l’économie; 

� Créer l’économie de marché et assurer son bon fonctionnement; 

� Créer des conditions réelles d’attraction des investissements étrangers à travers la 

consolidation de l’accumulation de capital autochtone ; 

� Impulsivement le processus de création de nouvelles entreprises privées, surtout dans le 

domaine de la production des biens nécessaires sur le marché déjà conturé ; 

� Maintenir le contrôle total sur l’évolution à moyen et longue terme de l’économie 

nationale, en fin d’assurer l’indépendance économique et politique, de la souveraineté 

nationale. 

Du point de vue du pays hôte, on peut énumérer les suivants bénéfices potentiels de 

base des investissements étrangers: 

1. Les investissements étrangers directs avancent la croissance économique et la 

haute productivité; 

2. Les investissement étrangers directs sont une source de devise forte pour les 

pays en cours de développement (ceux-ci peuvent être diverses formes d’arrangements 

financiers qui peuvent être des contributions en argents, des matériaux ou des propriétés). 

Le plus grand avantage est le fait que la dette externe du pays n’augmente pas par ce type 

de contributions. 

3. Les investissements étrangers directs contribuent au transfère des nouvelles 

technologies, du know-how, des aptitudes managériales, accompagnées par des aptitudes de 

marketing de l’investisseur étranger. 

4. Les investissements étrangers directs avancent le commerce international par 

des liaisons horizontales avec les branches des compagnies mères, ce qui mène à 

l’augmentation de la compétitivité sur le marché du pays hôte, avance les projets de jointventure 

avec des partenaires locaux et il y a aussi un potentiel d’établir des relations dans la 

recherche et le développement avec des universités locales et des centres de recherche. 

5. Le capital sous forme d’investissements étrangers directs de capital est la 

forme la plus bénéfique pour l’économie du pays récepteur, grâce aux effets positifs à 

longue duré sur l’économie domestique (ils ne sont pas volatils comme autres formes de 

capital). 

6. La création des lieux de travail et l’apport, par cela, à l’augmentation de la 

demande solvable. 

7. On occasionne de la compétition pour les firmes locales et on les oblige à se 

restructurer, à devenir plus compétitif ou à disparaître. 

8. Les bénéfices résultés de la croissance de la productivité pour les 

consommateurs locaux sous forme de prix plus bas et une plus haute qualité des produits et 

services. 

Le développement déséquilibré des certaines zones dont on a fait des investissements 

provient que les investisseurs étrangers ont actionné la plus part des fois dans leur propre 

intérêt jusqu’à mésestimer les intérêts nationaux des pays bénéficier d’investissements 

étrangers.


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Tout de même, l’approfondissement des processus de globalisation économique et 

l’intensification des tendances integrationistes dans tout le monde et surtout en Europe 

suscitent, pour les pays avec des économies en cours de transition, les conditions d’apparition 

de certains intérêts pareils à ceux des pays développés. Ces intérêts sont principalement : 

• L’harmonisation des niveaux du développement économique et la création des 

possibilités de revitaliser l’économie des pays hôte en plein processus de transition. 

• La création des conditions d’usage plus intense des ressources concernant la force de 

travail et les capacités créatrices dans les pays de résidence de celles-ci et la 

prévention de l’émigration vers les pays développés. 

• L’exploitation très efficace des ressources de matières premières pour le plus long 

possible et dans des conditions écologiques adéquates. 

• La consolidation du cadre économique et l’assurance des milieux d’affaire saine, 

fondé sur une économie concurrentielle qui crée les conditions nécessaires au 

processus d’intégration économique et politique des pays en cours de transition. 

Séparément de ces intérêts convergents, les pays développés ont une série de propres 

intérêts, comme: 

• Assurer des placements plus stables de l’excédent de capital accumulé sur le marché 

de capital et dans les banques occidentales et qui ne sont pas fructifiés favorablement 

dans leurs propres économies. 

• Créer de nouveaux marchés de vente pour les propres produits d’un haut niveau 

technologique, compétitifs et qui ne peuvent pas être totalement vendus sur les 

marchés des pays d’origine sans un développement du niveau technologique ou sans 

refaire la technologie des autres économies. 

• L’intérêt dans l’extension des capitaux et du contrôle sur d’autres économies 

nationales pour y tirer des bénéfices. 

• La tendance de saisir le contrôle sur des entités économiques ou sur des secteurs 

d’une importance majeure à travers les investissements stratégiques. 

Sur le plan intern des économies nationales des pays développés, dans 

l’exploitation des investissements étrangers directs aparraissent certaines divergences 

d’intérêts qui sont causées par les orientations vers l’extérieur des potentiels investisseurs et 

par les intérêts généraux des pays d’origine. 

III. 48BÉvidences 

empiriques 

Les investissements étrangers exercent sur le système récepteur tant des effets 

quantitatifs que des effets qualitatifs, et la nature et l’intensité de ces effets dépendent des 

caractéristiques propres à ce système, mais aussi du niveau culturel et éducationnel de la force 

de travail. 

Dans le cas particulier des économies en cours de transition, cela est traduit par l’idée 

qu’il y a des différences importantes entre ces économies en ce qui concerne le volume 

entre les structures des investissements étrangers attirés, tant en fonction de la dimension 

et de l’intensité des réformes structurales et institutionnelles parcourues, qu’en fonction 

des valeurs socioculturelles spécifiques. 

Les flux d'IED vers l'Europe du Sud-Est et la CEI se sont maintenus en 2005 a un 

niveau relativement élève (40 milliards de dollars), a peine supérieur â celui de l'année 

précédente. Ils se sont surtout concentres sur trois pays - a savoir la Fédération de Russie, 

l'Ukraine et la Roumanie, dans cet ordre - qui ont compte pour près des trois quarts dans le 

total. Les sorties d'IED de la région ont progresse pendant quatre années consécutives, pour 

atteindre 15 milliards de dollars l'an dernier, la Fédération de Russie étant a elle seule 

responsable de 87 % du total des sorties. Les pays de la région ont des priorités différentes


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concernant l'IED (entrées et sorties), en fonction de leurs structures économiques et de leurs 

cadres institutionnels respectifs. Dans les pays dont l'économie est fondée sur les ressources 

naturelles, tels que la Fédération de Russie, l'Azerbaïdjan et le Kazakhstan, les préoccupations 

essentielles concernent la gestion des bénéfices exceptionnels engendres par le niveau élevé 

des prix internationaux du pétrole et la définition - ou la redéfinition - du rôle de l'Etat. 

Figure 1 

Investissements directs à l’étranger des pays en développement et pays en transition, 

1980-2005 

Source: UNCTAD, World Investment Report 2006: FDI from Developing and Transition 

Economies 

En 2005, les flux d'IED en provenance des pays en développement et pays en 

transition ont atteint 133 milliards de dollars, soit 17 % environ des flux mondiaux. Si l'on en 

déduit l'IED provenant des centres financiers offshore, on arrive au chiffre record de 120 

milliards de dollars au total (fig. 3). La valeur du stock d'IED en provenance des pays en 

développement et pays en transition en 2005 était estimée a 1 400 milliards de dollars, soit 13 

% du total mondial. En 1990 encore, seulement six pays en développement et pays en 

transition déclaraient des stocks extérieurs d'IED supérieurs a 5 milliards de dollars; en 2005, 

ce seuil avait été dépasse par 25 pays en développement et pays en transition. 

Si nous faisons une extension de l’analyse de l’impact des facteurs interculturels 

sur les investissements étrangers directs dans les économies en cours de transition, de 

manière empirique nous pouvons illustrer l’existence d’une liaison entre le milieu 

institutionnalisé et culturel et le niveau de croissance économique. L’analyse sera 

effectuée utilisant l’indicateur de transition proposé par le BERD dans Le rapport de 

transition publié en 2001. 

Les indicateurs de transition fournissent des estimations liées au progrès effectué en 

trois domaines majeurs, qui jouent un rôle important dans une économie de marché :


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• LES MARCHES ET LE COMMERCE (Y INCLUS DES CATEGORIES COMME 

LA LIBERALISATION DES PRIX, LE SYSTEME COMMERCIAL ET CELUI DE 

L’ECHANGE, LA POLITIQUE DE COMPETITION) 

• les firmes (y inclus des catégories comme la privatisation à grande et petite échelle, la 

restructuration des entreprises d’état, le cadre légal de fonctionnement des firmes) 

• les institutions financières (y inclus des catégories comme la réforme bancaire, la 

libéralisation de la taux d’intérêt et le progrès dans l’établissement d’un marché de valeurs 

mobiliers fonctionnel et des institutions financiers non bancaires). 

Les indices de transition utilisés par l’EBRD mesurent le progrès dans le domaine de 

la réforme du milieu institutionnel en comparaison avec les standards des pays développés et 

ont les valeurs attribuées entre 1 et 4, en ajoutant ou réduisant de 0,3 pour indiquer le trend. 

Ces valeurs reflètent plutôt le progrès cumulé dans la transition de l’économie planifiée à 

l’économie de marché, et non les changements d’une année à l’autre. 

Figure 2. 

La croissance réelle du PIB et l’indicateur de transition 

Notes : La Rép. Tchèque (CZR), L’Hongrie (HUN), La Pologne (POL), La Slovaquie (SLK), 

La Slovénie (SLV), La Roumanie (ROM), La Bulgarie (BUL), L’Estonie (EST), La Lettonie 

(LAT), La Lituanie (LIT), L’Arménie (ARM), L’Azerbaïdjan (AZB), Le Belarus (BEL), La 

Georgie (GEO), Le Kazakhstan (KAZ), Le Kirghizstan (KYR), La Rép. Moldave (MOL), 

Russie (RUS), Le Tadjikistan (TAJ), Le Turkménistan (TUR), L’Ukraine (UKR) et 

L’Ouzbékistan (UZB). 

Source: Banque Européenne de Reconstruction et Développement, „ Le Rapport de 

transition”, 2001. 

Comme nous pouvons observer dans la figure 2, les pays de succès sont groupés dans 

le coin droit en haute du diagramme, avec un score haut dans les réformes institutionnelles et 

une moyenne positive des taux de croissance du PIB, pendant que les pays qui ont réalisé 

moins de progrès institutionnel montrent des taux de croissance plus baisses ou même 

négatives. 

Une étude réalisée sur un échantillon de 69 pays en cours de développement 

concernant l’augmentation du PIB entre les années 1970-89 (Borensztein, 2004), est arrivé à 

la conclusion que les investissements étrangers directs ont été seulement en une petite mesure


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significatifs à influencer positivement la croissance économique, mais qu’alors que les 

investissements étrangers directs ont intéractionné avec un plus haut niveau d’éducation, 

l’influence sur la croissance économique a été plus conséquente. Tant le niveau d’éducation et 

de culture de la force de travail était plus haute, tant le gain dans la croissance économique 

provenant d’une infusion d’investissements étrangers directs était plus grand. 

IV. 27BConsidérations 

finales 

Un rôle essentiel dans l’établissement à long terme de la trajectoire suivie par les 

sociétés en cours de transition est joué par les facteurs culturels. Le processus de 

transformation systémique parcouru par les pays en cours de transition doit être réalisé dans le 

contexte dont les cultures en transition sont capables de se rapporter tant à leurs propres 

systèmes de valeurs, qu’aux valeurs partagées par les autres, ayant une importance critique 

pour la façon dans laquelle les flux internationaux, réels, financiers et informationnels se 

constituent en restrictions ou impulsions de la croissance économique. 

LA CAPACITE DE REMODELER NON PAS SEULEMENT LES 

STRUCTURES ECONOMIQUES, LE CADRE INSTITUTIONNEL ET LES 

MECANISMES SOCIAUX, MAIS AUSSI LES PARADIGMES CULTURELLES, 

EDUCATIONNELLES, LES ATTITUDES ET LES COMPORTEMENTS 

SPECIFIQUES, LE CHANGEMENT DES SYSTEMES DE VALEURES 

CONSTITUENT LA COMPOSANTE NONMATERIELE DETERMINANTE DE LA 

REFORMATION DES SOCIETES EN TRANSITION. 

Bibliographie: 

1. Aitken, B., Harrison, A. “Do Domestic Owned Form Benefit from Foreign Direct 

Investment: Evidence from the Panel”, International Monetary Fund, 1993, pag 22- 

23. 

2. Borensztein, E., Mauro, P. , "The Case for GDP-Indexed Bonds" . Economic Policy, 

Vol. 19, No. 38, pp. 165-216, April 2004 

3. Denuta, I. – „Investiţiile străine directe în ţările est şi central europene, Ed. 

Economica, 1998 

4. *** Banque Européenne de Reconstruction et Développement, „ Le Rapport de 

transition”, 2001 

5. *** UNCTAD, World Investment Report 2006: FDI from Developing and Transition 

Economies


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LA BANQUE DANS L’AGE DE LA GLOBALISATION 

Hagiu Alina 

Assistant stagiaire doctorant 

Université de Piteşti 

ABSTRACT 

La globalisation, comme un procès qui suppose élargissement des les relations parmi les 

économies nationales du monde, n’a pas détoure la marché bancaire, la globalisation de l’activité bancaire 

représentent une réalité essentielle des notre jours, qui exerce une forte influence ne seulement sur l’économie 

mais aussi sur l’entier monde contemporaine. 

Dans les conditions de la globalisation il se parle de plus en plus de l’installation des quelques 

systèmes électronique ultraperformant qui ont détermine la utilisation dans le cadre de la système bancaire de le 

concept de "banque globale", impliqué simultanément en transactions dans plus centres du monde. Les dépenses 

très grandes que la formation de l’infrastructure d’une banque globale suppose, peuvent être supportable 

seulement pour les plus solides groupes. 

La globalisation facilitera la dispersion de les risques bancaire et augmentera les performances 

général des les économies individuels par l’amélioration de l’allocation des les ressources. 

Introduction 

In present, the world of banks entered it also, without doubt, in a period of 

profound and significant changes. Discreet, protecting and being protected by the law of 

confidentiality, the banking universe appeared for a long period as an elegant citadel, in which 

time was flowing with other units of measure, the access being opened only to those which 

were accomplishing some rigorous criteria, and the information broadcasted toward exterior, 

were extremely little, personalized and precisely addressed. 

The market globalization, the revolution in technology and communication 

technique, the intense competition between banks regarding the products offered determined 

on world level transmutations without precedent in this field. 

The direct, classic relations between client and bank are structural changed at the 

content level as well as at the concrete form of realization. Access to information or diverse 

banking services by phone, internet, telebanking, will change the nature of reports between 

the bank and its customers, and the communication network development will exude 

gradually the classic counter. In fact, we assist at replacing banks with numerous counters, 

with an army of functionaries, and a mountain with folders and papers, with banks entirely 

informatized, accessible on network 24 hours from 24, from any corner of the world, capable 

to provide any specialized service in the next second. 

In some developed countries, “virtual bank” became a reality. It takes place, in 

fact, a function revalorization. The classic banker must abandon its individual office and to 

leave the place for the professional, who moves with lot of agility and easiness in the diverse 

and complete multitude services, products and financial schemes from the chambers of 

counseling the customers. The modern banker it is asked more and more competence, an 

advanced professional formation and a new labor philosophy, the bank of the beginning of the 

millennium doesn’t assure anymore a smooth and well paid way until retirement.


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The internationalization and the concentration 

The increased competition determined bank systems to update the strategies they 

apply. Thus took place the internationalization of the banking systems from the developed 

countries and the concentration of banking activities. Important banks and financial groups 

merge controlling the entire area activity. These groups are real conglomerates which includes 

beside banks, assurance societies, investment or pension funds, capital market activities, 

leasing, capable to offer complete financial services to their customers. Banking 

internationalization can be realized through cooperation under alliances form for developing 

the increasing profitability and competitiveness conditions. 

The bank alliances advantages are: 

• it can enter to a difficult access market; 

• proper funds savings; 

• reducing cost related to entering on a new market; 

• to important capital investments, participates all partners; 

• banks have the possibility of keeping a relative self-sufficiency and of giving 

the possibility to break a report. 

Multinational banks 

In the second half of the XX century the world banking system registered 

important changes in its structure. Every country banking system continued to have specific 

elements, but the trend is the same, namely forming some power centers, which obtain a high 

market quote. It is necessary to make a distinction between multinational banks and the 

international ones. Multinational banks are the ones which had implanted branches and 

subsidiaries in many countries, the transnational activity exceeding one fourth from all 

activities. An international bank effectuates operations for customers from different countries 

or in different currencies, from the headquarters in the residence country. 

Virtual banks and the Romanian market 

In the globalization frame, it is said more and more about the installment of 

some new electronic systems, and even about the digital economy, thus also in the frame of 

the banking system it was introduced the notion of “global bank”, integrated simultaneously 

in transactions from many centers of the world. Big expenses that are supposed by the 

formation of a global bank infrastructure can be supported only by the solid groups. 

Numerous banks use online operations for extending on foreign markets, avoiding the costs of 

building a subsidiaries network. The apparition of virtual banks and electronic money created 

the possibility of non-banking institutions development which collects funds and offers 

credits to the public. Virtual banks work with money as real as they can be, threatening the 

position of the classic institutions. Because they don’t have a bushy structure, they have the 

advantage of covering commissions half of those of the classic banks. Moreover, transactions 

are made from the armchair, customers not being forced to face out the sour image of some 

bored functionary, not to say that transactions are made in a real time. With a single click and 

at lower costs that the classic ones, you can send or receive money from all over the world or 

you can go shopping with the card. Virtual banks give also credits or cards universally 

recognized. Everything is for you to know about their existence. 

Nowadays, the customer has a stinted image of the institution as such. The way 

of contact between the customer and the bank is firstly represented by phone and computer, 

connected to an informational network and to the main access channels to the bank, because 

they are the single ones that allow an interactive report similarly with the traditional one. The 

other ways of distribution, necessary for following the operations that can’t be realized by 

phone or computer (e.g. retraction of credit), are accessory to the direct report realized by


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phone or computer. This change of the report between bank and customer, determine a radical 

change of the bank image. 

In graphic bellow is presented the virtual banks distribution in the world: 

Figure1. 

The virtual banks distribution in the 

world 

48% 

37% 

6% 

2% 

5% 

2% 

Europe 

North America 

South America 

Africa 

Asia 

Australia 

Source: based on the dates from Hwww.virtualbank.com 

It is obvious that the two continents more developed and which hold advanced 

technologies are also the most preoccupied in this area. In Europe exists virtual banks and 

traditional banks that use virtual channels in completion of their counter activities. In present, 

there isn’t a unique European system of the virtual banks which to assure the success of the 

initiative, but there are different kinds of formulas which adapts to the requirements and 

exigency of the market. 

While exchange intensification, electronic communication development, big 

stocks exchange have electronic terminals that can be accessed by the customers toward its 

office internet. Still inchoate in Romania this system develops hard while wining customer’s 

credibility which prefers displacements and papers in place of the computer and of the 

internet. It’s also about credibility in case of virtual banks, banks with annual flows of 

thousands of bullions of dollars and which are created for facilitating the electronic 

commerce, some interbanking transactions as well as for replacing with high gain of 

promptness, the money transfer, like Western Union. Romanians start to bump often with the 

refuse of large virtual banks of creating account to the Romanian physical or juridical persons. 

If it were to refer to the larger bank of this kind, Pay Pal, from the form of creating an account 

which this puts on customer disposal, Romania was simply cut out from options besides other 

countries from the ex soviet space (Ukraine, Russia). The causes which lend here refer to the 

attitude of the Romanians who live abroad, who were reclaimed in various occasions by the 

large firms of online transactions for the lack of honesty developed in electronic auctions or 

for the numerous attempts of fiddling those firms or their customers. One of them is E-Bay, 

which two years ago was reclaiming it’s customers from Romania, recently required Pay Pal 

to retire Romania’s interdiction. The request was made at Romanian honest customer’s 

intimation which has difficulties on paying some correct and profitable transactions for E- 

Bay. The American banking company which detains Pay Pall, not only that didn’t respond 

positive to this request, but put into practice a more secured electronic system, which blocs 

any account user signed by an Romanian IP, fact that debunks also business peoples, 

employees or foreign tourists resident in Romania who forced by circumstance must make 

transactions using virtual banks services from a computer found on Romanian ground. The 

effects of this security measures are hard to quantify. At least in this step of Romania’s


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development they are felt more at small transaction level. In time though, they can reflect 

negative at payments flow level but especially at the Romanian operator’s credibility on the 

virtual banking markets. 

There are some hundred of virtual banks in the world, but few work with 

Romania. One of them is Moneybookers. The company, a payments intermediary on U.K. 

jurisdiction, allows to each holder of email to make online payments on real time. 

Moneybookers is developed on the same security and performance principles as the banking 

services web sites or as the stock market online transactions. Moneybookers is an ideal 

service for small business, online dealers and for other current activities disserved by 

traditional mechanism of payment. With a viable solution for international payments, it 

accepts clients from all over the world. 

Last year, has launched in our country Neogen Virtual Bank. Neogen, the 

regional leader for online services, launched together with Volskbanc, the virtual service 

“Neogen Virtual Bank”, free service which comes into reception of user’s financial needs. 

The service addresses to everyone, and offers the possibility to contract online credits, 

regardless their type, through an online interface, easy to use. Users, who need more 

information, can discuss online with a credit officer. Credits contracted by Neogen have the 

same costs as those offered directly at banks counters. For receiving money effectively, the 

applicants must come with the documents which testify that incomes declared in requesting 

forms are accordingly with the reality. 

Conclusions 

The development and the diversification of the financial instruments increased 

the access possibilities to funds for banks. Therefore, these entered on the capital markets 

also, at competition with assurance and real assets societies, mutual funds or of pension. 

Therewith, for being able to compete with rivals, banks had to develop new 

goods and services, leaving on second place traditional activities like attracting deposits and 

giving credits. This way developed activities like financial market transactions and generating 

incomes through commissions which represents important sources for banks profitability. 

Bibliography: 

1. Donaldson, T.H., Understanding Corporate Credit, Macmillan Publishers 

LTD, London, 1983. 

2. Gandy, T., The network bank. Chartered Institute of Bankers, 1999. 

3. Hirst, P., Thompson, G., The international economy and the possibilities of 

governance, Polity Press, Cambridge UK., 1999. 

4. Ionescu, L., The economy and banks role, Economical, Bucharest, 1997. 

5. Jhonson, F.P., Jhonson R.D., Bank Management, Colorado State University, 

American Bankers Association, 1999. 

6. Schlier, F., Multiple styles of electronic financial services. Research Note 

KA-900-112, Gartner Group, 1997. 

7. Steger, B.M., Globalization, a very short introduction, Oxford University 

Press, New York, 2003. 

8. Hwww.bankrate.com 

9. Hwww.npr.org 

10. Hwww.virtualbank.com 

11. Hwww.cyberdirect.com


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LE MESURAGE DE LA RENTABILITÉ DE L’ENTREPRISE PAR UN 

SYSTÈME DE TAUX D’EFFICIENCE 

Camelia Mihalciuc 

doctorante, chargée de cours, Université “Ştefan cel Mare” Suceava 

Anişoara Apetrii 

doctorante, chargée de cours, Université “Ştefan cel Mare” Suceava 

Abstract 

Les taux de rentabilité sont exprimés sous une variété de formes, chacune ayant une valeur 

informationnelle propre et mettant en saillie de la sorte de nombreuses facettes de l’activité économicofinancière 

de l’entreprise. 

Le mesurage de la rentabilité de l’entreprise est donné par un système de taux d’efficience qui mettent 

en évidence les caractéristiques économiques et financières des entreprises, permettant de comparer leurs 

performances industrielles et commerciales. Les taux de rentabilité apprécient les résultats par rapport à l’activité 

de l’entreprise (rentabilité de l’exploitation) et avec les moyens économiques (rentabilité économique) ou 

financiers (rentabilité financière). 


informationnelle propre et mettant en saillie de la sorte de nombreuses facettes de 

l’activité économico-financière de l’entreprise. Ainsi, de toute cette variété, les principaux 

taux de rentabilité opérationnels dans l’analyse financière de l’ entreprises en Roumanie et 

que j’ai exemplifiés sont:. 

:les taux de rentabilité de l’exploitation ; les taux de rentabilité commerciale; les taux 

de rentabilité économique; les taux de rentabilité financière; les taux de rentabilité des 

ressources consommées; les taux de rentabilité des revenus. 

Le mesurage de la rentabilité de l’entreprise est donné par un système de taux 

d’efficience qui mettent en évidence les caractéristiques économiques et financières des 

entreprises, permettant de comparer leurs performances industrielles et commerciales. Les 

taux de rentabilité apprécient les résultats par rapport à l’activité de l’entreprise (rentabilité de 

l’exploitation) et avec les moyens économiques (rentabilité économique) ou financiers 

(rentabilité financière). 

Pour apprécier la rentabilité d’une entreprise ou d’un projet d’investissement, selon 

l’optique de l’analyse préconisée, il faut comparer les flux monétaires qui seront payés avec 

ceux encaissés sur la durée de vie de l’entreprise, respectivement de l‘investissement réalisé, 

en prenant en compte le facteur temps (techniques d’actualisation). 

Au cas où la rentabilité est calculée pour la période écoulée, à partir des informations 

contenues dans les comptes annuels, elle sera obtenue en comparant le résultat obtenu pendant 

une période avec les ressources nécessaires à l’obtention de ce résultat [6, 127]. 

Vu qu’à travers la rentabilité on apprécie les performances des entreprises, elle 

représente une information indispensable aux banques, aux créditeurs et partenaires d’affaires, 

étant définie comme rapport entre le résultat obtenu et les moynes employés à cet effet [8, 

163].


ISSN: 1842-4856 

Les taux de rentabilité sont exprimés sous une variété de formes, chacune ayant une 

valeur informationnelle propre et mettant en saillie de la sorte de nombreuses facettes de 

l’activité économico-financière de l’entreprise. Ainsi, de toute cette variété, les principaux 

taux de rentabilité opérationnels dans l’analyse financière de l’entreprise sont-ils: les taux de 

rentabilité de l’exploitation; les taux de rentabilité commerciale; les taux de rentabilité 

économique; les taux de rentabilité financière . 

44BLe 

diagnostic des taux concernnat la rentabilité de l’exploitation 

La rentabilité constitue une des formes d’expression de l’efficience économique, à 

savoir une forme synthétique réalisée à l’aide de catégories de valeurs. L’efficience 

économique est plus vaste que la rentabilité, représentant la catégorie la plus générale qui 

caractérise les résultats qui découlent des différentes variantes préconisées afin d’utiliser ou 

économiser certaines ressources entrées ou pas entrées dans le circuit économique. 

Les taux les plus significatifs concernant la rentabilité de l’exploitation sont détaillées 

en deux catégories : 

A.Les taux des marges bénéficiaires ; 

55BB.Les 

taux de rendement des actifs 

A.Les taux des marges bénéficiaires peuvent être ainsi structurés: 

1.Le taux de la marge commerciale 

(1) Taux de la marge commerciale = marge commerciale / Chiffre d’affaires = Chiffre 

d’affaires-Prix d’acquisit./ Chiffre d’affaires 

Une marge commerciale réduite (insuffisante) implique des dépenses générales 

rigoureuses, et donc le recours à des formes de distribution des marchandises qui permettent 

la réduction des coûts de personnel, et des économies quant aux frais de transport, de 

stockage, etc. [12, 148]. Cet objectif est réalisé dans les pays à économie de marché par 

l’emplacement d’unités commerciales sur de vastes surfaces à la périphérie des villes, avec 

libre service, etc. Par contre, une marge commerciale élevée (importante) exige des dépenses 

générales accrues et donc des services meilleurs envers la clientèle (les grandes surfaces des 

centre-villes, les boutiques de luxe, etc.). 

Le taux de la marge commerciale apprécie aussi l’influence des contraintes du 

marché et de la politique des prix de vente. Ainsi la croissance du taux est-elle accompagnée 

d’une diminution des ventes (CA) est signe du fait que l’entreprise essaie de maintenir ses 

marges en promouvant une politique des prix élevés. Par contre, un taux de la marge 

commerciale en baisse accompagné d’une forte croissance des ventes met en évidence le fait 

que l’entreprise en question préfère réduire les prix de vente afin de conquérir un nouveau 

segment de marché. Enfin, le cas où la croisssance du taux de la marge commerciale est 

accompagnée d’une croissance du chiffre d’affaires montre une situation favorable à 

l’entreprise, à savoir la mise en vente de produits performants supérieurs ou l’occupation sur 

le marché d’une position de concurrence forte. 

2. Le taux de la valeur ajoutée au chiffre d’affaires (TVACA), utilisé notamment par 

les entreprises industrielles, mesure son degré d’intégration. 

(2) TVACA = valeur ajout/ chiffre d’affaires


ISSN: 1842-4856 

On peut encore déterminer les taux de structure de la valeur ajoutée pour accroître la 

qualité de l’analyse, sur la base des principaux éléments constitués (dépenses de personnel, 

amortissements et provisions). 

Les relations de calcul en sont : 

(3) Poids des amortissements et des provisions en VA = Amortissements et prov. Calc. 

/ val. Ajout. X 100 

(4) Taux des frais de personnel en VA = Frais de personnel / val. Ajout. X 100 

56BNormalement, 

par l’automatisation des processus industriels, le poids des frais de maind’œuvre 

devrait baisser, à mesure que les dépenses d’amortissement s’élèvent, de telle 

sorte que la rentabilité future de l’entreprise s’appuira en grande partie sur la 

croissance du travail salarisé qualifié. Dans ce cas, l’analyse doit être complétée avec le 

taux de productivité du travail. Ainsi, le taux de productivité du travail est-il : 

57B(5) 

Taux de productivité du travail = VA/Nr. personnel 

3. Le taux d’excédent brut d’exploitation (Tebe) ou le taux de marge brut 

d’exploitation mesure le niveau du résultat brut d’exploitation indépendant de la politique 

financière, de la politique d’investissement, de l’incidence de la fiscalité et des éléments 

exceptionnels. 

76B(6) 

Tebe = Excédent brut d’exploitation / chiffre d’affaires 

La politique d’amortissement présente des avantages axés notamment sur des 

possibilités fiscales plus favorables que la durée et le rythme de l’usure des immobilisations. 

L’utilisation des provisions réglementées et des provisions destinées à couvrir les futurs 

risques potentiels peut influencer sensiblement les résultats enregistrés dans la comptabilité, 

l’utilisation de l’excédent brut d’exploitation (ou du résultat brut d’exploitation pas atteint par 

les dépenses financières), élimine l’incidence de la politique d’amortissement, de la politique 

financière (dépenses financières), mais aussi du principe de prudence (les provisions). Ainsi 

le taux d’excédent brut d’exploitation indiquera-t-il l’aptitude propre à l’activité 

d’exploitation de dégager du profit. Etant comparable au taux d’intensité capitalistique, dans 

la mesure où l’entreprise est fortement industrialisée, il est nécessaire que le taux de marge 

brute d’exploitation soit très élevé, l’entreprise ayant dans ce cas la possibilité financière de 

renouveler rapidement ses équipements. 

Un amendement du taux d’excédent brut d’exploitation exprime une croissance de la 

productivité, dans la mesure où il (Tebe) n’est pas la simple conséquence de la croissance du 

taux de marge commerciale, et sa baisse (ou celle du taux de valeur ajoutée), par rapport à un 

taux de marge commerciale stable, prouve une surcharge des coûts d’exploitation. D’ailleurs, 

dans les entreprises où le processus technologique est rapide, où il faut investir en 

permanence, les préoccupations pour maintenir et accroître l’excédent brut d’exploitation par 

rapport à la valeur ajoutée (EBE/VA) devraient être permanentes. 

Pour éliminer l’influence de la politique financière sur le résultat brut on peut calculer 

le tau 

4. Le taux du résultat d’exploitation (TRE) exprime l’efficience de l’activité 

d’exploitation sous tous les aspects : industriel, administratif et commercial.


ISSN: 1842-4856 

(7) TRE = Résult. Exploit./ Chiffre d’affaires (TVA) = (Résultat brut d’expl.- 

Amortissem.)/ Chiffre d’affaires 

5. Le taux de la marge nette (TMN) exprime l’efficience globale de l’entreprise, 

respectivement la capacité de réaliser un profit net et de résister face à la concurrence. 

77B(8) 

TMN = Résultat net de l’exerc./ Chiffre d’affaires 

Si l’indicateur saisit la variation du résultat net (ΔRn) par rapport à la variation du 

chiffre d’affaires (ΔCA), le rapport exprimera le taux du profit marginal (TPM). 

Le taux de la marge nette présente des facilités de calcul, car il ne suppose pas de 

préparer au préalable les données, étant recommandé dans les analyses financières qui visent 

des périodes courtes, mais aussi de petites entreprises. 

6. Le taux de la marge d’auto-financement (TMAF) est moins sensible que le taux de 

la marge nette à la politique d’amortissement et aux provisions. 

78B(9) 

TMAF = Capacité d’autofinancement/Chiffre d’affaires 

Ce rapport mesure le surplus de ressources dont dispose l’entreprise pour s’assurer le 

développement et/ou la rémunération de ses actionnaires. 

B. Les taux du rendement des actifs [12, 96]. 

Les taux du rendement des actifs évaluent l’efficacité de l’utilisation des moyens 

économiques, étant déterminés en tant que rapport entre les différents indicateurs de résultats 

(résultat de l’exploitation, résultat net) et les actifs utilisés dans l’entreprise pour leur 

réalisation. 

Il existe plusieurs formes d’expression des taux du rendement des actifs : 

Dans les pays anglo-saxons, le taux de rendement des actifs, connu sous la 

dénomination Return On Investement (ROI) [2, 251], exprime l’aptitude des entreprises de 

valoriser les moyens de travail dans le cadre de l’activité d’exploitation. 

(10) ROI= Résultat de l’exploit./ Actif total 

La rentabilité de l’investissement ROI, Return On Investement, est aussi connu dans 

les ouvrages de spécialité sous le nom de rentabilité des actifs totals (ROA – Return On Total 

Assets. 

Ainsi la ROA est-elle déterminée comme rapport entre le profit net (après paiement 

des impôts) et la valeur totale des actifs, ce rapport mesurant le degré de rentabilité de la 

totalité du capital investi dans l’entreprise. Ainsi: 

(11) Taux rentabilité actifs ROA = Profit net (après paiement impôts) / Actifs totals 

5 

8 

BDans le calcul de la ROA, il semble parfois qu’il vaut mieux ajouter la dépense à intérêt au 

profit net après paiment des impôts. La théorie qui fonde cette approche réside en cela que, 

étant donné que les actifs sont financés tant par les actionnaires que par les créditeurs, le 

rapport doit donner la mesure des gains pour les deux catégories d’investisseurs.


ISSN: 1842-4856 

(12) Taux du rendement des actifs = Résultat exploité / Actifs d’exploitation 

(13) Taux du rendement des actifs = Résultat net de l’exerc. / Actif total 

45BLe 

diagnostic des taux de rentabilité commerciale 

La qualité de la gestion d’une entreprise est apte à apprécier ses produits sur le 

marché, situation mise en évidence par le chiffre d’affaires. Le rapport entre le résultat obtenu 

et le chiffre d’affaires représente le taux de la rentabilité commerciale. 

Par définition, le taux de la rentabilité commerciale caractérise l’efficience de la 

politique commerciale (du processus d’approvisionnement, stockage et vente) et surtout de la 

politique des prix pratiqués par l’entreprise. En concordance avec les objectifs de l’analyse et 

la sphère d’investigation, cet indicateur peut être déterminé par l’application en qualité 

d’“effet” du résultat brut de l’exploitation, du résultat de l’exploitation ou du résultat de 

l’exercice. De manière correspondante, le chiffre d’affaires impliqué vise l’activité courante 

d’exploitation ou totale. 

Les modalités de calcul afférentes aux taux de rentabilité commerciale peuvent être les 

suivantes : 

(14) RC = Résultat brut de l’exploit. / Chiffre d’affaires x 100 

(15) RC = Résultat de l’exploit./ Chiffre d’affaires x 100 

(16) RC = Résultat de l’exerc. / Chiffre d’affaires x 100 

La principale limite de ces taux de rentabilité dans la caractérisation de la performance 

au niveau micro-économique est issue du fait qu’elle est calculée sur la base du profit 

comptable, donc elle sera influencée significativement par les politiques et les pratiques 

comptables utilisées par l’entreprise (la méthode d’amortissement des actifs fixes, la méthode 

d’évaluation des stocks, la politique d’aprovisionnement, etc.) [1, 270]. 

Dans la plupart des travaux de spécialité étrangers on rencontre aussi l’indicateur 

concernant le taux de la rentabilité commerciale nette (ROS – Return on Sales). 

L’avantage de ce taux est qu’il peut être établi sur la base du Compte de profit et de 

perte, étant facilement calculable par ceux qui n’ont pas accès aux données de la comptabilité 

de gestion de l’entreprise. Pourtant, le taux de la rentabilité commerciale nette a une valeur 

informationnelle limitée, car le profit peut être influencé aussi par le résultat d’autres 

opérations que les ventes, respectivement le résultat financier, le résultat exceptionnel, ainsi 

que celui de fiscalité. 

En RoumanieF 

117 

F, les études pratiques réalisées sur des entreprises cotées sur le marché 

du capital démontrent que le taux de la rentabilité commerciale nette (calculé comme rapport 

entre le profit net de l’exercice et le chiffre d’affaires) a enregistré les plus modérés des 

niveaux moyens de 0,74 % - 4, 84 % entre 1996-2000, ce qui confirme que ce taux de 

rentabilité est le moins affecté par l’inflation, suite à la prise simultanée de l’effet de 

l’inflation tant sur le profit que sur le chiffre d’affaires. Grâce à sa moindre variabilité par 

rapport à d’autres taux de rentabilité, cet indicateur de la performance de l’entreprise est 

préféré par les investisseurs du marché de capital roumain. Les analystes financiers 

reconnaissent l’évidence informationnelle du taux de rentabilité commerciale nette, mais pour 

obtenir des informations pertinentes et éclairantes sur la performance de l’entreprise, il est 

nécessaire d’étudier le trend de ce taux financier sur une période de 3 à 5 ans, par rapport au 

taux moyen au niveau du secteur d’activité et des entreprises similaires. Il est aussi nécessaire


ISSN: 1842-4856 

de faire l’analyse corrélée d’un système complexe de taux de rentabilité : taux de la rentabilité 

des actifs, taux de la rentabilité économique, taux de la rentabilité financière du capital propre, 

etc. 

Quels que soient le niveau et le système de détermination, le taux de la rentabilité 

commerciale doit être apprécié sur le total et sur la structure des sortiments, dans la 

dynamique et par rapport à la moyenne du secteur et avec les résultats des principaux 

compétiteurs [7, 377]. 

46BLe 

diagnostic des taux de rentabilité économique 

Le taux de la rentabilité économique a une large acception, visant essentiellement à 

mesurer les performances de l’actif total de l’entreprise à partir d’un résultat économique 

(RBE, RE – Résultat brut de l’exploitation, Résultat de l’exploitation) et l’ensemble des 

moyens utilisés. 

La construction du taux sur la base du résultat de l’exploitation va déterminer un taux 

indépendant tant par rapport à la politique fiscale et à la structure des capitaux (politique de 

financement), que par rapport aux flux exceptionnels. 

L’analyse du taux de rentabilité économique porte à la base des informations de 

diverses situations financières (fig. 3). 

Entrées STOCK 

flux (- consom 

mation 

(tableau 

financem 

Autres consommations 

RESULTAT 

(compte de profit et perte) 

exploitatio 

n 

flux (- flux (+) 

REVEN 

Figure 4. Analyse du taux de rentabilité économique [7, 378] 

STOCK 

(bilan) 

TAUX 

RENTABILITE 

ECONOMIQUE 

Afin de pouvoir produire et commercialiser, l’entreprise doit faire des investissements, 

ce qui suppose l’existence de sources de financement et d’un certain risque, mais aussi 

dégager un profit qui justifie d’assumer le risque. La technique moderne de financement des 

actifs des ressources totales de l’entreprise, sans une affectation spéciale (la conception Pool 

de fonds), permet d’identifier deux catégories principales d’investissement : investissements 

industriels et investissements commerciaux – qui constituent les actifs d’exploitation de 

l’entreprise – et investissements financiers. 

L’analyse du taux de rentabilité économique relève une série d’aspects liés à la gestion 

de l’entreprise [7, 379]: 

–la concordance entre le taux de la rentabilité réalisée et les objectifs établis en 

fonction des actifs de l’entreprise, de leur structure ; 

–la corrélation entre le niveau des investissements et la capacité du marché : 

l’appréciation de la dimension des investissements (sur/sous-investissement) ;


ISSN: 1842-4856 

–le positionnement du taux de rentabilité réalisé par rapport à la moyenne du secteur et 

à d’autres entreprises du même secteur ; 

–la dynamique propre et comparative avec le secteur et les principaux compétiteurs. 

Dans l’appréciation de la rentabilité économique il faut tenir compte du fait qu’elle 

doit avoir une dimension qui permette à l’entreprise de rémunérer ses actionnaires et ses 

créditeurs, en concordance avec le niveau de risque que ceux-ci ont asumé en investissant 

dans l’entreprise ou en lui accordant des prêts [5, 313]. 

La rentabilité économique brute n’étant pas perturbée par les décisions concernant 

l’amortissement est fréquemment utilisée dans les analyses extérieures puisqu’elle permet 

d’effectuer des comparaisons dans l’espace entre les entreprises appartenant au même secteur 

ou à des secteurs d’activité différents, quelle que soit leur dimension sous forme de propriété 

[12, 159]. Le taux de la rentabilité économique brute mesure l’aptitude du capital économique 

d’assurer son renouvellement et sa rémunération, renouvellement qui devrait se réaliser en 

une période la plus courte possible. 

Dans les économies occidentales on considère convenable une rentabilité économique 

au-dessus de 25 %, ce qui signifie qu’en maximum 4 ans l’entreprise peut renouveler ses 

capitaux engagés, par son excédent brut d’exploitation [10, 120]. Dans les conditions de 

l’économie roumaine qui enregistre des durées moyennes de rotation des actifs économiques 

au-dessus de 4 ans, le seuil minimum de la rentabilité économique sera beaucoup plus bas que 

celui des économies occidentales. 

Le taux de rentabilité économique constitue un indicateur important dans 

l’appréciation des performances des entreprises, dans l’évaluation du mode de valorisation du 

capital investi, constituant source de rémunération des resources ainsi placées, devant se situer 

au moins au niveau du coût du capital investi (tout dépassement se concrétisant en des 

augmentations de la capacité d’autofinancement) et donc il doit être forcément plus élevé que 

le taux des intérêts [7, 383]. Cet indicateur constitue une référence pour apprécier le choix des 

destinations des investissements, en le comparant aux résultats issus de diverses autres 

possibilités d’investissement. 

Le diagnostic des taux de rentabilité financière 

Le taux de la rentabilité financière est l’indicateur dont disposent les possesseurs de 

capital afin d’apprécier l’efficience, respectivement l’opportunité de maintenir les 

investissements faits pour financer l’entreprise, investissements qui supposent souvent aussi 

de consolider ses capitaux propres par la contribution des anciens ou des nouveaux 

actionnaires. Ce taux est important par son niveau tant pour les actionnaires, qui dans les 

conditions d’une valeur en hausse acceptent de laisser à la disposition de l’entreprise une 

partie de leur profit, que pour les managers, représentant une condition essentielle dans le 

cadre de la stratégie de maintien du pouvoir. 

Le rôle primordial qui revient au capital concerne l’obtention, sur la base de son 

utilisation, d’un profit plus grand, le capital étant une catégorie économique qui exprime la 

totalité des ressources matérielles, qui par association avec les autres facteurs de production 

participe à la réalisation de nouveaux biens économiques, dans le but d’obtenir du profit. 

La rentabilité financière représente la capacité des entreprises de dégager du profit net 

à partir de leurs capitaux propres, engagés dans l’activité. 

Par taux de rentabilité financière il faut comprendre l’indicateur qui exprime le rapport 

entre profit et capitaux dans leur qualité de sources de financement de l’activité de l’entreprise 

[9, 393]. 

La rentabilité financière reflète le but final des actionnaires d’une entreprise (et plus 

généralement propriétaires ou associés), exprimé dans le taux de rémunération de 

l’investissement de capital fait par ceux-ci dans la procuration d’actions de l’entreprise ou le 

réinvestissement total/partiel des profits qui leur reviennent de droit [4, 9].


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Dans un système concurrentiel donné, une entreprise doit de développer, investir, et 

cet investissement doit être financé [5, 316]. Souvent, le financement suppose aussi de 

consolider son capital propre, soit par la contribution des actionnaires existants, soit de 

nouveaux actionnaires. L’incitation aux investissements est conditionnée par la rémunération 

convenable de son propre capital. En plus, si le taux de rémunération est élevé, les 

actionnaires acceptent facilement de laisser une partie de leur profit à la disposition de 

l’entreprise, assurant ainsi des moyens de croissance. Pour les managers, la rentabilité 

financière représente un objectif fondamental, une condition essentielle de leur stratégie de 

maintien du pouvoir. 

La structure financière de l’entreprise dont la fixation constitue un objectif important 

du management financier au niveau de l’agent économique reflète la composition de ses 

capitaux. 

La fixation d’une structure financière optimale est une décision qui tient de la période 

financière de l’entreprise, quand il faut décider comment faire la répartition financière entre 

les crédits à court terme et les capitaux permanents, et deuxièmement comment faire la 

répartition entre ses propres fonds et ceux empruntés à long et moyen terme. 

Le taux de la rentabilité financière constitue un indicateur important dans l’évaluation 

de la position de l’entreprise sur le marché. Une rémunération en hausse des capitaux investis 

assure [7, 387]: 

–Un accès facile aux ressources financières grâce à la confiance des propriétaires 

actuels d’investir dans l’entreprise et des potentiels investisseurs-détenteurs de ressources 

financières disponibles pour les placements ; 

–La capacité de développement. 

En tant que telle, la santé financière d’une entreprise et la qualité de sa gestion sont 

désignées par la dimension suffisante et en hausse du taux de la rentabilité financière. 

Les ouvrages de spécialité présentent une variété significative d’indicateurs financiers 

et leurs taxinomies, l’emploi de l’un ou l’autre de ces indicateurs tiennent du libre choix de 

celui qui effectue l’analyse économico-financière [1, 513]. Il n’existe pas de recette stricte 

pour sélectionner les indicateurs, la seule exigence qu’il faut respecter est que les indicateurs 

sélectionnés couvrent le mieux possible l’activité déroulée par l’agent économique, qu’ils en 

saisissent les avantages et les limites et qu’ils constituent une bonne base pour l’évolution de 

l’activité prochaine. 

REFERENCES: 

1. Albu, A., Mihalciuc, C., “Diagnosticul economico-financiar privind activitatea de 

turism a unei firme”, dans les actes du Colloque International „Economia românească: 

prezent şi perspective”, Editura Universităţii Suceava, 2003. 

2. Ballada, S., Coille, S.C., Outils et mécanismes de gestion financière, Paris, Maxima, 

1992, p. 251, cité in Vintilă, G., Diagnosticul şi evaluarea întreprinderilor, Bucureşti, 

Editura Didactică şi Pedagogică, 1997, p. 152. 

3. Bărbulescu, C., Diagnosticarea întreprinderilor în dificultate economică. Strategii şi 

politici de redresare şi dinamizare a activităţii, Bucureşti, Editura Economică, 2002. 

4. Colasse, B., Gestion financière de l’entreprise – Problématique, concepts et méthodes, 

Paris, 1987. 

5. Niculescu, M. Diagnostic global strategic, Bucureşti, Editura Economică, 1997. 

6. Nişulescu, I., Finanţarea şi reorganizarea întreprinderii, Bucureşti, Editura 

Infomedica, 1999. 

7. Petcu, M., Analiza economico-financiară a întreprinderii, Bucarest, Editura 

Economică, 2003. 

8. Robu, D., M., Controlul de gestiune pe bază de bilanţ, Iaşi, Editura Moldova, 1998.


ISSN: 1842-4856 

9. Spătaru, L., Analiza economico-financiară. Instrument al managementului 

întreprinderilor, Bucureşti, Editura Economică, 2004. 

10. Stancu, I., Gestiunea financiară a agenţilor economici, Bucureşti, Editura Economică, 

1994, apud Vintilă, G., Diagnosticul financiar şi evaluarea întreprinderilor, 

Bucureşti, Editura Didactică şi Pedagogică, 1997. 

11. Vâlceanu, Gh., Robu, V., Georgescu, N., Analiza economico-financiară, Bucureşti, 

Editura Economică, 2004. 

12. Vintilă, G., Diagnosticul financiar şi evaluarea întreprinderilor, Editura Didactică şi 

Pedagogică, Bucureşti, 1997, p. 148.


ISSN: 1842-4856 

E-BANKING SERVICES AND THEIR REGULATING PROVISIONS 

Rădulescu Magdalena, Pîrvu Daniela 

Lect. dr, Faculty of Economic Studies, 

Lect. dr., Faculty of Economic Studies, 

University of Piteşti, Romania 

Resumé 

Il est à prévoir que les banques jouent un rôle important dans le domaine e-business. Dans le cas de la 

Roumanie, on a identifié quelques facteurs spécifiques restrictifs pour l’adoption des services bancaires 

électroniques : des facteurs concernant l’accès à la technologie et à l’infrastructure, des facteurs spécifiques à 

l’Internet banking et d’autres facteurs socio-économiques. 

Pourtant, en Roumanie, l’industrie de l’Internet connaît un grand potentiel, aspect qui se trouve dans un 

développement continu. Dans ce sens-là, en 2001, on a implémenté en Roumanie une loi qui a amélioré 

considérablement la qualité des services bancaires sur l’Internet ; de même, la Loi de la Signature Electronique a 

été adopté par le Parlement. Cette loi est très importante parce qu’elle sert à la réalisation des paiements 

électroniques et au transfert des données secrètes sur Internet tout en gardant la confidentialité. 


Banks have established an Internet presence with various objectives. Most of them are using 

the Internet as a new distribution channel. Financial services, with the use of Internet, may be 

offered in an equivalent quantity with lower costs to the more potential customers. This 

means that banks may enlarge their market without opening new branches. 

In Europe, the Internet is accelerating the reconfiguration of the banking industry into three 

separate businesses: production, distribution and advice. Though e-banking in the Europe is 

still in the evolutionary stage, it is very clear that it is having a significant impact on 

traditional banking activities. Unlike the US, though large banks in the Europe have a 

competitive edge due to their ability to invest in new technologies, they are still not ready to 

embrace e-banking. Hence, medium-sized banks and start-ups have an important role to play 

on the e-banking front if they can take concrete measures quickly and effectively. 

2. Authenticating e-banking customers 

E-banking introduces the customer as a direct user of the institution’s technology. Customers 

have to log on and use the institution’s systems. Accordingly, the financial institution must 

control their access and educate them in their security responsibilities. 

Verifying a customer’s identity, especially that of a new customer, is an integral part of all 

financial services. Consistent with the regulations, each financial institution must develop and 

implement a customer identification program (CIP) that is appropriate given the institution’s 

size, location and type of business. 

As part of its non-documentary verification methods, some financial institutions may rely on 

third parties to verify the identity of an applicant or assist in the verification. The financial 

institution is responsible for ensuring that the third party uses the appropriate level of 

verification procedures to confirm the customer’s identity. New account applications


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submitted on-line increase the difficulty of verifying the application information. Institutions 

conducting the entire account opening process through the mail or on-line should consider 

using third-party databases to provide: 

• Positive verification to ensure that material information provided by an applicant matches 

information available from third-party sources, 

• Logical verification to ensure that information provided is logically consistent, 

• Negative verification to ensure that information provided has not previously been 

associated with fraudulent activity (e.g., an address previously associated with a 

fraudulent application ). In addition to the initial verification of customer identities, the 

financial institution must also authenticate its customers’ identities each time they attempt 

to access their confidential on-line information. 

• Authentication methods involve confirming one or more of three factors: 

1. meting only the user should know, such as a password or PIN; 

2. meting the user possesses, such as an ATM card, smart card, or token; 

3. Something the user is, such as a biometric characteristic like a fingerprint or iris pattern. 

Authentication methods that depend on more than one factor are typically more difficult to 

compromise than single-factor systems therefore suggesting a higher reliability of 

authentication. For example, the use of a customer ID and password is considered singlefactor 

authentication since both items are something the user knows. 

3. Administrative controls 

E-banking activities are subject to the same risks as other banking processes. However, the 

processes used to monitor and control these risks may vary because of e-banking’s heavy 

reliance on automated systems and the customer’s direct access to the institution’s computer 

network. Some of the controls that help assure the integrity and availability of e-banking 

systems are discussed below. 

Segregation of duties. No one employee should be able to process a transaction from start to 

finish. Institution management must identify and mitigate areas where conflicting duties 

create the opportunity for insiders to commit fraud. 

Dual controls. Some sensitive transactions necessitate making more than one employee 

approve the transaction before authorizing the transaction. Large electronic funds transfers or 

access to encryption keys are examples of two e-banking activities that would typically 

warrant dual controls. 

Reconcilements. E-banking systems should provide sufficient accounting reports to allow 

employees to reconcile individual transactions to daily transaction totals. 

Suspicious activity. Financial institutions should establish fraud detection controls that could 

prompt additional review and reporting of suspicious activity. Some potential concerns to 

consider include false or erroneous application information, large check deposits on new ebanking 

accounts, unusual volume or size of funds transfers, multiple new accounts with 

similar account information or originating from the same Internet address, and unusual 

account activity initiated from a foreign Internet address. 

Similar website names. Financial institutions should exercise care in selecting their website 

name(s) in order to reduce possible confusion with those of other Internet sites. Institutions 

should periodically scan the Internet to identify sites with similar names and investigate any 

that appear to be posing as the institution. Suspicious sites should be reported to appropriate 

criminal and regulatory authorities. 

Error checks. E-banking activities provide limited opportunities for customers to ask 

questions or clarify their intentions regarding a specific transaction. Institutions can reduce


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customer confusion and the potential for unintended transactions by requiring written 

contracts explaining rights and responsibilities, by providing clear disclosures and on-line 

instructions or help functions, and by incorporating proactive confirmations into the 

transaction initiation process. 

Alternate channel confirmations. Financial institutions should consider the need to have 

customers confirm sensitive transactions like enrollment in a new on-line service, large funds 

transfers, account maintenance changes, or suspicious account activity. 

Business continuity controls. E-banking customers often expect 24-hour availability. Service 

interruptions can significantly affect customers if the institution offers more than the most 

basic services. Management should periodically reassess this decision to ensure the 

supporting rationale continues to reflect actual growth and expansion in e-banking services. 

4. Legal and compliance issues 

Financial institutions should comply with all legal requirements relating to e-banking, 

including the responsibility to provide their e-banking customers with appropriate disclosures 

and to protect customer data. Failure to comply with these responsibilities could result in 

significant compliance, legal, or reputation risk for the financial institution. 

Financial institutions may choose to use a name different from their legal name for their ebanking 

operations. Since these trade names are not the institution’s official corporate title, 

information on the website should clearly identify the institution’s legal name and physical 

location. This is particularly important for websites that solicit deposits since persons may 

inadvertently exceed deposit insurance limits. 

Financial institutions that use trade names for e-banking operations should: 

- Disclose clearly and conspicuously, in signs, advertising, and similar materials that the 

facility is a division or operating unit of the insured institution; 

- Use the legal name of the insured institution for legal documents, certificates of deposit, 

signature cards, loan agreements, account statements, checks, drafts, and other similar 

documents; 

- Train staff of the insured institution regarding the possibility of customer confusion with 

respect to deposit insurance. 

Maintaining the privacy of a customer’s information is one of the cornerstones upon which 

trust in the banking system is based. Misuse or unauthorized disclosure of confidential 

customer data may expose a financial institution to customer litigation or action by regulatory 

agencies. To meet expectations regarding the privacy of customer information, financial 

institutions should ensure that their privacy policies and standards comply with applicable 

privacy laws and regulations, particularly the privacy requirements established. 

5. The ‘E’ regulating provisions in Romania 

In Romania, the trust in ‘e’ sector activities could come only from law. It was necessary that 

laws regarding ’e’ world be concluded and adopted by the Romanian Parliament. 

The main actors of ‘e’ market could be, at the beginning, public institutions and physical 

persons. The law of electronic authentication was necessary, and it obliged the public 

institutions to enter the ‘game’. 

A good legislation in this field is focus on the participants to the economic game protection, 

and non-intervention as long as the participants have nothing to reproach one to the other. 

The electronic signature represents an information attached to an electronic document which: 

- uniquely identifies the signer, being realized with means 

placed at user’s disposal; 

- it identifies the document,


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- and signals any afterward modification brought to it. 

It is much stronger than the hand written form one (and given this reason it can have its 

juridical regime). It is clear that the law on the electronic signature is at the basis of any 

regulation referring to an electronic data needing juridical regime. 

The regulating institution should be a recently created one, namely, the Information and 

Communication National Agency, having the role of regulating the certification and ecommerce 

service providers. The Agency is under the control of the Romanian Government. 

The project of law 13 regarding the e-commerce stated the juridical aspects related to business 

to business operations (with the typical application: virtual factory) and to those of business to 

customer type. 

The law form proposed by the Romanian Information Communication National Agency 

collects all the common regulations from the existent legislation. The challenged questions 

were those related to taxes that could be perceived on e-commerce. The only way in which 

these activities could be taxed is the one proposed by the law project, would be the 

establishment of an Internet Police 

Department has the duty of monitoring every transaction in the network. For the on-line 

documents transacted the aspects related to the hour and the place of the signing of the 

document and the ways of proving that the addressed really got the document, these, together 

with the electronic signature. 

The law defines the electronic exchange of data as a data electronic transfer from one system 

to another using a stated standard for information structure. In the sense of the same law, the 

informational system is a system used for generating, transmitting, receiving, stocking or any 

other similar processing. 

The information used under the form of an electronic message, is considered valid of 

producing juridical effects, regarding the conditions provided by law. 

The agency must elaborate regulations regarding electronic data exchange security in order to 

protect electronic commerce operations it also realizes reports on multilateral recognition with 

organism from other states. 

An economy’s state of health depends also on the speed at which economic cycles close up, 

and, in Romania it appears that the fluidity of the economic cycles is one of the major 

problems of the economic decline. So, the non-cash digital operations must be initialized on a 

large scale, together with the legislative framework. 

In Romania, the analysis of the financial-banking market lead to the following statements: the 

technological endowment is old and isolated; the economic climate needs a serious 

investment; the legislative context continues to be rigid, but steps have been made – the 

projects of law regarding the ‘e’ domain are waiting for the approval of the Romanian 

Parliament; major banks offering e-banking services proved to be successfully in Romania. 

For the establishment of electronic banking service platforms, the basic requests are: the rapid 

access, a simple connection to a variety of channels, respecting the security business rules; 

assure secure and rapid transactions; the programming of the electronic applications must be 

simple; to contain efficient administration utility programs; mobility; comfort and cost 

savings; 24 hours per day, every day accessibility; security that meets the very highest 

European standards; people can focus their attention on achieving their every day objectives; 

time saved; account management. 

In Romania, the electronic payments could be a factor of revitalization of the monetary field. 

But there are still many things to be done. Although the electronic payments are more 

efficient and cheaper than a paper- based payment system, there are certain facts related to the 

environment that are not favorable to the passing to the digital economy: 

• It appears that, even if steps have been made in order to gradually adopt the electronic 

system, even if e-business continues to develop in Romania and the IT market is increasing, 

Romania in not entirely ready to accept the new era of digital economy; this is due to the


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fiscal evasion manifested on the market, to the economic agents that are not acting 

disciplinary, to the existence of a financial blockage. 

• In Romania, the infrastructure is not corresponding for the development of e-business; the 

legislative framework has many gaps. Recently, the Law of electronic signature was 

promulgated and this represents a clear step toward ‘e’ era of digital transactions; other 

projects of law with the aim of regulating the electronic domain are in a project phase: the law 

of e-commerce, the law regarding the payment effecting through Internet, the law on the 

software parks, the laws regarding e-banking and e-finance, the regulations regarding the 

encryption. 

• The electronic payments are still in an incipient phase; in order for an efficient electronic 

payment to be made, institutions like the National Bank of Romania and other public 

institutions adopt electronic systems, offer in-time and modern services. The clearing system 

should be automatically be designed and effected. 

• The Romanian system, as a whole, is reticent to changes. 

• The electronic system does not benefit of trust. 

• In Romania there is no encouragement from authorities to use the electronic system, there is 

no project sustaining the electronic system. 

• Romanians’ mentality, the conservatory regime is present also in the field of electronic 

transactions. 


In Romania, a significant number (23) of banks are providing e-banking services, phone 

banking, electronic banking, internet banking, mobile banking. Still, the number of users is 

very small if we compare it with the ones in the developed countries. The number is growing 

but in a very low rhythm. 

As far as the Romanian e-banking development is concerned, experts agree that many of the 

innovating solutions will develop in parallel while some others will be faster. Home-banking 

will lose ground for the internet banking, the last one allowing the users all over the world 

make transactions through a simple internet connection. Mobile banking can have a larger 

dynamic than internet-banking on private persons as many of them have invested in mobile 

communication. The IMM-s will also prefer the internet banking. The e-banking solutions 

brought by the foreign banks and rapidly embraced by the local ones must be used and 

developed in parallel so that to offer the clients a variety of solutions. 

There are a lot of banks in Romania that are already providing such a services, such as: the 

Commercial Bank of Greece Romania, Demir Bank (also and with a mobile banking – using 

mobile phones), Bank Austria Creditanstalt, City Bank Romania, Libra Bank, Unirea Bank 

etc. So, we estimate that soon that kind of banking service will have a great future in Romania 

and all over the world. 

References: 

1. Bossone B., “Do banks have a future?: A study on banking and finance as we move into the 

third millennium”, Journal of Banking & Finance, Volume 25, Issue 12, Pages 2239-2276, 

2001. 

2. Bughin J., “Attack or convert?: early evidence from European on-line”, Omega, Volume 

32, Issue 1, Pages 1-7, 2004. 

3. Furst K., Lang W., Nolle D., “Internet Banking: Developments and Prospects”, Economic 

and Policy Analysis Working Paper, 2000-9, 2000. 

4. Goloşoiu Georgescu L., „Business of Banking”, volume I, Economic Publishing House, 

Bucharest, 2002.


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5. Institute of Monetary Economics, “Technological Innovation and Banking 

Industry/Monetary Policy: Forum on the Development of Electronic Payment Technology and 

its Implication for Monetary Policy: Report”, IMES Discussion Paper No. 2001-E-3, 2001. 

6. Liao Z., Cheung M. T., “Internet-based e-banking and consumer attitudes: an empirical 

study”, Information & Management, Volume 39, Issue 4, Pages 283-295, 2002. 

7. Petria N., “Innovative solutions in the banking distribution channels. E-banking”, 

Proceedings of the 3 rd International Conference “Economy and Transformation 

Management”, West University, Timişoara, May 2006. 

8. Şerbănescu L. „Modele de afaceri pe Internet” Sesiunea Internaţională de Comunicări 

Ştiinţifice – “Integrare şi Globalizare”, vol. II, Piteşti, aprilie 2005.


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YEARLY BALANCE SHEET AND THE ACCOUNT FOR 

PROFIT AND LOSS MADE BY THE BANKING SOCIETIES 

Victor Troacă, Conf. univ. dr. 

University „Constantin Brancusi” Tg-Jiu 

ABSTRACT. The banking societies, as economical entities with specific activities inside the economy, draw up 

yearly financial situations, as well as in the situations designedly specified by the lawgiver. The financial yearly 

situations which the banking companies are compelled to draw up and at the same time to assure their 

publication, are made up of a unitarian documents system, namely: balance sheet, account of profit and loss, 

situation of modifications of proper capitals, situation of cash ebbs and flows and explanatory notes. To ensure a 

whole conformity with the European practice, as well as the assurance of comparability of yearly synthesis 

information presented by the Romanian banking companies with those of European banking companies, the 

contents, the structure and the way of drawing up of these documents has been designedly regulated by the 

Romanian authorities. These situations are presented as a unity whole and in a clearer manner in order to reflect 

the faithful image of the assets, debts, financial position, profit or loss and also of treasury ebbs and flows of the 

concerned bank.. The indicators presented inside the yearly financial situations made by the banking companies, 

have s synthesis character, reflecting different states or components of their acitivity, and the knowledge of 

content and their significance is being essential both in drawing papers and subsequently in the analysis of 

grouped or individual indicators or the ensemble activity of one or another of the banking societies. The balance 

sheet and the account of profit and loss have a central place in the ensemble of these yearly sinthesis documents, 

for which reason our analysis should focus on their presentation. 

1. General aspects and specific regulations 

In accordance with the general and specific accountancy regulatings, banking societies 

make yearly financial situations by means of which reflects their situation out of accountancy 

and financial point of view. Yearly financial situations are meant to give a tenacious copy 

image of the assets, of the involved bank financial position as well as the profit and loss 

coming from the development of activity. The yearly financial situations offer at the same 

time an image on the treasury flows of the involved banking society. 

To ensure some complex information but at the same time in concordance with the 

financial situations made by the European banking societies, with a view to assure a 

comparison of information at European level, the Romanian accountancy regulatings have 

been in keeping with the European ones. 

Therefore, nowadays, the form and contents of yearly financial situations, general 

accountancy principles and rules of evaluation of elements presented in the yearly financial 

situatins, as well as the rules of drawing up, approval, audit and publication of yearly financial 

situations and consolidated financial yearly situations of banking societies are regulated by a 

series of accountancy regulations according to the European directives applicable to credit 

118 

institutions.F 

F The regulations are meant to ensure the comparison and transparence of 

accountancy information and of those of financial nature supplied by Romanian banking 

societies through the yearly financial situations. A convergence is assured, of form and 

contents of yearly financial situations, of the principles of general accountancy and of 

118 Accountancy regulations in accordance with European directives applicable to credit institutions approved by 

Order no.5/22.12.2005 of the governor of the National Bank of Romania, modified and completed by Order of 

the National Bank of Romania no.24/21.12.2006.


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valuation rules of elements presented in the yearly financial situations, as well as the rules for 

drawing up, approval, audit and publication both of yearly financial situations and 

consolidated yearly financial situations. 

The regulations issued by Romanian authorities are applicable to banking societies 

which are Romanian juristic persons and to branches from Romania of the foreign banking 

institutions. In accordance with these regulations, the yearly financial situations that are 

compulsory for the banking societies are made up of: balance sheet; account for profit and 

loss; situation of modification for proper capitals; situation of cash flow; explanatory note. 

These situations must be presented as a whole unit and very clearly, in order to show 

the tenacious image of the assets, debts, financial position, profit or loss and of treasury flows 

of the involved bank. In order to ensure a very retentive image, additional information can be 

presented as compared to the compulsory 

ones imposed on by means of regulations. 

One must specify that the subunits without juristic personality, belonging to a banking 

society, a Romanian juristic person, organizes and manage the proper accountancy till the 

level of verifying balance sheet, without having the obligation of drawing up the financial 

situations, this obligation devolving upon the central administration of the respective bank. 

In the case when a banking society, a Romanian juristic person, develops an activity 

also abroad by means of some subunits having no juristic personality, their activity is 

included in the financial situations of the bank Romanian juristic person and reported on the 

territory of Romania. 

2. Balance sheet 

The balance sheet drawn up by the banking societies is defined, according to bookkeeping 

regulatings conformable to European directives, as being a synthesis accountancy 

document by means of which the assets elements are presented, also debts and proper capital 

of a bank at a certain date, which is the end of a financial exercise, as a rule. The balance 

sheet is also drawn up in other situations, not only at the end of a financial exercise. These 

types of situations are designedly stipulated by means of legal regulations. 

Inside the group of balance sheet elements is to be applied the principle of liquidation 

(for assets) and the principle of exigibility, for liabilities elements. Thus, the grouping of 

assets elements in a balance sheet is made following their type and the degree of liquidation, 

from the liquid to the less liquid, and the debts are grouped according to type and exigibility, 

from the shortest to the ones with longer exigibility. The balance sheet indicators are to be 

presented as follows, accompanied by a presentation of their contents. 

2.1. Description of assets elements of balance sheet 

The patrimonial elements of assets which are implies in the activity of a bank are 

grouped, in a balance sheet, as follows: 

Cash, money supply , comprises: cash which is to be found at the bank pay office, 

banknotes and Romanian and foreign coins which have a legal rate of exchange; the cash in 

ATMs and ASVs; travel cheques bought and not handed for cashing to the issuers; balances 

of money supplies accounts at central banks and issue institutions from Romania and/or from 

the countries where they are put, provided that these should be easily available an dat any 

moment; 

Public effects and other titles accepted for refunding at central banks , comprise: 

tresorery certificates and debentures on public organisms issued in Romania, as well as the 

instruments of the same kind issued abroad in the situation they are accepted for refunding by


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the National Bank of Romania and/or by the central bank of the country where is the bank 

concerned; other titles accepted for refunding by the National Bank of Romania and/or central 

bank of the country where the bank concerned finds itself. 

Debts on the credit institutions , referring to the debts that come from bank 

transactions, held by the involved bank which makes the financial situations , on the national 

or foreign credit institutions, central banks and international and national official banking 

organizations. Here they are not included debts represented by bonds or any other titles. 

Debts on clients, comprise debts for foreign and national clients, others than credit 

institutions, whatever their name may be, except for the debts represented by debentures or 

any other title, that presents itself separately. 

Debentures and other titles with fixed income comprise the obligations and other 

titles with negotiable fixed income, issued by the credit institutions, by other societies or 

public bodies. Debentures and other titles with fixed income issued by public bodies included 

within this position referred only to those which were not accepted for refunding by the 

National Bank of Romania and/or central bank of the country where the bank concerned finds 

itself, which is to be registered in a separate position. Negociable and refunded proper 

debentures are separately pointed out. 

Shares and other titles with variable revenue , comprise shares or other titles with 

variable revenue that the bank holds, others beside those held inside legate trade companies, 

which are distinctly pointed out. 

The interests, comprise the interest titles or other titles having similar contents held by 

the bank The interests at the credit institutions are separately pointed out. 

Parties inside legate trade companies comprise fixed values represented by shares or 

other titles with variable revenue held by the bank at its branches on which it has control, 

materialized in the authority to lead operational and financial policies of the concerned 

company ,with a view to get benefits 

Intangible assets, comprise net value of the elements of intangible assets held by the 

bank. 

Tangible assets, comprise net value of the elements of tangible assets, held by the 

bank. 

Other assets, comprise other assets that are not comprised in other positions.(posts) 

Expenses registered in advance and unengaged revenues, comprise the expenses 

made in advance which are to be paid at intervals as expenses, on the basis of a bills payable 

book, during the periods or future financial exercises (subscriptions, rents, insurance policy, 

interests and commissions paid in advance etc) and which are not to be found in debts 

accounts and attached debts, as well as the debts coming from revenues to receive ascertained 

as a rule, at the end of the year and which are not to be found in the attached debts accounts. 

2.2. Description of liabilities positions of the balance sheet 

Balance sheet comprised in the liabilities of the accountancy balance sheet concluded 

by the banking companies, group the following elements, which we try to characterize 

concisely: 

Debts concerning credit institutions, comprise all debts that result from banking 

transactions of the bank that draws up the financial situations, as compared to the national and 

foreign credit institutions, central banks and international and national official banking 

organizations. Subordinated debts and the ones representing bonds or any other title that 

presents itself in separate positions/ posts. 

Debts regarding the clients, comprise the amounts the clients have to receive, other 

than the credit institutions mentioned before. Subordinate debts are not to be included in this


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position, as well as those represented by bonds or any other title which is presented in 

separate positions. 

The debts concerning the clients are presented grouped, on debts made from deposits, 

at sight and at term, and other debts, at sight and at term, too. The deposit certificates are not 

comprised in this position, which are negotiable titles, presented in other position. 

Debts made by titles, comprise both bonds and debts for which the negotiable 

certificates have been issued, especially deposit certificates that are negotiable titles, 

interbanking market titles and negotiable debts titles, bonds and other titles having fixed 

revenue, as well as the debts which result from proper acceptances and bills payable to order 

in circulation, except for the subordinate debts. One may understand by proper acceptances 

exclusively those issued by the respective bank for its proper financing and in which it 

appears through debitor (drawn). 

Other liabilities, comprise other liabilities elements which are not to be found in other 

positions of liabilities in the balance sheet. 

Incomes registered in advance and engaged debts, comprise the incomes registered 

in advance (discount,agio and commission of administration for 

factoring operations, interests, commissions, rents cashed in advance, premii of issue 

negative, etc. that are to be allocated for incomes during the future periods and which are not 

found in the receivable claims and attached debts, as well as the debts afferent to payment 

expenses ascertained, as a rule, at the end of the year and that cannot be found in the accounts 

of attached debts. 

Provisions, comprise those ones made by the bank in accordance with the legal 

regulations. 

The subordinate debts, comprise the funds coming from the issue of titles or from 

subordinate loan, whose reimbursement, in case of liquidation of the involved bank, is 

possible only after the payment of other debtors; 

Subscribed capital,comprise all the amounts, no matter their naming, which, 

depending on the juridical form, are regarded as being subscribed parties by the shareholders 

or partners, in accordance with the national legislation. 

Capital premii, comprise capital premii made by the bank, coming from the issue, 

fusion, new contributions of capital, division, conversion and other premii, according to legal 

regulations. 

Reserves, comprise legal reserves, reserves for banking risks , statutory or contracting 

reserves and other ones, except those reserves for revaluation, which present themselves 

separately. 

Reserves from revaluation, comprise the reserves from the revaluation made in 

accordance with the legal provisions of patrimonial elements. 

Proper actions, comprise the value of proper actions rebought, according to the legal 

regulations. 

Reported result, comprises the result or partie from the result of the preceding 

financial exercise that were not distributed by the general essembly of the shareholders as 

well as other elements specially mentioned. 

Result of financial exercise, comprises the profit or loss achieved by the bank in the 

current financial exercise. 

2.3. Elements outside the balance sheet 

The specific of banking activity, determines the registering of a huge volume of 

operations outside the balance sheet, grouped into: 

� Contingent debts, comprise all the transactions trough which the bank has guaranteed 

the obligations of a third party. The engagements representing endorsements of 

rediscount effects, as well as the acceptances - others than the proper ones. As for the


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guarantees and the assets charged, which present themselves as a distinct element, that 

comprises all the assumed guarantees and assets warranted in the account of a third 

party, especially the balls and irrevocable letters of credit. The significant guarantees 

in comparison with the ensemble of bank activity, issued by this one, present 

themselves in explanatory notes, as kind and value of engagement type. 

� Engagements, extrabalance sheet element, that comprises all the irrevocable 

engagements of the bank which may cause a risk. The significant engagements as 

reported to the ensemble of the bank activity present themselves in explanatory notes. 

3. The account for profit and loss 

The account for profit and loss is a synthetic picture in which the 

elements of incomes and expenses are pointed out, as determining elements of the result 

obtained from the activity developped by a bank for the administration period to which it 

refers, concretized in the registered profit or loss. 

We shall present now some of the indicators belonging to the structure of account of 

profit and loss of a bank, namely: 

Interests to receive and assimilated revenues, indicator which comprises incomes 

generated by banking activity, including: 

� Achieved revenues generated by the patrimonial elements included in the following 

positions from the assets of banking balance sheet: cash and money supply at central 

banks, public effects and other titles accepted for refunding at central banks, debts on the 

credit institutions, debts on clients, debentures and other titles with fixed income and other 

assets, whatever they may be calculated; 

� Revenues resulted from the operations at term, covered, spread out on the effective 

duration of operation and which have an interest character; 

� Taxes and commissions to receive, with interest character and calculated in accordance 

with the duration or value of debt or given engagement; 

Interests to pay and assimilated expenses, reflect the expenses generated by the 

developed banking activity, comprising: 

� Expenses coming from patrimonial elements of a bank inscribed in the following positions 

of the liabilities of balance sheet : debts regarding credit institutions; debts concerning the 

clients; debts made by titles; other liabilities; subordinate debts, whatever these expenses 

may be calculated; 

� Expenses resulted from the operations at term covered, spread out on the effective 

duration of the operation and which have an interest character; 

� Taxes and commissions to pay, with an interest character and calculated depending on 

duration or value of debt or the received engagement; 

Revenues concerning the titles, indicator that comprises the value of dividends and of 

other revenues afferent to shares, interests and parts detained inside the legate companies. 

Revenues from commissions, comprise the revenues afferent to services given to third 

parties, without diminishing the revenues included in the indicator „Interests to receive and 

assimilated revenues”. The revenues from the commissions included in this type of indicator 

are: 

� Commissions for guarantees, credits administration in the account of other creditorsand 

for the transactions with titles in the account of a third party; 

� Commissions for the payment of trade operations and other revenues that are afferent to 

these ones, commissions for the administration of accounts and commissions to keep in 

custody and administration of titles; 

� Commissions perceived for the exchange operations and for sale and purchase of coins or 

precious metals in the clients’account;


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� Commissions perceived in a capacity of intermediary for credit operations or disposal of 

agreements of economies and insurances; 

� Expenses from commissions, comprise the expenses afferent to services made by thir 

parties, others beside those included in the indicator „Interests to pay and assimilated 

expenses”. 

Profit or net loss out of financial operations, is made up of: 

� Net result out of transactions with titles which have not character of financial fixed assets 

and the corrections and taking again from corrections on the value of these titles; 

� Net result from the exchange operations, without causing a prejudice to the revenues from 

the interests to receive and the revenues assimilated and the expenses concerning the 

interests paid and expenses assimilated presented at the first two indicators above; 

� Net result from other sale and purchase operations that imply financial instruments, 

including precious metals. 

Other revenues from operation, comprise the other expenses of operation which are 

not comprised in the other positions of the balance sheet; 

General administration expenses, include all the expenses with general character 

made to assure the bank operation, respectively the expenses with the staff and other 

administration expenses; 

Current activity result, reflects the profile or loss resulted from the development of 

current activity, determined as a difference between revenues from current activity and 

current expenses. 

Extra revenues, represent banking revenues with special character registered along the 

development of activity of subsidies nature for extraordinary events and other ones 

assimilated. 

Special expenses, include the expenses resulted from events or extra transactions 

(taking over of assets, earthquakes or other acts of God). 

Result of special activity, determined as a difference between the extra revenues and 

special expenses. 

Total incomes, represent total revenues from the development of activity, determined 

by means of totalizing current and those special revenues. 

Total expenses, represent total expenses made in order to ensure the development of 

activity, determined as an amount of current expenses and of those extra. 

Raw profit, reflects the profile or loss resulted from the development of activity, 

determined as a difference between total revenues and total expenses, being registered a profit 

when total revenues are bigger than total expenses and a loss when total expenses are bigger 

than total revenues from the development of banking activity. 

Tax on profit, represent the legal tax calculate on the profit obtained, which is owed to 

the budget of state. 

Net result of financial exercise, represented by profit or loss, determined as a 

difference between raw profit/ raw loss and the taxo n profit ans other taxes according to legal 

regulations.


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GENERAL ACCOUNTING PRINCIPLES 

CIUMAG MARIN economist dr. D.G.F.P. GORJ 

L’objectif fondamental de la comptabilité et y compris des situations financières annuelles concernant la 

présentation d’une image fidèle des actives, des dettes, de la position financière, du profit ou de la perte de 

l’identité se réalise conformément aux certaines règles, méthodes et procédues comptables qui se fondent et se 

concrétisent ayant en vue une diversité de principes et de règles d’évaluation détérminées par la réalité 

économique afin de satisfaire certaines conditions de qualité imposées par les bénéficiaries des informations 

comptables. 

D’ailleurs, l’activité comptable de n’importe quelle économie 

de marché ne peut pas être conçue sans l’utilisation des principes comptables au caractère general. En ce sens, on 

a en vue le fait que, dans l’activité pratique on peut rencontrer des opérations comptables pour lesquelles il n’y a 

pas de règles établies, ou de procédures de résolution et leur solution peut être accomplie seulement par 

l’appellation d’un ou de plusieurs mèmes principes, ce qui justifie la nécessité de l’existence, de la connaissance 

et de la compréhension correcte de leur contenu. 

The general accounting principles assimilated for the practical afferent activity of legal 

entities that organize and conduct the financial accounting are briefly presented and defined 

in the effectual accounting regulations. These principles have a special importance in realizing 

the main objectives of accounting and especially for the evaluations that are caused by the 

annual financial situations, and because of that, in the following lines it will be elaborated in 

detail the conditions and the manner in which each of the nine adopted principles are applied. 

Also these principles allow the assessment of the elements that are presented in annual 

financial situations according to the ledges accounting, which denote that the effects of the 

transactions and other events are known when these are produced, and therefore not when the 

ready cash or its equivalent is cashed or paid, and therewith, when they are registered in the 

accounting and reported in financial situations that regard the respective exercise. The 

continuity of the activity principle consists in that “is supposed that the entity normally 

continues the functioning, without entering in a liquidity state or significant reduction of the 

activity”. 

This principle usually acts when ending the exercise, when are drawn up the synthesis 

documents, and, especially in stocktaking, and implicitly in goods evaluation. 

When it is assured the activity continuity it is proceeding to the prosecution of the 

annual valuation of the goods in accordance with their utility inside the entity, taking into 

account the normal use of the accounting methods, from which I present: the delimitation of 

the activities developed in exercises and also of some expenditures on much more future 

exercises, the use of historical costs in the patrimony valuation and in administration etc. 

When it is observed the beginning of the liquidation state or of the sensitive reduction 

of the activity, for the goods evaluation are used other values than those of utility (smaller 

ones), also known as liquidating values, adopting a valuation manner adequate to the activity 

shutting or non-continuity. It is also taken into account the value of the corporal 

immortalisation cannot be recovered in time, and some expenditures, as those for constitution 

and development cannot be allocated on more exercises.


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The possible insecurity elements, known by the entity’s administrator connected to the 

events that can lead to this one’s incapacity to carry on its activity must be presented in the 

explanatory notes. 

There are also needed to be given explanations in the case in which the financial 

situations are not drawn up on the basis of the analyzed principle, being presented the motives 

that have determined adopting the decision according to which the entity’s activity cannot 

carry on. 

The principle of the immanency of the methods consists of assuring the continuity in applying 

the evaluation rules from a financial exercise to another, desiderate according to which by 

registering in accounting and by presenting the patrimonial elements and the results are 

created the necessary premises for comparing in time of the accounting information. The 

methods used must have the character of permanence, meaning of their use during much more 

consecutive exercises, which allows the comparison of the data or the information from the 

financial situations that are drafted, and therefore the analysis of the economic-financial 

indicators contributes in obtaining some pertinent information for those who are interested. 

When it is imposed the changing of some methods that can be established by law or by 

an accounting standard or by the entity’s decision motivated by obtaining some more relevant 

or credible information regarding its operations, it is necessary that they are signalled in the 

explanatory notes of the financial decisions under the aspect of the respective changes 

explanation, and also of the consequences explanations that those have generated. 

The prudence principle is referring to the fact that the patrimonial elements evaluation 

imposes prudence, meaning that it must be accorded considerable attention to the aspects that 

consider the taking into account of the following four elements: only of the realized profit at 

the balance sheet date (a), of all the arisen debts during the current financial exercise or of any 

precedent exercise (b), of all the predictable debts and potential loses that appear during the 

current financial or during an precedent exercise, even if these become obvious only between 

the balance sheet date (31 December) and its drafting date (c), and also of the adjustment of 

the corresponding values of the observed depreciations, indifferently if the result of the 

exercise is lost or profit (d). 

The analysed principle as it is observed, it is organically connected to the valuation of 

the patrimony and for respecting its demands it is necessary that this operation is effectuated 

correctly, which present doubtless advantages. In this way it is taken into consideration the 

fact that it is assured a certain dilution of the exaggerated optimism of some business people 

in favour to the creditors, and also a protection plus for investors, by avoiding the 

overestimation of the profit and the active elements, and also of the sub estimation of the 

expenditures and the passive elements. 

Therewith it is kept in mind that by intended incorrect application of the discussed 

principle it can be hidden or distorted the reality, being created unjustified reserves by 

exaggerating the future risks. 

The principle of the exercise independence is important to assure a truthful image of 

each financial year result. 

In practicing a engagement accounting and, therewith for the forecasts in the field, he 

supposes the rigorous delimitation in time of the incomes and expenditures afferent to the 

financial exercise which the reporting is done for, indifferently of the date of the amounts 

cashing or of the payments. Therefore, the effects of transactions and other events are 

recognized when they are produced and when they are registered in accounting and in the 

afferent financial situations, therefore not regarding the cashing or payment of the numeral or 

its equivalent, after case. 

A first consequence that is disengaged from this principle application consists of that 

the finances are reflected into accounting when the goods are handed over by the buyer, when 

they are delivered according to the invoice or in other conditions stipulated into the contract,


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which testify the propriety transfer of the respective goods to the clients. In this conditions we 

do not take into account the cashing moment that can also be done in the following exercise, 

and not even the fact that the invoice it will be drawn up subsequently, and the realised 

operation is temporarily registered in a specific account called “Clients-invoices to lay down” 

(418). 

The expenditures represent, in their turn, the amounts or paid values or values to be 

paid that are regarding the current financial exercise. This denotes that there are not taken into 

account the aspects regarding the properly payment that can be done even during the future 

exercise, and not even the situation, rather of exception, that the invoice did not accompanied 

the delivered goods or the services performed by thirds, and the operation in question is 

reflected temporarily in the specific account called “Providers-not arrived invoices” (408). 

Another consequence regarding the analysed principle refers to the fact that it is necessary the 

use of some regularisation accounts namely: 471 “Expenses registered in advance” and 472 

“Incomes registered in advance”. These account also contribute to the definition in time of the 

realised incomes and expenses and, effectuated in the current exercise, but that are regarding 

the next exercise and its result, from which there are reminded: the anticipated cashing from 

rents, the expenses for capital unpredictable repairs, the rents paid in anticipation, etc. 

In which regards the fulfilment of the demands of the presented principle it cannot be 

neglected the problem of the calculation and the registration of the amortisements and the 

provisions at the end of each exercise, indifferently if these are or are not fiscally deductible. 

The principle of the separate evaluation of the active and debts elements is referring to 

drafting the balance sheet and especially to the fact that for establishing the total 

corresponding value of each position (indicator) of this one it is necessary the disjointed 

definition of the value of each individual element of active or debts that is included in its 

component. 

The intangibility principle consists of that between the opening balance sheet of an 

exercise and the closing one of the precedent exercise must be in a perfect concordance. 

When it is the case, the corrections imposed by the application IAS 8 “The clear profit or the 

clear loss of the period, fundamental errors and modifications of the accounting policies” are 

excluded from this demand. Therefore it is created the possibility of easy verifying of the 

patrimony integrity and the correct informing of the external users of information. With this 

purpose there are extremely important the information presented in the Explanatory Notes 

afferent to the precedent exercise. Regarding this last aspect it can be mentioned that in the 

practical activity there are numerous situations when it is handled with superficiality, meaning 

that are not presented the information established by the regulations from this area, from 

which are reminded those regarding: the manner of evaluating the patrimonial elements; the 

used depreciation regime; the constituted provisions, deductible and non deductible, and if 

these weren’t constituted, which is the cause and the effect over the financial results of the 

exercise; if it has been derogated from the known general principles, including the reason and 

the effects of this derogation; other situations that are influencing the comparability with the 

precedent year and the truthful image; the eventual events posterior to the closing of the 

financial exercise, etc. 

The non atonement principle imposes the distinct registration in the balance sheet of 

the active elements value and the passive ones in the profit and loss account of the incomes 

and the expenditures, not being admitted any atonement among them. In this way we 

exemplify: the non atonement of the claims of debts to the same third and the non atonement 

of the valuable pluses with the valuable minuses that can intervene when applying the 

prudence principle. 

Therewith it is reminded as an exception the fact that between the claims and the debts 

towards the same economic agent, only the atonements admitted by the effectual regulations


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can be realised, having the obligation of the former registration in the bookkeeping of the 

afferent incomes and expenditures at the integral value. 

The principle of the prevalence of the economic over the juridical is referring to the 

fact that the value of the balance elements and those from the profit and loss account is 

presented taking into consideration the economic fund of the transaction or of the reported 

operations and not only in their juridical form, assuring in this way the credibility of the 

provided information. 

In this way it is taken into account the fact that the transaction fund or other events one 

is not always concordant with what is foreseen from their juridical or conventional form. 

The analysed principle is applied to the entities that made up the individual financial 

situations and that are outrunning the limits of two of the measure criteria described above. 

On their turn the entities that do not outrun the limits of two of the measure criteria legally 

established apply the principle at which we are referring, only in the case in which the 

strengthened financial situations are drafted. 

The principle of the breakeven point is influencing the relevance of the accounting 

information, cause for what is necessary that in the financial situations to be distinctively 

presented only the elements that have significant value. The other elements, as far as they 

have the same nature, as well as similar functions are reflected in cumulated amounts. 

In certain cases the nature of the information is sufficient by itself to determine the 

relevance of the information but there are situations when the nature and the significance 

point are important in this way. 

The information is considered as being significant if the erroneous omission or 

declaration of those one might influence the economic decisions of the users. The significance 

point depends upon the measure of the element or of the error judged in the specific 

circumstances of the omission or the false declaration. 

The significance point cannot be defined by a mathematic formula because in order to 

establish it, in each situation that shows interest, are taken into account the quantitative and 

the qualitative aspects. In this way are mentioned the insignificant but repeated errors that 

totalised pass the significance point and, therefore must be taken into account the incorrect or 

incomplete presentation of the accounting politics inside the explanatory notes from the 

financial situations, which determine the incorrect interpretation of the used politics. 

The analysed principle is acting meaning that the balance elements and those from the 

profit and loss account can be combined when they represent an insignificant amount in 

which regards the assurance of a truthful image as it is understood by the effectual 

accounting regulations and also when contributes at rising up the clarity level. This last way 

needs a distinct presentation in the explanatory notes. 

The significance point is determined according to the entity’s situation and the interest of the 

users of financial situations, taking into consideration one or more elements from which are 

reminded: the gross profit, the turnover, the total of actives, the net active and clear profit, 

specifying that it is allowed to be applied only by the entities that surpass the limits of two of 

the three criteria of measures regulated. 

Besides the above presented principles and the ones assimilated in our country by the 

applicable regulations, there are accepted on an international plan other accounting principles 

and conventions, from which we are reminding: the pertinence and the relevance of the 

information according to the economic decisions at whose elaboration they contribute; the 

justification of the facts that regard the veracity and objectivity of the information; the 

monetary quantification etc. 

In which regards the general accounting principles above analysed it is imposed as a 

final definition also to be taken into consideration the fact there are admitted digressions from 

the requests imposed only in exceptional cases, having the obligation of presenting them in 

the explanatory notes as the motives that have determined them, and also as the evaluation of


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the effect that they had over the actives, the debts, the financial position and the profit or the 

loss.


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THE GENERAL CHARACTERISTICS AND THE LIMITS OF 

FINANCIAL CONTROL 

POPEANGĂ GABRIEL economist Dr. D.G.F.P. GORJ 

Le procès de transformation de la Roumanie dans un état démocratique basé sur le pluripartitisme, la 

séparation des pouvoirs dans l’état, la domination de la proprieté privée, la libre initiative et l’esprit concurrentiel 

a determiné la création du cadre nécessaire pour le transfert d’une grande partie du pouvoir administratif du 

niveau central au niveau des colectivités locales, en vue de la gestion de leurs intérêts particuliers. Il en resulte le 

rôle decisive des unités administratives-territorielles locales dans la ratification du principe de l’autonomie 

locale, la descentralisation des services publiques, de l’éligibilité des autorités administratives-locales, la prise 

des conseils des citoyens dans tous les problèmes d’intérêt majeur, la propre responsabilité des élus locaux pour 

les actes des autorités dont ils appartiennent. 

The control, in its general definition, is a permanent or a periodical analysis of an 

activity, a situation, in order to follow the development and take measures for this one’s 

improvement. At the same time, it signifies a continuous moral or material supervision, as 

well as the management of an activity, a situation. But, interesting aspects show other 

definitions, according to which the control is verification, an attentive inspection of the 

correctitude of an act or a surveillance action of someone, something, a meticulous 

examination or the power to conduct, as an instrument for the settlement of a mechanism or a 

process. The control activity may also be defined as a part of the management, an 

administration instrument, as a manner of knowing the reality and error correction. Also, the 

control is defined as the process by which it is verified and measured the quantitative and 

qualitative realisation of the performances, the tasks or works that compares with the planned 

objectives and indicates the correction measures that seem to be necessary. 

Regarded from its mission, the control is an intrinsic part of the management, and 

from its development point of view, it is a human, autonomous and specific activity that 

serves to the administration of the company, to its societies and partners, but also to the public 

authorities and even to the population. 

On the basis of these exhaustive considerations we ascertain that the control is an 

attribute of the company’s management, a function of the management and, at the same time, 

it is an independent activity. As a management function, the control endorses the parameters 

maximisation that refers to the results obtained, and to the increment of their attainment 

speed. 

Due to its importance, the financial control system can be considered as a needful 

instrument for the management for a regular surveillance of the activity of the administrative 

entity, with the purpose of taking on time the needed decisions. 

The management represents the organisational effort, the managerial activity in 

accordance with the market’s laws, in order to know and improve the administrative manner 

of the managerial entity and to prevent the emergence of the risks, deficiencies and lacks in 

this one’s activity. The management is constituted in a real state of mind that opposes to the 

lagging and passivity, transforming in a general public interest in order to obtain the


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maximum efficiency from any kind of action, because it supposes the economic area analysis 

and the prognosis of its evolution, the preparation of the decisions from the field. The 

financial administration of the managerial entity involves the preparation, the substantiation, 

financial decisions making and executing. 

In this way, the French economist Henry Fayol, considered together with F.W. Taylor, 

such as the father of the science of administration, defined the management of an 

administrative entity by five main functions: the foresight, the underline, the financial 

decisions making and their execution. 

To all the authors that have discussed the theory of the company’s management and 

the science of management, we find, with insignificant changes, the five functions described 

above. We observe that these ones, irrespective their specialisation, reserve to control a well 

determined place among the administrative entity’s functions, namely at the end of the cycle 

of the achievement of the managerial process. 

In this context, the control is, at a micro and macro-economic level, an efficient and 

necessary function of the management, harmonising in a unitary whole the individual interests 

with those of the collectivity and the society. The financial control, integrated part of the 

financial management and administration, constitutes, at the same time, the expression of an 

objective necessity as a knowledge form, which confers it a much larger sphere and with 

multiple significances that outdraw the strict interest of the company. Moreover, the same 

control that is performed inside the administrative entity, has a triple significance, being, at 

the same time, a control for the self (an internal control), a control for the others (an external 

control) and a control for the state (a public control). 

Irrespective for whom and in what purpose it would be done the control, it is, at the 

same time, a process of the knowledge of the past, of the appreciation of the present and of 

the decipherment of the future, connected with the administrative entity activity and with its 

economic-financial performances. Therewith the financial control is a process of knowledge, 

a practice that whips up to study, action and reflection. Also, this one assures the protection of 

the interests that gravitate around the administrative entity, providing a global vision over it. 

At the same time it constitutes a security and autonomy factor for the society, it appears as an 

instrument for the settlement of the administrative entity activity, and as a guide for those 

which make decisions at any level. In other words, the control brings its contribution to the 

integration of the administrative entity in the market economy mechanism through a complex 

and continuous managerial activity. 

The budgetary execution imposes to the administrators and accounts certain 

restrictions owed to the fact that the financial resources are limited, and their way of 

assignation on different destinations presupposes the realisation of those operations control. 

Between the budgetary execution and the budgetary control there is an indissoluble 

connection. As the budgetary execution stage, the budgetary operations control has a political 

and financial motivation. This fact derives from the fact that the budgetary regime is based on 

the authorising idea, according to which the budgetary execution control must assure the 

correspondence of this execution with the limits of the authorisation given by the Parliament. 

The political reason of control is that of verifying the manners of fulfilment of the 

Parliamentary decisions in budgetary. From a financial point of view the budgetary control 

has as a purpose the avoidance of any possibility of defalcation of financial funds from the 

approved destinations, allowing to the Parliament to assure, with the help of the written 

information in the execution account, that its decisions have been correctly executed by the 

Government. In the development of the control it is permanently followed the observance of 

the operations efficiency criterion. But in practise, the development of a complete control is 

very complicated as a cause of some special funds emerged at the Government and Parliament 

disposal that are not subjected to control. Also, the limit of budgetary control derives from its 

technical character, which makes the control project to be out of the Parliament action.


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Being based on the budgetary legacy, the budgetary control is practically realised through 

parliamentary or jurisdictional institutions destined to cover this legality. 

The practice has confirmed the fact that the economic financial control efficiency is 

determined, on one hand, by the independence during its entire activity, from the structure of 

the control program until the establishment of the measures as a result of the findings, and on 

the other hand by the competence of its authorities, subject of the professionalism and 

conduct that it must prove. In the control activity there are three important moments in which 

it must be shown its independence towards the activities and persons subjected to verification. 

The first moment it refers to the establishment of the control program that must be realised by 

the management of that control institution, starting from the attributions and the objectives 

provided by the law, and taking into account the results on the field. When the control 

independence doesn’t exist, it can interfere a series of negative situations, such as the drawing 

out of the program or the postponement of the control of a certain activity, being in change 

proposed other ones that do not completely justify the control intervention. 

A positive example in which regards the control independence it is given, at present, 

by the Account Court of Romania, which, by its organisational and function law has textually 

provided that this one is elaborating its activity program autonomously. 

A second element in which it is necessary to be manifested the control independence 

is the stage of its actual development. 

From the practical control activity, during the years, it results that in this stage it can 

be manifested the following lacks: 

- From different reasons, the control program approved by the right authorities it 

hasn’t been respected being included in the verification other companies than the programmed 

ones; 

- The intermission of some started controls, is quite a frequent situation, when from 

the first researches are resulting digressions and irregularities, negative situations that are not 

revealed by some persons which are not interested in doing this; 

- The call of the control team to different authorities of the central or local power and 

on different considerations, in one way or another, the execution of some pressures on the 

control authorities to attenuate the observed digressions, on the basis that these ones are due 

to some “objective causes”, not being the case to make responsible certain persons; 

The third moment, also important, in which it must be manifested the control 

independence is that regarding the settlement and measures taking in accordance with the 

done observations. 

Here the experience in the practical control activity also signals the following possible 

situations: 

- The control influence in measures taking, after ending its activity, either by the 

emphasis of the facts gravity and of the measures that need to be taken, or by diminishing and 

minimising the facts, and therefore the measures attenuation; 

- The lateness of measures taking on different basis, such as the necessity to complete 

or to obtain some notifications from different institutions, etc; 

- Not tracing the given control measures, in order to make the time pass, not taking 

into consideration the necessity and the opportunity of these one’s application. 

In conclusion, in order to assure the independence of the economic-financial control, 

as one of the main conditions of its efficiency, in all the organisational structures where 

institutions, compartments or formations of control function, is necessary to be respected 

some rules, such as: 

- The control must autonomous elaborate the activity program that, once approved 

should be entirely executed; 

- The control actions, once started must not be interrupted or stopped, indifferently 

whom such a disposal should come from;


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- During the prosecution of the control, no person should have the right to influence or 

give disposals to the control authorities; 

- The control proposed measures must be taken and applied by the right persons which 

do not apply them should answer on the consequences of this kind of situations. 

Certainly, the above written emphasize at the maximum the control responsibility, 

meaning: 

- To strictly respect the legality; 

- To be completely objective, laying aside any subjectivism in the appreciation of the 

states of fact; 

- To avoid any abuse and force position from the control. 

Analysing the actual situation of the control, it is observed that from a conceptual and 

legislative point of view the efforts have been made and it has been obtained the desired 

effects for placing the financial control in a central place in the arsenal of the state levers 

intended for assuring the order and the legality. But the realisation of the desiderates of the 

financial control activity depends on the degree of understanding, involvement and on the 

efforts that each supervisor and each economic agent will do in order to work more correctly 

from a moral and professional point of view. The intensification of the fiscal control is 

necessary because much more economic agents don’t give the due attention to the exact 

observance of the legal norms regarding the fulfilment of the fiscal obligations towards the 

state. At this situation a main contribution it has the eluding of the effectual legislation and 

the incorrect administration on time of the accounting, this happening especially as a cause of 

the lack of the specialised personnel, the ignorance of the legal forethought or the wrong 

interpretation of these one.


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The Implications of the Derivative Financial Products in the Context of the 

Financial Globalization 

Boariu Angela, conf.dr. 

Bilan Irina, prep.drd. 

Facultatea de Economie şi Administrarea Afacerilor 

Universitatea”Al. I. Cuza” Iasi 

Résumé : 

Dans le contexte de la globalisation et de la libéralisation des marchés financiers on a enregistré une 

meilleure allocation des ressources, la réduction du coût de financement, et aussi l’accentuation de la volatilité et 

de l’incertitude des marchés, ce qui a entraîné le développement significatif des produits financiers dérivés. 

L’apparition des produits financières dérivés s’inscrit dans le processus d’innovations financiers qui a 

favorisé la manifestation de la globalisation financière. Les produits dérivés permettent la protection contre les 

risques financiers, tout comme l’obtention d’effets de levier considérables. 

L'ouvrage envisage mettre en évidence le rôle des produits dérivés dans la gestion des risques 

financiers, dans le contexte de la globalisation, et la manière dont ils sont devenus l’un des facteurs qui ont 

généré l’instabilité du système financier international ayant des implications significatives, surtout, sur le risque 

systémique et sur la politique monétaire. 


In the last two decades, the financial systems of the majority of the world states were marked 

by profound transformations. The process of deregulation, subdivision and nonintermediation, 

the financial innovations, the new informational and telecommunication 

technologies determined the financial globalization process and influenced significantly the 

financial systems both of the developed countries and of the ones in course of development. 

Thus, these are characterized by the free circulation of the capitals, the creation of liquid 

financial and inter-connected markets, the intensification of the competition between markets, 

as well as between the financial institutions. 

Under these mutations, it has been registered a significant development of the 

financial markets, but also an increase of the instability of the interest rates, of exchange rates, 

of prices in general, that determined the creation of new instruments and of protection 

markets against risks. Within those, one should mention from the point of view of the 

spectacular development and of the economic implications, the derivative financial products 

and markets on which these are negotiated. 

2. The influences exercised by the significant usage of the derivative financial products 

The derivative financial products represent contracts of risk transfer, whose value depends 

(derives) on the value of a basic asset (named also support-asset) represented by a debenture, 

an action, an interest rate, an exchange index, a currency etc. The use of these products has 

developed significantly from the 1980s, especially because of the desire of the economic 

agents involved in international transactions to protect themselves against the risk of interest 

rates’ and exchange rates’ fluctuation.


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The derivative financial products allow the protection against the risks regarding the 

currency, the interest rates, credit etc., but they are used also for performing arbitration and 

speculation operations. The main derivative products are represented by the forward contracts 

futures contracts, option contracts, and swap contracts and from 1990 a major innovation is 

brought by the credit derivatives. 

By means of the derivative products, the participants from different markets can be 

protected against the fluctuations of the interest rates, of the exchange rates or of other prices 

of the assets. 

The derivative financial products has as main function the risk’s transfer; they allow to 

stand a risk considered bearable and to transfer the undesired risk part towards other 

operators that accept it due to their position opposite to the respective risk or from the desire 

to perform speculative operations. 

The transfer of the risk by means of the derivative products can be accomplished due 

to their capacity to establish prices for risks and to separately negotiate different elements of 

the price risk for the support-assets, on the one hand; on the other hand due to the lever effect 

of these products, allowing the users to negotiate the risks without being necessary to acquire 

or sell the support-assets.[5, p.100] The lever effect of the derivative products allows the users 

of these products to achieve a considerable volume of operations with limited expenditures 

and with reduced transaction costs. For example, the futures agreements allow the opening of 

positions, immobilizing only a low level of liquidities under the form of the guarantee deposit. 

In a similar way, the option agreements allow the opening of positions if the option’s buyer 

pays a bounty that can be modified according to its expectations of gain. 

The lever effect that characterizes the derivative products stimulates the performance 

of speculation operations that are much easier to be achieved on the derivative markets in 

comparison with the markets of the support-assets, a fact that explains the considerable 

growth of the speculative positions and of the volatility of the markets, but also of the losses if 

the anticipations do not come true. Thus, the derivative products can constitute also a factor of 

instability for the markets. 

The main function of the derivative of protection against risks allows the reduction of 

the incertitude by using these products so that one can better appreciate if he/she contributes 

to the creation of a more favorable climate for the development of international transactions 

and investments. 

The development of the derivative financial products can also contribute, under 

normal conditions (where no tensions appear on the markets), by stimulate of the transactions 

from the support-assets markets. This is due to the fact that the derivative products facilitate 

the coverage of risks, stimulates the investors to acquire support-assets and this allows the 

development of the respective assets’ markets, the amelioration of the liquidity and their 

efficiency. For example it was observed that the derivative markets facilitate the issuance of 

securities of the public debt because they allow the agents that buy them to protect themselves 

against the interest rates’ risk. 

In the context of financial globalization, the accentuated development of the financial 

markets and especially of the derivative financial products’ market has significant 

implications also over the activity of the bank institutions. As a result of the deregulation, 

subdivision and non-intermediation process, it was registered an intensification of the 

competition between the bank financial intermediates and the non-bank ones, the 

diversification of the bank institutions’ activities and, at the same time, the reassessment of 

the role of the banks in the economy. 

In respect to the derivative financial products’ markets it was established a 

considerable involvement of the bank institutions on these markets, aiming to improve the 

financing conditions, the administration of the own risks but also of the clients’ risks. The 

banks take part on the derivative markets both as tenderer of derivative financial products as


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well as users, being at the same time the main intermediates on the markets, according to the 

agreement. Thus in some countries where the process of bank non-intermediation is 

accentuated (for example in Great Britain or USA), the operations with derivative products 

performed between the banks hold the predominant share from the total number of 

transactions from the derivative markets. 

The increase of use of the derivative financial products at the level of bank institutions, 

in the context of bank non-intermediation has contributed to the development of their 

operations on the financial markets that means the diversification of bank activities and of 

income resources. 

At the same time, it can be observed the fact that, in the event in which the bank 

institutions develop activities with derivative financial products without complying with the 

bank caution, there appear errors in the bank system that can determine the manifestation of a 

system crisis. 

Another significant influence of the fast development of the derivative financial 

products is the one of the monetary policy. The accentuation of the financial innovation 

process in general and the increase of the usage degree of derivative financial products in 

particular have determined the growth of the monetary policy’s complexity and the difficult 

evaluation of its impact over real economy. 

The development of derivative financial products influences the transmission speed of 

monetary policy decisions, supposing that they can attenuate their efficiency.[5, p.109] For 

example, using swap agreements on the interest’s rate could delay or accelerate the impact of 

the directive interest rates’ modifications performed by the central banks over the debtor 

economic agents, in the following manner: the economic agents that anticipate the decisions 

of restrictive monetary policy and owe a variable interest rate have the possibility to limit the 

impact of these rates over the financing plans by modifying the loan’s characteristics, 

respectively by transforming the initial loan (contracted at a variable interest rates) in a loan 

with a fix interest rate. Under a reversed situation, the economic agents that anticipate a 

relaxation of the monetary policy can accelerate its effects over the financing plans by 

transforming the debts, employed at a fix interest rate into debts at a variable interest rate. But 

such an influence of the derivative products is limited and manifests itself on the short term if 

we take into consideration the fact that the anticipations can be incorrect. Moreover, even in 

the case in which the anticipations prove to be correct, not all economic agents can act in the 

same manner and so some of them will be eventually affected by the modification of the 

directive interest’s rate. 

Another aspect regarding the implications of the derivative financial products over the 

monetary policy aims the influence over the transmission mechanisms of this over the real 

economy. For example, the use of derivative products can attenuate the role of the exchange 

rate’s mechanism. This is due to the fact that the economic agents that perform foreign trade 

activities can protect themselves against the fluctuations of the exchange rate by means of the 

derivative financial products (especially by means of swap agreements on currencies, futures 

and currency options). But, on the long term, the fluctuations of the exchange rate influence 

the price level and, consequently, the production decisions of the economic agents. 

The explosive development of the derivative financial products and, in the last years, 

of the credit derivatives diminishes the impact of the monetary policy over the real economy 

through the bank credit mechanism. 

The bank credit mechanism reflects the impact that the decisions of monetary policy 

has over the real economy through the offer of bank credits and it is based on the idea 

according to which the bank credits and the financial securities are not perfectly 

interchangeable.[2, p.102] As assets that are hold by the trade banks, the financial securities 

and the bank credits are not perfectly interchangeable due to their different degree of liquidity. 

For example, the promotion of a restrictive monetary policy can determine the banks to


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develop investments in the financial securities (especially, state securities) and so to reduce 

the offer of bank credits. 

In the last years, due to the significant expansion of the security operations performed 

by the banks, due to the increased usage of the credit derivatives – that allow the banks to 

diversify the credit portfolio and to reduce their credit risk exposition – and due to the 

intensification of the activities for hedge funds) it is observed that a great part of the credit 

risk is transferred to the non-bank financial institutions, a fact that has determined an 

important growth of the offer for bank credits. Under these circumstances, a decision 

regarding the monetary policy that would cause the increase of the efficiency rate for the 

financial assets without risk is possible not to affect the offer of bank credits that means the 

reduction of the impact of the monetary policy over the real economy by means of the bank 

credit mechanism. 

The markets of the derivative financial products offer new information to the monetary 

authorities, regarding the anticipations of the participators on the markets over the prices’ 

future evolutions of the support-assets. Such information can be used by the central banks for 

a better grounding of the monetary policy decisions. 

After the 1990s, the crises registered on stock exchange and real estate markets of 

numerous countries reflect the important role of the price of real estate shares and goods 

within the mechanisms of transmission of the monetary policy as their value is sensitive to the 

fluctuations of the interest rates. What is more, the practice shows that the prices of real estate 

goods grow significantly in comparison to the share prices, in the context of the excessive 

relaxation of the crediting conditions in a country. 

The problem of the derivative financial products that has been discussed for a long 

time in the literature, regards their impact over the stability of the financial systems and their 

role in the occurrence of the systemic risks. Although it is well known the fact that the main 

function of the derivative financial products is to offer protection against financial risks, one 

should never forget that, at the same time, they build an instability factor due to the lever 

effect that allows the opening of significant speculative positions (for example the case of 

Long-Term Capital Management). The practical experience highlights the fact that the 

derivative products can, during periods of tension, amplify the instability of the prices and 

emphasize their fluctuations. 

In respect to the role of the derivative financial products in the occurrence of the 

systemic risks, some specialists in this field are frequently invoking, as an example, the case 

of the credit derivatives. The market of the credit derivates has registered in the last years a 

very fast development and the value of the transactions with credit derivates are significantly 

increasing, according to the estimations of the International Regulations’ Bank, from 180 

billion USD in 1997 to 12400 billion USD in 2005. [3, p. 86]. Although the market of the 

credit derivatives is much more restricted in comparison with other markets of derivative 

products, the accentuated development of the transaction with credit products would reflect 

the fact that the credit risk is considered much more important in comparison with the 

exchange rate risk or interest risk. 

Credit derivative products appeared in the early 90s in USA and represent a new 

instrument of protection against the credit risk, used on large scale by the banks. By means of 

the credit derivatives, the bank institutions transfer the credit risk to some investors, such as 

insurance companies, mutual funds or hedge funds. 

The fast development of the credit derivatives markets can determine the apparition of 

financial crisis (for example, the recent USA crisis from the bank and real estate market that 

had significant implications also over other countries, including over our country), because 

the transfer of the credit risk is performed mainly towards the investors much less capitalized 

and that are not bound to some strict regulations. At the same time, these markets are “Over 

the Counter” markets that through their nature are less transparent. Moreover, the significant


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implication of the bank institutions in the transactions with credit derivatives highlights the 

use of these products without complying with the bank cautiousness, a fact that can determine 

can determine the manifestation of instability at the level of the bank system and even the 

apparition of the systemic risk. 


In the last years, in the context of globalization, the financial systems from the majority of the 

world states register significant economic transformations, especially through a very fast 

development of the markets of derivative financial products (especially of the credit 

derivatives) and through the intensification of the hedge funds activity. In this context, the 

financial systems have become more complex and less transparent so that the monetary 

authorities confront themselves with difficulties regarding the evaluation of potential risks 

that threaten the financial stability. 

The financial crisis that manifest themselves in the context of financial globalization 

(especially the crisis from the Asian markets and the recent crises from USA) have 

determined the intensification of the preoccupations of the monetary authorities from different 

countries, including of some international institutions (The International Monetary Fund, The 

Bank of International Regulations) so that they evaluate the implications of the speculative 

derivative financial products (hedge funds) over the financial stability. Such preoccupations 

have at least two reasons. On the one hand, a large proportion of the transactions with 

derivative financial products are being performed by the banks and, consequently, the use of 

those products that don’t comply with the bank cautiousness could determine the instability. 

On the other hand, the intensification of the direct relations between the bank institutions 

(especially between the most important banks) and hedge funds can be the source of financial 

instability of systemic type. 

The disastrous effects of the financial crisis, manifested in the context of financial 

globalization, impose the preoccupation of the monetary authorities for the rigorous analysis 

of the relationship among the prices of the shares, of the real estate and the economic activity, 

as well as for the outline of the monetary models that include the prices of these assets for the 

orientation and the evaluation of the monetary policy. 

The mutations registered on the national financing systems, in the context of the 

financial globalization, have determined the increase of the complexity and of the incertitude 

of the mechanisms of monetary policy so that the evaluation of the impact of the monetary 

policy on the real economy encounters difficulties. 

The complexity and the incertitude of the monetary policy mechanisms is explained 

by the majority of specialists in the field by the big length of time that the monetary policy 

measures need in order to have an impact on the real economy and by the insecure 

relationships between the financial variables and the real ones. In this context, the monetary 

authorities of various countries intend for the decisions of monetary policy to have a 

prospective character, to own an important volume of information with regards to the 

intended plans and objectives. 

Bibliography 

1. Filip, Ghe. (coordonator), Politici financiar- monetare şi implicaţiile lor asupra dezvoltării 

societăţii, Performantica Publishing House, Iaşi, 2006; 

2. Plihon, D., La monnaie et ses mécanismes, Editions La Découvert & Syros, Paris, 2001; 

3. Plihon, D., Instabilité financière et risque sistemique: ľinsuffisance du contrôle 

macroprudentiel, Cahiers française nº 331, 2006;


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4. Weber, A., Hedge funds: un point de vue de banque centrale, Banque de France, Revue de 

la stabilité financière, Nº 10, 2007; 

5. *** Implications macro-économiques et de politique monétaire du développement des 

marchés dérivés, Bulletin de la Banque de France- Nº 14, 1995; 

6. ***Les implications de la globalisation pour la stabilité financière, Banque de France, 

Revue de la stabilité financière, Nº 8, 2006; 

7. Hhttp://www.banqueducanada.ca/fr.monetaireH.


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47BLES 

MODALITÉS ESSENTIELLES D’UTILISATION DE L’ANALYSE À 

TRAVERS DES INDICATEURS 

Elena Hlaciuc, Prof. dr. 

Université “Ştefan cel Mare” Suceava 

Camelia Mihalciuc, Lect. Drd. 

Université “Ştefan cel Mare” Suceava 

Abstract 

En effet, la méthode des taux présente un certain risque, et si cette méthode n’est pas utilisée 

correctement, l’analyse de l’évolution des rapports (par ailleurs très nombreux) ne traduit pas toujours avec 

exactitude la réalité économique des entreprises. Il faut aussi mettre en évidence les taux les plus carctéristiques 

d’un phénomène économique ou d’un certain équilibre financier. 


informationnelle propre et mettant en saillie de la sorte de nombreuses facettes de l’activité économicofinancière 

de l’entreprise. 

Epigraphe 

“Il est pratique et usuel de se choisir une méthode qu’on puisse appliquer. Si cela ne va pas, il faut 

l’admettre franchement et réessayer. Mais avant toute chose, il faut essayer quelque chose.” 

BF.D. Roosvelt 

28 

Outre l’étude détaillée de la profitabilité de l’entreprise, le subsystème manageriel a 

besoin d’une série de données qui soient comparables et qu’il puisse utiliser soit à l’intérieur 

de l’entreprise, pour faire, par exemple, des comparaisons entre différents centres de profit, 

soit à l’extérieur, pour se reporter à d’autres entreprises ou à des moyennes de branches, 

nationales, internationales, etc [8, 385]. Ces comparaisons deviennent possibles par 

l’intermédiaire des taux de rentabilité. 

Les taux de rentabilité s’établissent sous forme de rapports significatifs, le numérateur 

ayant une forme d’expression du profit, et le dénominateur étant formé d’actifs, capitaux ou 

un flux d’activité. 

Dans la définition du taux de rentabilité, par flux d’activité on comprend le chiffre 

d’affaires, les ressources consommées, etc. 

Les taux de rentabilité font partie de la catégorie des indicateurs d’efficience du type 

effet/effort [6, 134]. L’effet est exprimé à travers le profit sous ses diverses formes de calcul: 

brut, net, de l’exploitation, courant, etc. L’effort est reflété sous la forme des capitaux 

(propres, permanents), des ressources consommées, des actifs totals ou de certaines parties de 

celles-ci, des revenus, etc. 

L’expression relative du niveau de rentabilité complète le diagnostic par la capacité 

informationnelle des indicateurs relatifs [4, 214]. 

Dans l’analyse économico-financière de l’entreprise, les taux de rentabilité permettent 

d’effectuer des comparaisons dans l’espace, ainsi que par rapport à certaines normes ou 

standards élaborés et acceptés par les organismes de spécialité. 

Fonction des élements pris en compte, la théorie et la pratique économiques opèrent 

avec plusieurs formes d’expression de la rentabilité. 

Le mesurage de la rentabilité de l’entreprise est donné par un système de taux 

d’efficience qui mettent en évidence les caractéristiques économiques et financières des 

entreprises, permettant de comparer leurs performances industrielles et commerciales.


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Les taux de rentabilité apprécient les résultats par rapport à l’activité de l’entreprise 

(rentabilité de l’exploitation) et avec les moyens économiques (rentabilité économique) ou 

financiers (rentabilité financière), comme il résulte de la fig. 1[3, 44]. 

70BDifférents 

niveaux des résultats 

• Marge commerciale 

• Valeur ajoutée 

• Excédent brut d’exploitation 

• Résultat de l’exploitation 

• Résultat courant 

• Résultat net 

• Résultat distribué 

71 

72 

BDégagés de…………………… 

Activité BMoyens 

Economiques Financiers 

• Chiffre d’affaires • Immobilisations • Capital social 

(sans TVA) 

brutes 

• Capitaux propres 

• Valeur ajoutée 

• Immobilisations • Ressources durables 

nettes 

• Passif total 

• NFRE 

• Capital économique 

• Capital investi 

• Actif total 

Figure n° 1. Résultats dégagés de l’activité de l’entreprise et les moyens économiques ou 

financiers 

La variété des indicateurs impliqués dans le calcul rend possible la détermination d’un 

nombre pratiquement illimité de taux de rentabilité. Essentiel pour l’analyse financière est de 

construire un système de taux opérationnels qui par sa structure et son contenu représente un 

instrument de travail utile, opérationnel et performant [7, 308]. 

En effet, la méthode des taux présente un certain risque, et si cette méthode n’est pas 

utilisée correctement, l’analyse de l’évolution des rapports (par ailleurs très nombreux) ne 

traduit pas toujours avec exactitude la réalité économique des entreprises [2, 41]. Il faut aussi 

mettre en évidence les taux les plus carctéristiques d’un phénomène économique ou d’un 

certain équilibre financier. D’autre part, l’analyse des taux peut être utilisée en suivant deux 

optiques différentes : 

–elle a souvent pour but de distinguer le risque que la banque assume quand elle 

accorde un crédit à l’entreprise ; 

–elle peut aussi servir de base pour un certain type de tableau de bord, destiné à suivre 

la gestion de l’entreprise pour dégager l’évolution enregistrée, cette notion étant essentielle, 

tant pour ce qui est de la gestion interne, que de la gestion externe de l’entreprise. 

Dans le premier cas, il s’agit de prévoir le risque, en utilisant notamment la 

méthodologie bancaire de l’analyse des taux, dans le second cas s’agissant de comprendre un 

ensemble de phénomènes et en appliquant à l’entreprise une variété de taux. 

L’utilisation tendantielle est l’utilisation la plus évidente et la plus traditionnelle de la 

méthode des taux, car elle permet d’établir l’évolution, au fur de certains exercices financierscomptables 

successifs, des taux caractéristiques (choisis) offrant à la direction ou à l’analyste 

financier un instrument précieux d’appréciation de l’activité et de l’équilibre financier de 

l’entreprise. L’objectif poursuivi dans l’utilisation de cette méthode reste essentiellement celui 

d’informer. Mais il ne s’agit pas seulement de suivre l’appréciation de l’équilibre financier ou 

de la santé financière de l’entreprise, mais, surtout, d’analyser l’évolution de sa situation ou


ISSN: 1842-4856 

de l’évaluer ; dans cette mesure, la méthode proposée pouvant être utilisée en tant que moyen 

pour établir les signaleurs de directions concernant l’activité et la situation financière de 

l’entreprise. 

L’utilisation normative ou comparative, où le but poursuivi est celui de corriger le 

jugement porté sur la situation financière de l’entreprise, sur son état de santé, en général, un 

tel jugement ne pouvant pas être réalisé qu’à travers les principes financiers considérés 

comme fondamentaux par l’analyste. 

Un organisme de crédit accordera ainsi une plus grande importance au respect par 

l’entreprise des principes traditionnels de l’équilibre financier. 

Parmi les nombreuses possibilités dont dispose l’analyste pour élaborer des normes 

significatives, les plus importantes et les plus utilisées sont les suivantes [2, 42]: 

a)Les références aux normes professionnelles 

Vu la spécificité des structures et de l’exploitation qui carcatérise l’activité d’une 

entreprise, les seules qui peuvent être comparées sont les entreprises dont les activités sont 

semblables. 

b)L’élaboration de normes moyennes 

Dans le cadre de la même branche, les rapports moyens peuvent être établis pour les 

taux qui pourront être comparés. On peut utiliser à cet effet deux méthodes : 

–La première consiste dans le calcul de la moyenne arithmétique des taux du même 

type, calculés pour chaque entreprise du secteur économique et l’échantillon considéré ; 

–La seconde vise à établir, à partir des bilans et des comptes de résultats de chaque 

entreprise, des documents d’ensemble, en assumant des données de même nature, ensuite de 

calculer les taux choisis, à partir des valeurs globales ainsi déterminées. 

c)L’utilisation de taux types 

Cette méthode, plus élaborée, consiste à établir une série de taux-types, qui tiennent 

compte de la situation de l’”entreprise-type” de la branche. Chaque rapport de l’entreprisetype 

représente une moyenne générale combinée, calculée, à partir des taux respectifs d’un 

certain nombre d’entreprises qui forment un échantillon représentatif et fondés, en général, 

sur un ensemble de quelques (cinq) données. A partir de ces moyennes combinées, calculées 

pour chaque taux, l’entreprise doit alors comparer ses propres rapports et analyser les écarts 

qui les différencient. 

d)Le choix des taux idéaux 

Dans le but de mettre en valeur séparément l’importance relative de chaque taux 

mensuel, un coefficient de poids est attribué aux taux considérés comme étant les plus 

significatifs. 

Cette méthode, qui a été relativement utilisée pendant de nombreuses années en 

Occident, est devenue désormais désuète, étant donné le caractère arbitraire du choix des 

coefficients de poids et, par conséquent, du jugement porté sur l’entreprise. 

L’utilisation statistique se fonde sur l’analyse du comportement d’un échantillon 

d’entreprises. L’objectif de la méthode statistique n’est plus de déterminer les taux en tant que 

“normes”, en fonction des principes financiers, ni d’expliquer à travers les taux la situation 

financière de l’entreprise. Cette méthode considère en effet que les taux constituent euxmêmes 

des informations dont l’analyste dispose au sujet de l’entreprise, vu qu’ils transposent 

des comportements qui peuvent être soumis à une analyse statistique. Une telle conception 

nous permet en même temps de tester la validité des taux en tant qu’instruments de prévision 

de la situation financière de l’entreprise ; les taux peuvent, par exemple, relever pour 

l’entreprise étudiée un risque de faillite ou des difficultés de trésorerie à brève échéance. 

Conformément à l’analyse financière, au sens strict, la méthode des taux peut être 

utilisée à finalité de gestion comme de contrôle. Son appliquation est limitée vu que les 

rapports obtenus, à partir des documents comptables d’une entreprise, démontrent ce qui s’est 

passé, mais non quelles sont les raisons qui ont déterminé une telle situation. L’attention de


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celui qui gère le patrimoine d’une entreprise se concentre en effet sur la rentabilité obtenue 

par rapport à l’actif et sur les facteurs de cette rentabilité ; en échange, les causes de 

l’évolution enregistrée doivent être étudiées après le constat des résultats, et non pas par la 

simple lecture des taux calculés. Dans cette optique, une technique vaut d’être retenue, à 

savoir l’analyse en pyramide, qui est la conséquence directe des relations existantes entre les 

différents taux. Un taux abordé individuellement a une signification réduite, représentant un 

seul aspect de la gestion et de l’activité de l’entreprise, il doit donc être comparé avec d’autres 

taux en vue de déterminer les relations qui existent entre les variations de chacune. 

L’analyse en pyramide exige tout d’abord de déterminer le taux considéré le plus 

caractéristique pour l’activité de l’entreprise, le taux de base retenu en général étant le taux 

des résultats : le bénéfice (profit)/ capitaux engagés, qui constitue la pointe de la pyramide 

(figure 2) [2, 44]. 

Immobilisa 

tions 

Liquidités 

disponibles 

49B 

Figure 

Capitaux 

engagés 

Taux de 

rotation 

Actif 

circulant 

Taux de rentabilité des capitaux 

engagés 

Ventes 

+ + + + 

Valeurs 

réalisables 

Valeurs d’ 

exploitatio 

Coûts 

additifs 

n° 2. Analyse en pyramide des taux 

Taux de 

marge 

Ventes Résultat 

d’exploitat 

Coût des 

ventes 

Coûts de 

distributio 

Ventes 

Coûts de 

production 

L’ensemble des taux occupe une place bien définie dans le système global qui relie les 

taux d’activité dans le système global et de résultats, cette interdépendance résultant de 

l’intégration des divers aspects du marché de l’entreprise. Ainsi l’analyse en pyramide a-t-elle 

été conçue pour mettre en évidence cet important facteur. 

Pour permettre une plus rapide prise des décisions et l’augmentation de l’efficacité 

opérationnelle, les grosses entreprises sont en général organisées en divisions ou de façon 

décentralisée. 

Chaque division [5, 163]: 

–est définie en tant que centre de profit ;


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–dispose de ses propres unités de production, outillages et capital de travail, ainsi que 

d’une proportion de l’actif total de la corporation, à savoir les daboratoires de recherches ou 

des bâtiments du siège central ; 

–doit faire preuve d’un taux de rentabilité adéquate aux actifs opérationnels qu’elle 

détient. 

Le siège de la corporation, à travers le personnel central, utilise habituellement une 

forme de système Du Pont en vue d’exercer le contrôle sur les différentes divisions. 

La ROA calculée en tant qu’équation dans le cadre du système modifié Du Pont (Du 

Pont étant la première compagnie américaine qui a utilisé le schéma d’analyse financière 

appelé Du Pont de Nemours, à la fin des années 1940, pour le contrôle de la rentabilité de ses 

différents départements), a comme résultat le produit entre la marge de profit et le taux de 

rotation de ses actifs totals : 

79B 

(1) 

80B 

(2) 

ROA = Marge de profit x Taux de rotation de ses actifs totals 

ROA = Revenu net / Chiffre ventes x Chiffre ventes / Total actifs 

Le taux de rentabilité des actifs (ROA) étant multiplié par le facteur de multiplication 

du capital propre, qui est représenté par le rapport entre l’actif total et le capital propre, va 

déterminer l’obtention d’un autre taux de rentabilité du capital propre (ROE – Return On 

Equity). 

81B 

(3) 

82B 

(4) 

ROE = ROA x Facteur de multiplication du capital propre 

ROE = Revenu net / Actif total x Actif total / Capital propre 

Le principe qui met en évidence le schéma d’analyse financière du système modifié 

Du Pont de Nemours est détaillé dans la figure 3 ci-dessous : 

Dans les conditions d’une économie de marché, une entreprise vise à être performante 

afin de préserver et développer les segments de marché qu’elle détient et à faire face à la 

concurrence, supposant l’usage d’un ensemble d’indicateurs qui lui permettent d’évaluer les 

performances réalisées et de les comparer aux performances obtenues par les entreprises 

concurrentes pour un positionnement objectif sous le rapport économique [1, 49]. 

Taux de rentabilité des actifs 

Taux de rentabilité du capital 

propre 

Multiplié par 

Actifs / Capital propre


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Figure n° 3. Schéma „Du pont de Nemours” 

REFERENCES: 

1. Bărbulescu, C., Diagnosticarea întreprinderilor în dificultate economică. Strategii şi 

politici de redresare şi dinamizare a activităţii, Bucureşti, Editura Economică, 2002. 

2. Brezeanu, P., Gestiunea financiară a întreprinderii în economia de piaţă, Bucureşti, 

Editura Fundaţiei “România de mîine”, 1999. 

3. Dardac, N., Mosteanu, T., Vintilă, G., “Metodologii de diagnosticare financiarbancară 

a întrepriderilor”, Buletin Economic Legislativ, n° 9/1996. 

4. Işfănescu, A., Stănescu, C., Băicuşi, A., Analiza economico-financiară, Bucureşti, 

Editura Economică, 1999. 

5. Mihalciuc, C.C., Utilizarea sistemelor de planificare şi control financiar de către 

managerii financiari pentru îmbunătăţirea eficienţei operaţionale, Tîrgu-Jiu, 

Université “Constantin Brâncuşi”, 2002. 

6. Moroşan, I., Analiza economico-fiannciară, Bucureşti, Editura “Fundaţiei România de 

mîine”, 2002. 

7. Niculescu, M. Diagnostic global strategic, Bucureşti, Editura Economică, 1997. 

8. Spătaru, L., Analiza economico-financiară. Instrument al managementului 

întreprinderilor, Bucureşti, Editura Economică, 2004.


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MANAGEMENT ACCOUNTING VERSUS FINANCIAL ACCOUNTING 

Gomoi Bogdan Cosmin, prep. univ. drd. 


Cernuşca Lucian, conf. univ. dr. 


ABSTRACT: Knowing a little of the history of management accounting is very useful in 

understanding the differences between management accounting and financial accounting. Frankly, a lot of 

professionals have a difficult time separating the purpose of management accounting and financial accounting. 

Overall, the purpose of financial accounting, as determined by several regulatory groups, is to establish an 

objective and consistent format for all companies to use in reporting financial results to the public. In contrast, 

management accounting is established by individual companies that want to create proprietary information for 

internal use that has competitive value. The “rules” of management accounting are not governed by anything 

other than market forces. 

Among the successful innovators in management accounting were Donaldson Brown and the du Ponts, 

who, at the beginning of the twentieth century, consolidated the previous work of others into the famous DuPont 

ROI management accounting model. The essential purpose of management accounting is to support decision 

making that adds value to the organization. Effective decision making is the key to the management process and 

it is central to the management functions of controlling, planning and evaluating. Planning is the process of 

making decisions about future products and services, operations and investments. Controlling involves tracking 

actual costs, quality and timing performance within the organization. Evaluating is a process of analyzing results, 

computing variances and providing feedback to assess personnel, divisions, products and processes. 

One of the oldest continuously operating industrial enterprises in the world, the Du 

Pont company was established in 1802 near Wilmington, Delaware, by a French immigrant, 

Eleuthére Irénée du Pont de Nemours, to produce black powder. Essentially, E.I. du Pont 

builds a product that ignited when it was supposed to. Public enthusiasm for du Pont’s 

product continued, and the company grew into a major family corporation. The start of the 

twentieth century brought increased competition from other companies, however, and DuPont 

fell on hard times. Seizing the opportunity created by the crisis, three of E.I. du Pont’s greatgrandsons, 

Alfred I. du Pont, Thomas Coleman du Pont, and Pierre Samuel du Pont, offered 

to purchase the firm’s assets from the family in exchange for bonds and stock in a new 

corporation (a transaction known today as a leveraged buyout). The offer was accepted. In 

1902, the company was restructured to look for new business and create new products through 

research and development. Alfred Coleman, and Pierre had some pretty innovative ideas 

about running a business. 

29BThe 

Return on Investment (ROI) Technique 

By the time Alfred, Coleman, and Pierre du Pont had finished buying out suppliers 

and establishing sales offices throughout the country, they had created a giant organization. 

The fact that their company was big, however, is not what makes their situation interesting. 

Francis Cabot Lowell, Edward Henry Harriman, Andrew Carnegie, and Rowland H. Macy 

each had already created a successfully managed huge company. Their companies, however,


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focused on doing one thing well- making cloth, moving railway cars, producing steel or selling 

goods. The du Pont’s, on the other hand, were trying to combine within one company many 

different types of businesses: wholesale purchasing, raw materials and finished goods 

manufacturing, and retail distribution. They had a huge management hierarchy, complicated 

production processes, geographically dispersed business locations, and inventory that needed to 

turn over rapidly. Each of these divisions required constant attention and additional capital 

investments in order to grow and flourish. The Du Ponts knew they could make or lose money in 

any part of this monstrous company. Obviously, neither they nor their capital resources could be 

everywhere at once. They needed to make trade-off decisions. The problem was, with very 

diverse divisions should receive additional investments of the time and money? They couldn’t 

really compare the cost reports of retail stores in Denver with black powder manufacturing 

factory in Delaware or with a sodium nitrate processing plant in Chile. Having all these unique 

business activities also made it quite difficult to relate various measures of efficiencies directly to 

overall company profit. The first thing the new DuPont management team did was develop 

extensive budgets to coordinate the flow of resources from raw materials to the final customer. 

But they still needed a measure for comparing performance in the firm’s separate divisions with 

performance of the whole company. Enter the accountant. 

Donaldson Brown, along with other executives at DuPont, realized that every division 

required an investment in capital (assets) in order to be in business. The overall goal of every 

business should be to effectively use its assets to make a profit. 

Although this simple formula was not really new to American business in the first part of 

the twentieth century, Brown took the idea of return to investment (ROI) and turned it into a 

management technique that could be used to manage any kind of business operation at DuPont. 

The ROI tool allowed the du Pont cousins to be hugely successful in managing the country’s first 

integrated company by combining cost management with asset management and raising it to an 

art form!. It’s likely that no management accounting techniques has had as great an impact on 

business management as the DuPont ROI formula. 

30BManagement 

Accounting and Financial Accounting 

In addition to introducing the ROI formula, the DuPont story is an example of how 

management accounting evolves within organizations that have a particular need for good 

information. This development pattern has been playing out across companies for a long time. 

Since the first days of the Industrial Revolution, business owners and managers have generally 

adopted the best accounting ideas available from other companies and then created their own new 

accounting system that provided a competitive edge in terms of good management information. 

Over time, management accounting has, quite literally, evolved within and migrated between 

organizations and industries in the process of satisfying individual information needs in a 

competitive world. In fact, a company often regards a good management accounting system as 

highly proprietary- and rarely discloses its details to the public. 

Conversely, primarily as a result of the Stock Market Crash of 1929, financial accounting 

has effectively developed in the United States to provide a common reporting platform to the 

public. In the rapidly rising stock market of the 1920s, many companies publicly issued shares 

for the first time. These shares issues were often accompanied by little or no financial disclosure. 

Thus, many stock traders were buying and selling shares based mainly on rumor, speculation, and 

deceit. In the aftermath of the crash, Congress established the Securities and Exchange 

Commission (SEC) to regulate the issuance and trading of securities in the United States. In


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addition to monitoring insider trading and stockbroker behavior, the SEC also ensures that 

companies issuing securities for purchase by U.S. investors provide full and fair disclosure of 

their financial status through the public release of financial statements prepared using a set of 

generally accepted accounting practices (GAAP). The SEC has the legal authority to prescribe 

accepted accounting standards, but has generally allowed the accounting profession in the United 

States to establish those rules. Currently, the Financial Accounting Standards Board (FASB), a 

nongovernmental body supported by a business community and the accounting profession, is the 

acknowledged source of authoritative accounting standards in the United States. 

The Management Process and the Management Accounting Terminology 

Critical to the success experienced by great companies like DuPont is intelligent decision 

making by individuals supported by competitive management accounting information. Managers 

will always need to make choices. What should be produced? What should be sold? How should 

the service be delivered? What does this client need? Which supplier should be used? Who 

should be promoted? How should financing be obtained? 

Planning 

Management planning involves a process of identifying problems or opportunities, 

identifying alternatives, evaluating alternatives, then choosing and implementing the best 

alternative(s). There are two basic types of planning: long-run planning, which includes strategic 

planning and capital budgeting; short-run planning, which includes: production and process 

prioritizing and operational budgeting (profit planning). 

Long run planning involves making decisions with effects that extend several years into 

the future-usually three to five years, but sometimes longer. This includes broad-based decisions 

about products, markets, productive facilities, and financial resources. Long-run planning is often 

called strategic planning. Strategic planning, likely the most critical decision-making process that 

takes place at the executive level in any organization today, usually involves identifying an 

organization’s mission, the goals flowing from the mission, and strategies and action steps to 

accomplish those goals. Successful executives, such as Pierre du Pont or Andrew Carnegie, have 

always displayed great skill in studying the market, identifying customer needs, evaluating 

competitors’ strengths and weaknesses, and defining the right investments and processes their 

organization need for success. Good management accounting supports good strategic planning by 

providing the internal information needed by executives to evaluate and adjust their strategic 

plans. With strategic planning in place (or in process), the company can then plan for the 

purchase and use of major assets such as building or equipment to help the company meet its 

long-range goals. This type of long-run planning is called capital budgeting. 

Controlling 

Controlling involves a process of tracking actual performance in terms of costs, and 

timeliness measures. These data are then used subsequently in the evaluating process to compare 

against the budgets previously prepared in the planning process to measure variances from the 

original goals and standards. The first management accounting systems focused on tracking paid 

for material, labor, overhead, and administrative costs. These systems often have built-in 

operational budgets so that they can simultaneously evaluate actual performance and compare it


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to expectation. These systems determine the desired amounts of labor, materials, and 

administrative support that should be used to efficiently achieve the right outputs of products and 

services. The foundation of management accounting is a carefully developed model of product 

and service costs. We’ll explore this model later in this chapter. 

Evaluating 

Evaluating involves analyzing results, providing feedback to managers and other 

employees, rewarding performance, and identifying problems. Evaluating is typically a process 

of comparing actual performance against expected inputs of costs, expected outputs of quality, 

and expected timelines. This comparison typically results in information called variances, which 

tell management how well the organization is achieving its plans. If performance is in accordance 

with the plan, the variances signal that operations are in control and no unusual management 

action is necessary. If performance is substantially different from the plan, management needs to 

decide how to alter operations in order to improve future performance. One specific type of 

evaluation focuses on company personnel and their responsibilities within the organization. 

Upper-level management must evaluate how well lower-level managers have performed the 

activities assigned to them in the original planning stage. Feedback enables management to 

evaluate performance and provide direction for future improvements, an important aspect of 

growth in the organization. If performance is good, management needs to consider rewards; if 

performance is poor, corrective action must be taken. Too many companies fail to clearly link 

incentive compensation with management goals to ensure that everyone is focused on low cost, 

high quality, and timely delivery of goods and services expected by customers and clients. 

The important thing to remember is that the purpose of financial accounting, as defined 

by GAAP, is to comply with requests of outside investors, creditors, and regulators for fair and 

consistent reports of operations. Accordingly, all companies are required to apply the same 

general financial accounting rules so that outsiders can compare financial reports coming from 

many different companies. In contrast, no government regulator or auditor is going to insist that a 

company implement a good management accounting system; the choice of how to collect and use 

information within a company is part of a company’s competitive strategy. For example, no one 

forced the DuPont cousins to use the ROI formula to better manage their business; however, 

because the ROI evaluation framework worked well for DuPont, it was subsequently mimicked 

by many (but not all) of DuPont’s competitors. Remember, the only reason a company does 

management accounting is to satisfy a competitive need, and competitive need often dictates that 

one organization’s management accounting system will not look like another’s!. 

References 

8. Harrison W., Horngren, C., Financial Accounting Second Edition, Editura Prentice Hall, 

2005. 

9. Nobes, C.W., Parker, R., Comparative International Accounting, Editura Prentice Hall, 2000. 

10. Albrecht, S., Stice, J., Stice, E., Skousen, F., Accounting Concepts and Applications Edition 

8, South-Western, Thomson Learning, 2000. 

11. Brigham, E., Fundamentals of Financial Management, The Dryden Press, 1995. 

12. *** Consilier Management Financiar, Editura Rentrop & Straton, 2005. 

13. *** Standardele Internaţionale de Raportare Financiară (IFRS), Editura CECCAR, 2005.


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MANAGEMENT OF INTERNATIONAL AFFAIRS 

LAPADUSI MIHAELA LOREDANA 

ASSISTANT LECTURER, PHD. STUDENT 

UNIVERSITY “CONSTANTIN BRANCUSI” 

ABSTRACT 

The strategy penetration and development of external markests is an important obiectiv important of 

management of internalional enterprises. It implies an accurate analysis of the business environment for emphasizing 

business opportunities and risks and the business potential of that paticular enterprise. In order to establish the 

objesctives of internalization and the aspects (forme) of internalization. International management gets particular 

throughout the environment in which that enterprise develops its economic activity, that means the world market 

where internalional business implies acces tro new markets, and enterpreises must adapt to specific necessities an 

oportunities. 

The management of the economic international business represents the totality of concepts, 

methods and necessary instruments to identify the opportunities of the economical business 

between the partners belonging to some different countries, promoting, negotiations, contracting 

and their development. The business management supposes to reach some objectives using as 

resources: people, materials, spaces, time. Resources are considered inputs (entering) in the 

process, and the outputs objectives (exits), the success of some business being given by the report 

between input and output that indicates the organization productivity. For developing an 

international business must be fulfilled some conditions as: interaction of the economical agents 

and the closure of some agreement/transaction ‘(business deals), creating some structures that 

allow the mobilization and ordering the resources in working purposes, assuming the risk 

regarding the future business, in the conditions of the complex character of the environment 

where is realized the business, assuring the process sustainability. [1] 

The term of management was defined by Mary Follet through the expression “the art of 

materializing something together with other people”, buy the notion of management may be seen 

form many points of view. 

As a first acceptation the commercial business management represent a scientific discipline 

that contains a principles assembly, concepts and own theories and its major purpose is that these 

to be learned and understood for later to be applied successfully in business. The theoretical bases 

of the management propose to reveal the laws, principles, methods, techniques, procedures and 

rules to the efficient actions. The ruler’s art means skill of transposing this theory in practice. 

The management as personal in the international business is an acceptance that refers to 

the people who, in different collectives, are responsible for the coordination and leading of the 

business. The managers are individual persons that lead to a certain hierarchic level of the 

organization. As well management may be regards as a way of making a career, so that a 

management, correctly understood and applied, leads to an increased efficiency of the business


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so, the persons implied in this process have the possibility to show the qualities and to step on 

the hierarchic treads, even in the top of the pyramid. 

In another acceptance through management is understood a practice activity that 

consists in leading and conducting the material resources, human and financial from a 

company. In this case the management activity supposes the realization in the economic 

practice of five base functions: planning, organization, order, control and coordination.[2] 

Planning is the most important function of management, because it represents the 

activity of taking the decisions in the development of the international business. Through 

planning are established the objectives and the most adequate strategies for their reachment. 

The other functions derive from this one and lead to the objective fulfillment. 

As a conclusion, through planning is fundamental the economic decision, leaving from 

the principle of the decisional alternative evaluation in report to the requests of the maximum 

efficiency. 

Organization is the function through which are grouped and assigned the activities for 

the utilization with efficiency of the available resources, are determined the organ grams and 

is assured the workers framing on compartments and work places. 

Once established the objectives and ways through which these will be reached, manager 

must project or re project the structure able to fulfill them. In the organization background, 

undertake the identified charges during planning and assign tem to the individuals, groups of 

persons and sectors in the respective company that may fulfill them. As well, they establish 

also the regulation of organization functioning and assure its appliance. Drawing a 

conclusion, it may say that through the realization of this managerial function, on different 

hierarchic levels it proceeds to the following actions: 

� are established the activities that lead to the objective realization; 

� there are grouped these activities and assigned on departments or sections; 

� it proceeds to name the authority, when is the case to realize it; 

� it realizes the training of the activity coordination, of the authority and horizontal and 

vertical informal in the organizing structure. 

The purpose of the organizing structure is to allow the getting by the company personnel 

of many performances in the business unrolling. The determination of some organizing 

structure is an important objective for the company management, because it must establish the 

activity types that must develop as well as the personnel that is able to develop them with 

efficiency. 

Command is the management function that begins to be applied in an international 

company after: the objective settlement, the projection of the organizing structure and 

establishing the personnel. The order function supposes the transmission of charges and 

convincing the organization members to be more performing in the chosen strategy for 

unrolling the business and respectively reaching the goals. This way, all managers must be 

conscious that the biggest problems are represented by the personnel; its desires and attitudes, 

the individual or group behavior, must be taken into account because people may be guided 

and helped to execute the charges. The managerial command implies motivation, a certain 

leading style of working with the people, of communication in the organization, this way the 

personnel is certainly an intermediary in the unrolling of international business. 

Coordination works with the personnel stimulation in the participative and efficient 

realization of the resulted charges in the company objectives. Through this function are 

assured the human resources valuing of the company, through the selection, preparation and 

promoting the personnel on performance criteria. 

The coordination function allows “the harmonization” of the individual or group 

interests with the organization purposes. No matter the organization type (production, 

comer5cial, financial, etc), each person interprets in its way the unrolling modality of some 

business. This way, this function intervenes in the “bringing to the same sum” of the


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respective interpretations, placing them in the direction of reaching the base objectives of the 

organization. 

Control supposes following the degree in which the obtained performances correspond 

to the stipulated standards, determining the causes that created deviations and taking the 

correct measures, Through the control function are also followed: the previous established 

limits of the performances that must be obtained; information that show the differences 

between the reached performance level and the planned one; establishing the main actions for 

correcting the deviations. The control purpose is to maintain the company at the level that 

allows it to reach the maximum performances of the company. 

In the entire managerial activity a special role belongs to communication, respectively to 

the process through which is assured the operative circulation of the information inside the 

company, as well as between the company and exterior. Communications may be: 

descendent, ascendant, horizontal and diagonal. 

Descendent communication follows, usually, the relations of hierarchic type, unrolling 

from the top management level, towards the execution levels. The main problem of this 

communication type constitutes the biggest probability that the message to be filtrated when 

is also spread from one level to another, because, each interprets the messages depending on 

the own necessities or objectives. 

The ascendant communication supposes the information transmission at the 

subordinate’s level towards the superior levels of the management. Through them are spread 

reports, demands, opinions, suggestions. The ascendant communication has a special role in 

improving the communication process, because it certifies the transmitted messages delivery 

by the managers. 

The horizontal communication (lateral) is used between the persons or compartments 

situated at the same hierarchic level. Through this communication is facilitated the activity 

coordination that aims at common objectives, excluding the managers intervention at a 

superior level. 

The diagonal communication is used in the conditions where members of the company 

cannot communicate through other networks. This type of communication presents a series of 

advantages: time and costs economy, using informal relations, encouraging a climate based on 

mutual appreciation. 

More and more companies participate into the international economic activity. This 

supposes the development of international dimension of management, of conceiving the 

activity and company’s strategy in an international and global optic. The factors that lead 

to the management evolution of the international business may be considered: 

development and diversification of the international economic relationships; 

diversification of the international economic business on fluxes and their content; 

international commerce with attainable merchandise, whose structure was diversified 

considerably; services commerce (techniques services, banking, transports, tourism, etc); 

the international circulation of capital and other financial- monetary relations. 

The international management and national plan business management are similar 

because both follow to reach the objectives of the company, through the rational coordination 

of the activities and the efficient utilization of the resources. On the other side, they are 

different because: the different contexts where they realize, the cultural diversity of the 

participants in the transaction, as a result of the conceptions and different managerial 

practices. 

The characteristics of the international management are: 

� developing the international management is a reflection of the internationalizing 

process of the economical life that imposed as an existence environment also the company


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functionality ion the world wide market (the global economic space). This process realized 

through: 

-intensification of the internationalizing on a regional plan (economic integration) or 

world wide (rising the international commerce, of the foreign investments, developing the 

financial-exchange relations); 

-enlarging the economical relations and rising the interdependences between the 

commercial fluxes, financially-exchanging, of investments at a global scale 

(international). 

� diversity and complexity of the world wide economical space that presents specific 

strategies and business tactics, based on an intercultural approaching. The international 

management must take into account the differences in the economical system and social 

structure and also those on cultural model between the partners hired in transactions. Through 

the internationalizing a company does not changes its identity, but it modifies its diversity, 

and the management must assure the control of this complex structure and, in the same time, 

the company’s integrity. 

� the business failure-one of the primary causes of the failure in the international 

business consists in the non corresponding information regarding the business environment. 

[3] 

As a conclusion the elaboration of the entrance and developing strategy on the extern 

market is an important attribute of the company’s management of international vocation. It 

supposes taking into account the evolution on the world wide background (analyze of the 

extern environment for accentuating the opportunities and business risks) and of the 

respective company potential (the company’s diagnostic for establishing the advantages and 

disadvantages in the international competition) for the internationalizing objectives and forms 

determination. This way in what regards the internationalizing objectives, the company may 

have: 

- increasing the business cipher through raising the production capacity or the 

commercial potential in accordance to the market requests; 

- increasing the invested capital efficiency and of the profits level through the valuing of 

the offered opportunities on the market and in the international environment; 

-accelerating the rising rhythm and the company development through the “stimulation 

of economical rising” (capital accumulation) and respectively to the “external rising” 

(acquisitions and fusions); 

-increasing the international activities in the company business assembly through the 

valuing of scale economies, of the differentiation possibilities of production etc. [4] 

BIBLIOGRAPHY: 

[1] NICOLAE SUTA “ INTERNATIONAL TRADE AND CONTEMPORARY 

COMMERCIAL POLITICS ”, PUBLISHER EFICIENT, BUCHAREST, 2000; 

[2]FOTA CONSTANTIN: ”INTERNATIONAL TRADE AND INTERNATIONAL 

COMMERCIAL POLITICS”, PUBLISHER ALMA, CRAIOVA, 2000; 

[3]ION ROSU HAMZESCU: “MONOGRAPHY REGARDING INTERNATIONAL 

TRADE, FIRST PART ”, SECOND VOLUME, PUBLISHER UNIVERSITARIA, 

CRAIOVA, 2005; 

[4]ION ROSU HAMZAESCU:” MONOGRAPHY REGARDING INTERNATIONAL 

TRADE, FIRST VOLUME ”, FIRST VOLUME, PUBLISHER UNIVERSITARIA, 

CRAIOVA, 2004.


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MULTINATIONAL WORKING-CAPITAL MANAGEMENT AND 

CAPITAL STRUCTURE DECISIONS 

Mirea Marioara, Conferenţiar universitar dr., Universitatea “Ovidius” 

Constanţa, Facultatea de Ştiinţe Economice 

Asaloş Nicoleta, Lector universitar dr., Universitatea“Ovidius” 

Constanţa,Facultatea de Ştiinţe Economice 

ABSTRACT 

The growth of our global economy, the increasing number of multinational corporations, and the 

increase in foreign trade itself underscore the importance of the study of international finance. In discussing 

working-capital management in an international environment, we find leading and lagging techniques useful in 

minimizing exchange risks and increasing profitability. In addition, funds positioning is a useful tool for 

reducing exchange risk exposure. The multinational corporations may have a lower cost of capital because it has 

access to a larger set of financial markets than a domestic company. In addition to the home, host, and thirdcountry 

financial markets, the multinational corporations can tap the rapidly growing external currency markets. 

In making capital-structure decisions, the multinational corporations must consider political and exchange risks 

and host and home country capital-structure norms. 

MULTINATIONAL WORKING-CAPITAL MANAGEMENT 

The basic principles of working-capital management for a multinational corporation are 

similar to those for a domestic firm. However, tax and exchange rate factors are additional 

considerations for the multinational corporation. For an multinational corporation with 

subsidiaries in many countries, the optimal decisions in the management of working capital 

are made by considering the company as a whole. The global or centralized financial decision 

for an multinational corporation is superior to the set of independent optimal decisions for the 

subsidiaries. This is the control problem of the multinational corporation. If the individual 

subsidiaries make decisions that are best for them individually, the consolidation of such 

decisions may not be best for the multinational corporation as a whole. To effect global 

management, sophisticated computerized models-incorporating many variables for each 

subsidiary-are solved to provide the best overall decision for the multinational corporation. 

Before considering the components of working-capital management, we examine two 

techniques that are useful in the management of a wide variety of working-capital 

components. 

Leading and Lagging 

Two important risk-reduction techniques for many working-capital problems are called 

leading and lagging. Often forward and money market hedges are not available to eliminate 

exchange risk. Under such circumstances, leading and lagging may be used to reduce 


Recall that a net asset (long) position is not desirable in a weak or potentially depreciating 

currency. If a firm has a net asset position in such a currency, it should expedite the disposal 

of the asset. The firm should get rid of the asset earlier than it otherwise would have, or lead, 

and convert the funds into assets in a relatively stronger currency. By the same reasoning, the 

however, firm should lag, or delay the collection against a net asset position in a strong


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currency. If the firm has a net liability (short) position in the weak currency, then it should delay 

the payment against the liability, or lag, until the currency depreciates. In the case of an 

appreciating or strong foreign currency and a net liability position, the firm should lead the payments-that 

is, reduce the liabilities earlier than it would otherwise have. 

These principles are useful in the management of working capital of an multinational corporation. 

They cannot, however, eliminate the foreign exchange risk. When exchange rates change 

continuously, it is almost impossible to guess whether or when the currency will depreciate or 

appreciate. This is why the risk of exchange rate changes cannot be eliminated. Nevertheless, the 

reduction of risk, or the increased gain from exchange rate changes, via the lead and lag is useful 

for cash management, accounts receivable management, and short-term liability management. 

Cash Management and Positioning of Funds 

Positioning of funds takes on an added importance in the international context. Funds may be 

transferred from a subsidiary of the multinational corporation in country A to another subsidiary 

in country B such that the foreign exchange exposure and the tax liability of the multinational 

corporation as a whole are minimized. It bears repeating that, owing to the global strategy of the 

multinational corporation, the tax liability of the subsidiary in country A may be greater than it 

would otherwise have been, but the overall tax payment for all units of the multinational 

corporation is minimized. 

The transfer of funds among subsidiaries and the parent company is done by royalties, fees, and 

transfer pricing. A transfer price is the price a subsidiary or a parent company charges other 

companies that are part of the multinational corporation for its goods or services. A parent that 

wishes to transfer funds from a subsidiary in a depreciating-currency country may charge a 

higher price on the goods and services sold to this subsidiary by the parent or by subsidiaries 

from strong-currency countries. 

INTERNATIONAL FINANCING AND CAPITAL STRUCTURE DECISIONS 

An multinational corporation has access to many more financing sources than a domestic firm. It 

can tap not only the financing sources in its home country that are available to its domestic 

counterparts, but also sources in the foreign countries in which it operates. Host countries often 

provide access to low-cost subsidized financing to attract foreign investment. In addition, the 

multinational corporation may enjoy preferential credit standards because of its size and investor 

preference for its home currency. An multinational corporation may be able to access thirdcountry 

capital markets-countries in which it does not operate but which may have large, wellfunctioning 

capital markets. Finally, an multinational corporation can also access external 

currency markets. These external markets are unregulated, and because of their lower spread, can 

offer very attractive rates for financing and for investments. With the increasing availability of 

interest rate and currency swaps, a firm can raise funds in the lowest-cost maturities and 

currencies and swap them into funds with the maturity and currency denomination it requires. 

Because of its ability to tap a larger number of financial markets, the multinational corporation 

may have a lower cost of capital; and because it may better be able to avoid the problems or 

limitations of any one financial market, it may have a more continuous access to external finance 

compared to a domestic company. 

Access to national financial markets is regulated by governments. Some countries have extensive 

regulations; other countries have relatively open markets. These regulations may differ depending 

on the legal residency terms of the company raising funds. A company that cannot use its local 

subsidiary to raise funds in a given market will be treated as foreign. In order to increase their


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visibility in a foreign capital market, a number of multinational corporations are now listing their 

equities on the stock exchanges of many of these countries. 

In arriving at its capital-structure decisions, an multinational corporation has to consider a 

number of factors. First, the capital structure of its local affiliates is influenced by local norms 

regarding capital structure in that industry and in that country. Local norms for companies in the 

same industry can differ considerably from country to country. Second, the local affiliate capital 

structure must also reflect corporate attitudes toward exchange rate and political risk in that 

country, which would normally lead to higher levels of local debt and other local capital. Third, 

local affiliate capital structure must reflect home country requirements with regard to the 

company’s consolidated capital structure. Finally, the optimal multinational corporation capital 

structure should reflect its wider access to financial markets, its ability to diversify economic and 

political risks, and its other advantages over domestic companies. 

DIRECT FOREIGN INVESTMENT 

An multinational corporation often makes direct foreign investments abroad in the form of plants 

and equipment. The decision process for this type of investment is very similar to the capitalbudgeting 

decision in the domestic context-with some additional twists. Most real-world capitalbudgeting 

decisions are made with uncertain future outcomes. Recall that a capital-budgeting 

decision has three major components: the estimation of the future cash flows (including the initial 

cost of the proposed investment), the estimation of the risk in these cash flows, and the choice of 

the proper discount rate. We will assume that the net present value criterion is appropriate as we 

examine (1) the risks associated with direct foreign investment, and (2) factors to be considered 

in making the investment decision that may be unique to the international scene. 

Risks in Direct Foreign Investments 

Risks in domestic capital budgeting arise from two sources: business risk and financial risk. The 

international capital-budgeting problem incorporates these risks as well as political risk and 


Business Risk and Financial Risk 

International business risk is due to the response of business to economic conditions in the foreign 

country. Additional business risk is due to competition from other multinational corporations, 

local businesses, and imported goods. Financial risk refers to the risks introduced in the profit 

stream by the firm’s financial structure. The financial risks of foreign operations are not very 

different from those of domestic operations. 

Political Risk 

Political risk arises because the foreign subsidiary conducts its business in a political system different 

from that of the home country. Many foreign governments, especially those in the Third World, 

are less stable. A change in a country’s political setup frequently brings a change in policies with 

respect to businesses-and especially with respect to foreign businesses. An extreme change in 

policy might involve nationalization or even outright expropriation of certain businesses. These are 

the political risks of conducting business abroad. A business with no investment in plants and 

equipment is less susceptible to these risks. Some examples of political risk are listed below: 

1. Expropriation of plants and equipment without compensation. 

2. Expropriation with minimal compensation that is below actual market value. 

3. Nonconvertibility of the subsidiary’s foreign earnings into the parent’s currency- the problem


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of blocked funds. 

4. Substantial changes in the laws governing taxation. 

5. Governmental controls in the foreign country regarding the sale price of the products, 

wages, and compensation to personnel, hiring of personnel, making of transfer payments to 

the parent, and local borrowing. 

6. Some governments require certain amounts of local equity participation in the business. 

Some require that the majority of the equity participation belong to their country. 

All these controls and governmental actions introduce risks in the cash flows of the investment to 

the parent company. These risks must be considered before making the foreign investment 

decision. The multinational corporation may decide against investing in countries with risks of 

types 1 and 2. Other risks can be borne-provided that the returns from the foreign investments are 

high enough to compensate for them. Insurance against some types of political risks may be 

purchased from private insurance companies. It should be noted that although an multinational 

corporation cannot protect itself against all foreign political risks, political risks are also present in 

domestic business. 

Exchange Risk 

The exposure of the fixed assets is best measured by the effects of the exchange rate changes on 

the firm’s future earnings stream: that being economic exposure rather than translation exposure. 

For instance, changes in the exchange rate may adversely affect sales by making competing 

imported goods cheaper. Changes in the cost of goods sold may result if some components are 

imported and their price in the foreign currency changes because of exchange rate fluctuations. 

The thrust of these examples is that the effect of exchange rate changes on income statement 

items should be properly measured to evaluate exchange risk. Finally, exchange risk affects the 

denominated profit stream of the parent company, whether or not it affects the foreign-currency 

profits. 

A Summary Illustration 

Investment across international boundaries gives rise to special risks not encountered when 

investing domestically. Specifically, political risks and exchange rate risk are unique to 

international investing. Once again: The Risk-Return Tradeoff - We Won’t Take on Additional 

Risk Unless We Expect to Be Compensated with Additional Return provides a rationale for 

evaluating these considerations. Where added risks are present, added rewards are necessary to 

induce investment. 

Bibliography 

1. Bartlett, Christopher A., Ghoshal, Sumantra – “Managing across borders. The transnational 

solution”, Ed. HBR, Boston, 2002; 

2.Mockler, R. – “Management strategic multinational ”, Ed. Economica, Bucuresti, 2001; 

3. Mullins, Laurie – “Management and organizational behaviour”, Pitman Publishing, Marea 

Britanie, 1996; 

4. Voinea, Liviu – “Corporatiile Multinationale si Economiile Nationale”, Ed. I.R.L.I., Bucuresti, 

2001.


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NOTIFICATION AS THE CORE ELEMENT TOWARDS INVESTORS’ 

INTERESTS PROTECTION 

Dragica Odzaklieska, MSc 


Gordana Vitanova, PhD 


ABSTRACT 

An efficient way to run the capital market implies the necessity to obtain qualitative, relevant and objective 

information on time. In terms of globalization, internationalization and high technology and in accordance with the 

international professional rules, the standard financial statements, but not the unique ones, ensure some high quality 

information about the financial state of the business firms, their performances, as well as the changes of their 

financial position. This information stands for a solid base to reach the economic decisions by the investors aimed at 

purchasing or selling the effects, as well as assessing the risk to return on invested capital at the global level. The 

information is actually considered as a kind of pillar to achieve the efficient running of the national and global capital 

markets. 

INTRODUCTION 

The practices in developed countries indicate that the market economy existence is unimaginable 

without presence and functioning of capital market. In every national economy, the existence of 

capital market ensures: 

- increase in national savings; 

- increase the efficiency of resource allocation; 

- expansion of property; 

- higher degree of long term financial sources availability. 

An efficient way to run the capital market implies the necessity to obtain qualitative, relevant and 

objective information on time. In terms of globalization, internationalization and high technology 

and in accordance with the international professional rules, the standard financial statements, but 

not the unique ones, ensure some high quality information about the financial state of the 

business firms, their performances, as well as the changes of their financial position. This 

information stands for a solid base to reach the economic decisions by the investors aimed at 

purchasing or selling the effects, as well as assessing the risk to return on invested capital at the 

global level. The information is actually considered as a kind of pillar to achieve the efficient 

running of the national and global capital markets.


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CAPITAL MARKET AS SPIRITUS MOVENS OF THE ECONOMY 

The capital market is often call “spiritus movens” of the economy, because, it is expected, from 

this market, a wide range of targets to be accomplished and realized, such as: 

- providing capital for prosperity and economic growth; 

- accomplishing optimal capital allocation; 

- accomplishing the biggest effect from money savings increase; 

- protecting the interest of the capital owners and users; 

- setting the real and market cost price of the capital i.e. reconciliation the rate of interests 

on capital market; 

- selection of economic programs and projects in accordance with the profitability 

principle. 

Considering the previously explained goals, whose realization is expected from capital market, as 

well as the fact that the capital don’t recognize limits, in the terms of globalization, the financial 

notification became very important. 

GLOBALIZATION 

Globalization represent the world integration of the markets as the result of technical possibilities 

as well as reduction and removal the barriers in international trade. The supporters emphasize the 

advantages of globalization, such as: making possibilities for development of different sectors, 

higher productivity and better resources utilization. The opponents stress the negative influence 

of the globalization concerning unemployment, weakening the role of the state etc. 

Globalization as process began in 19 century among distant parts of Europe and South America 

and it takes the biggest blow in the second half of 20 century as a result of market liberalization, 

extended free trade and elimination of trade restrictions. 

The explosion of the high technology arouses the globalization expansion. The high technology is 

characteristic of the production, notification and communication. Technique and technology 

cause great changes in the production concerning shortening the product lifecycle, as well as, the 

duration of a term of the competitive advantage. Company’s operating activities from the high 

technology became very complex with drastic uncertainty and risk enlargement. Every day, new 

subject, new industries, new professional services are emerging. The financial means mobility, 

risk control, investment profitability and defined business interests of the participants are factors 

that are seeking fast actions from the managers. 

Information and communication technology enable easy conquering the market barriers and 

faster information circulation. The influence of technique and technology can be understood 

119 

through the next exampleF 

F: 

- in the thirty years of the 20 century. the companies communicate over post and the time 

for getting financial information was a few days. Appearance of the telefax reduced the 

time on few hours; 

119 

Albercht W.S., Sack J.R., Charting the Crouse through a Perilous Future, Joint project, Accounting Education 

Series Volume 6, p. 5


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- appearance of the internet and e-mail allow economic communication for a very short 

time i.e. for a few seconds the investors from all over the world get very important 

information. 

CAPITAL MARKET IN THE TERMS OF GLOBALIZATION 

Capital market and financial institution in global economy can’t be observed only through known 

organizational forms that are specified with space, time and place of meeting the supply and 

demand of the financial means, but through the prism of the changes in the essence of the 

relationship among the banks and other financial institution as well as all potential investors. In 

the contemporary business conditions, globalization and internationalization of economic 

activities in the world, the international financial institutions are spiritus movens and one of the 

most important factors for international economic relation functioning. The global economy 

conditionality of the world economy in the international exchange relations have also influence 

on capital markets and financial relations. This influence can be seen through: 

- mobility and liberalization of capital flows in international relations; 

- openness of the capital market in the world towards new financial instruments and 

financial flows; 

- promotion, standardization and unification of the technology in accomplishing the 

activities on capital market; 

- financial innovations implementation based mainly on multilateral financial instruments, 

as well as speculative transactions increase i.e. increase of the investors that don’t have 

risk aversion; 

- unique international relation in accomplishing the payment activities; 

- expansion of bank net all over the world; 

- deregulation of the rules that refers to bank working. 

From the other side, the financial means owners are very careful when they decide about 

resources investments and they usually have clearly defined interests and information about 

market risk. According to these reasons, it is necessary to offer new financial services and 

product to the financial means owners, based on: 

- giving transparent information about creditworthiness of the potential users; 

- possibility for effective and gainfully financial means investments; 

- offer of the competitive programs for financial means investments; 

- capital mobility through different financial instruments; 

- possibility for risk diversification; 

- organized appearance of the investors on capital market through intermediary institutions. 

FINANCIAL NOTIFICATION IN THE TERMS OF GLOBALIZATION 

In the terms of globalization, financial statement preparation and presentation is doing according 

the different accounting standards in the different national countries and that is the reason for 

their incompatibility and their understanding seek experts and financial analysts for accounting 

systems in different countries. The different accounting systems are basic reason for 

incompatibility of capital values and results in the separate national economies, sectors and 

companies in the same industrial branches. From the other side, the differences in financial


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statements slow down the capital flow internationalization and reduce the national financial 

market efficiency. 

Individual and institutional investors seek unique system for financial notification and disclosure 

of additional information (from financial and non-financial character) on world level. This 

information is crucial for the investor when they decide about financial means investments. They 

require financial statements and relevant, prompt and correct information about the efficiency of 

capital usage for concrete time period from the subject in which they have invested or want to 

invest their financial means. 

As the result of the previous explanation, in the terms of globalization, the participants at the 

financial markets require the unique system for financial notification i.e. the accounting 

information valuation, disclosure and transparency should be performed on universal way. 

The instruments for standardizations i.e. the unique way for valuation and disclosure of financial 

statements are International Accounting Standards and International Audit Standards. They can 

be used as tool for solving the problems in international communication on global level. 

International Monetary Fond and World Bank set up five “gold” principles that are the base for 

financial infrastructure: 

- transparency; 

- solid financial system; 

- involvement in private sector; 

- liberalization of the capital; and 

- international market modernization. 

The application of these principles means their implementation on global level in the area of 

120 

accounting, audit, assurance, securities, paying system and bank controlF 

F. 

Implementation of International Accounting Standards and International Audit Standards and 

application of these five principles during financial statement implementation, besides quality 

financial notification, also enables the following advantages: 

- increase the investors interest for investments in the concrete country; 

- increase the possibility for participation on global capital market; 

- reduce the risk for investments in the concrete country; 

- simplify the payment procedure in international payment operations; 

- increase the securities market efficiency. 

In the contemporary terms of globalization, investors are interested in additional information and 

financial notification gradually lapse into business notification. Investors require information 

about production, development strategy, market position of the subject, the resources value and 

structure, planning tasks and their time realization. The required information must be delivered 

fast and expeditiously. It is necessary to underline that the investors aren’t alone when they seek 

information, but they have support from organization responsible for effective securities market 

functioning. This organization is International Securities Organization – IOSCO. Its task is to 

avoid the financial statements incompatibility in order to allow safely deployment of the free 

capital and to make condition for reconciliation of all national accounting systems with one 

unique accounting language. This organization has three principles for realizing the tasks: 

120 Insight, IFAC, october 1998, page 1


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- protection of the investor’s interests through supply with high quality information; 

- existence of effective and transparent market; 

- reducing the systematic risk. 

The realization of these principles require admiration of the securities market regulation 

principles, especially those that refer to the issuer, such as: completely, expeditiously and 

accurately disclosure the financial results and other data from financial statements that are 

important for investors to pass judgment about investments. 

CONCLUSION 

Considering the fact that International Accounting Standards ensure high quality information 

from financial statements about the financial condition of the company, its performances, as well 

as data comparison with other companies, Republic of Macedonia legislate the usage of these 

standards from 2004. Big influence for imposition of these standards as obligatory ones, has 

endeavor for attract the foreign capital that is essential for faster economy development. The 

foreign capital owners are very careful during capital investment in transition countries, so it is 

necessary the financial data for the companies in our country to be objective presented and that is 

possible only with international standards application. 

BIBLIOGRAPHY 

1. Albercht W.S., Sack J.R., Charting the Crouse through a Perilous Future, Joint project, 

Accounting Education Series Volume 6; 

2. Insight, IFAC, London, october 1998; 

3. Jaksic D., Andric M., Fer prezentacija racunovodstvenih izvestaja – uniformnost i 

fleksibilnost (Fair presentation of accounting statements – uniformity and flexibility), 

Racunovodstvo, 5-6/2003; 

4. Jahic M., Finansisko racunovodstvo (Financial Accounting), Zavod za racunovodstvo i 

finansije Federacije BiH, Sarajevo, 2003. 

5. Kovacevic R., Revizija u trzisnom gospodarstvu (Audit in market economy), Informator, 

Zagreb, 1993; 

6. Pantelic M., Ekspanzija procesa standardizacije – put ka harmonizaciji ili dodatna 

konfuzija (The expansion of standardization process – course to harmonization or 

additional confusion), Zbornik radova, Beograd, 1999;


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OPINIONS ABOUT THE OPTIMUM FISCAL POLICY 

Clipici Emilia, Ph.D. Student Assistant 

University of Piteşti, Romania 

Le processus de développement économique peut être influencé par l’intermédiaire des mesures de politique 

fiscale prises par les autorités gouvernementales. Mais, les effets de ces mesures-là sont diverses et elles différent 

d’un cas particulier à un autre. L’opinion des spécialistes en ce qui concerne un bon système fiscal sera présentée 

avec tous les détails dans cet article. 

There are 27 different systems for corporate taxation in the European Union. This creates 

tax obstacles that reduce the benefits of the Internal Market. Companies involved in cross-border 

transactions are most affected, for example through tax-induced obstacles to investment 

decisions. From a purely economic point of view, the main culprit is the large variation in 

effective corporate tax rates, driven by uncoordinated nominal corporate tax rates and different 

rules for calculating corporate tax bases. 

Whether they are positive or negative, the revenue effects of tax cooperation must be 

absorbed in some way. The choice fiscal instrument for balancing government budgets can 

sometimes have a significant influence on the effects of corporate tax cooperation. In fact, the 

often large country level effects on tax revenues mean that corporate tax cooperation would be 

likely to be bundled with additional tax policy reforms. 

For both full harmonisation and tax base harmonisation, it would not be realistic to 

envision adjustments of solely corporate tax rates to stabilize revenues for all member states. The 

required changes would be too large to be practically feasible. As an alternative, this study has 

therefore analysed the effects of adjusting labour tax rates to balance government budgets. In the 

case of tax base harmonisation, the model shows that bundling corporate tax cooperation with 

labour tax reforms can result in positive gains in both GDP, welfare and tax revenues. Increasing 

labour taxes to reduce corporate tax revenue shortfalls would, however, increase unemployment. 

Such reforms may prove equally painful as reforms requiring cuts in income transfers or other 

public expenditure. 

The examination of the taxes and duties system in EU proves that the tax burden is a 

consequence of the high level of public expenses. In order to fulfill the major objective of the 

fiscal policy, that of reducing the global fiscal pressure in EU, the measure of reducing duties 

must be accompanied by corresponding adjustments of public expenses by reducing them. We 

can anticipate that reducing the fiscal pressure, especially in the case of taxpayers, will have 

positive effects on investments, production and employment. The positive effects will increase if 

tax reducing will be found in the economic reform programs. Benefits will come if tax reducing 

is accompanied by decreases of current transfers. 

Many developed countries try to fulfill these objectives by means of the fiscal reforms 

which will be promoted in the following years. These reforms focus especially on reducing the 

tax burden in the case of work, especially at the bottom line of the salary rates. They also refer to 

the taxes on unearned income, having thus in view to improve the functioning of financial


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markets. The efficiency and pragmatism of the fiscal systems will be enhanced by these 

measures. But, for the time being, in most of the cases, the measures tend to be solitary as 

they do 

not belong to global reform programs, which is a vital characteristic that would allow them to 

have positive effects on production and employment. 

In the last period, the fiscal-budgetary politics represent important marks of building 

the financial equilibrium in the purpose of the economic development. Romania’s fiscal 

policy after 1989 and until nowadays has been examined many times, having a sinuous and 

inconstant character being less favorable to the business environment – although many of the 

adopted modifications were supposed to be meant to the business stimulation. It has also 

suffered the impact of an economy marked by structural strain. 

In 2000 there was registered the first step headed in a good direction, when the fiscal 

policy was consolidated and became more transparent. 

In 2004 the Fiscal Code, which reunited the entire fiscal legislation in one unitary 

document of economic policy, came into force, thus improving the transparency, the 

predictability and the legislative stability in this field. In the following period the fiscal policy 

measures were concentrated on the reduction of the tax level and on the continuation of the 

alignment to the forecasts of the communitary acquis. 

Concerning the observance of the criteria imposed through the Maastricht Treaty, the 

critical point of the Romanian economy is constituted by the observance of the inflation rate 

criteria; because these are not achieved implies the lack of sustainability of the economic 

macrostability process. 

If at the end of 2000 Romania was situated on the last place in the domain of adopting 

the community acquis from the 12 candidate states, in the period 2001-2003 it registered 

progresses in this direction by occupying the fourth place. We must mention the fact that the 

translation and adoption of the community legislation is not enough, they need to be 

completed with its implementation and application. 

The integration of the national market in the economical, social and cultural economic 

space represents a lasting process, whose realization needs the elaboration of a global and 

perspective strategy on the structural evolution of the Romanian economy. 

The harmonization of the Romanian legislation with the community one in matter of 

indirect taxes represents a commitment which must be respected. The European Union has the 

right to take decisions regarding the harmonization of the legislation for the member states 

regarding the indirect taxes, insofar as this process is necessary for the insurance of the 

creation and function of the internal market. 

In Romania a strategy of the fiscal evolution has never existed, the fiscality had a 

confused aim and behaved as a mechanism with untidy movements not having the capacity to 

orient the economic development towards performance, succeeding in constituting an inhibitory 

factor of the market’s relations than an inciting one. It is important the fact that between 1990- 

1996, the budget secured its greatest amount of earnings through the direct taxes and not through 

the indirect ones, contrary to the principles of fiscality’s strategic orientation towards the 

economic development’s stimulation. 

The general conception that dominated Romania’s fiscal system was the one that a 

direct tax is more productive from the budgetary point of view, it brings in more earnings than 

an indirect tax. 

To these, it was added the correct conception regarding the fact that the premium, as a 

direct tax, stimulates perturbations on the market than the indirect one, thus the first one is 

preferable to the second one. Of course, these conceptions are real and have a maximum 

resonance in an economy of performance and a strengthen, fixed and with a high level of 

acceptability fiscal system. In accordance with these approaches, the fiscality theory 

emphasizes the fact that in an optimal fiscal system with a high level of neutrality, the


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replacement of a direct tax with an indirect one has the role of improving the budgetary 

balance as well as the social welfare. On the other hand, the increase in the indirect taxes’ 

weight emphasizes the accentuation of the economic democratization process, expressed 

through the decline of the tax’s role as a state’s lever of direct intervention in economy. 

The theory as well as the economic practice have recognized the importance of the close 

relation between the fiscality and the level of the economic agents’ activity. The fact that a 

temperate fiscality stimulates the economic growth creates the premises for the goods’ and 

services’ demand incites the investing activity and increases the economic agents’ 

competitiveness. Conversely, an excessive fiscality, oriented towards the budget and not 

towards the contributors, limits the economic dynamism: 

- the high level of the profit tax and of the local charges affects directly investments’ 

financing sources as well as the inclination for saving so necessary for an economy facing a 

resources crisis. From the profit tax’s point of view, the fiscal system is considered as being 

adequate because it incites the economic system’s dynamism, the economic efficiency’s 

increase and the economic activity’s stimulation, suppliers of positive effects propagated in 

economy; 

- an increase level of the wage tax affects directly the solvent demand of goods and 

services and leads to the disturbance of the report between demand and supply, to the rise in 

prices and therefore of the consummation prices; 

- the high level of the VAT, of other indirect taxes, as well as of the local taxes and 

charges leads to the decrease in the goods and services demand and to the rise in prices. 

A high level of fiscality generates the rise of the tax burden upon the contributor 

whose resistance to the payment of the fiscal obligations increases and modifies completely 

its fiscal behaviour. As a result, the fiscal management will have to manage distinct risks 

regarding the ignorance of the fiscal legislation and the economy has to bear risks of the 

decrease in the productive activity and in the rendered services. 

From this point of view, in the ideological level, the liberal conception over the 

discouraging effects provoked by the high level of labour fiscality, of savings and investments, 

as well as the contributor’s level of satisfaction and psychological comfort is detaching. The 

increase or the holding of the tax at a high level generates contrary effects which affect the 

incitation to work, under at least two aspects: 

- the decrease in the individual effort allocated to labour as a result of the climb down of 

net earning given as a labour income; 

- the raise of the individual effect allocated to the labour for the compensation of the climb 

down of net earning because of the tax increase. 

The elimination of the fiscal obstacles requires the analysis and the elimination of the 

fiscal distortions which influence the decisions about labour, consumption, saving and 

investment. In the same time, the fiscal competition between the European states must be 

avoided. So, the elimination of the possibility that every European state can attract on its 

national market the saving constituted in the European financial space is necessary. The way 

towards the adhesion to the economic and monetary union is very long, the fiscality 

constituting an obstacle, but not the only one. That is why the coordination and the 

approaching of all the national policies and the existing ones at an European level are 

imposed. According to the used techniques of the constraints, the public may action in 

order to obtain the wanted or voluntary effects, oriented towards the stimulation or the 

protection of some social categories. But all these are destroying the neutrality and involve 

risks. Some decisions may generate the appearance of some undesirable or involuntary 

effects, which affect the competitive relations, penalize the productive activities, and 

reduce the desire of working and investing. As a conclusion, the exceeding effort of some 

situations of the Romanian economic and social environment, is confronting with the limits 

of the existing policies. With all these, the structural harmonization of the Romanian fiscal


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system must contribute towards the elaboration of some new techniques which will lead to 

an optimum and rigorous collecting of earnings. 

The influence of the European Union on the taxation in the economies in transitionis 

realised by the community acquis which chart the institutional reforms and aim the VAT and 

the excises. 

References: 

1. Croitoru, L., - Politica fiscală în România, Banca Mondială şi Centrul Român de Politici 

Economice, 2000 

2. Dinu, M., Socol, C., Niculescu, A. - Fundamentarea şi coordonarea politicilor economice 

în Uniunea Europeană, Editura Economică, Bucureşti, 2006


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PROPER FUNDS OF BANKING COMPANIES 

Victor Troacă, Conf. univ. dr. 

University „Constantin Brancusi”, Tg-Jiu 

ABSTRACT. The development of the activity by the banking companies, in normal conditions, imposes on that 

these ones should dispose on a certain volume of proper funds, determined in accordance with their size, the 

profile of operations and the assumed risks. The specific of banking activity imposes on the necesity that these 

ones should permanently ensure a certain level of proper funds, which should not lower under the level of 

statutory capital requests established by the regular authority, namely the National Bank of Romania. The 

importance of proper funds for a banking company is rendered evident also by the lawgiver, by means of fact 

that , in order to be made, a banking company needs a minimum level of distinct proper funds or an initial 

capital, which nowadays is situated at the equivalent level of 5 milion Euro. The level of proper funds of the 

societies are always pursued by the statutory authority, for which reason the banking companies have the 

obligation to determine and report regularly these funds to the National Bank of Romania. There is presented in 

the paper the componence of proper funds of a banking company, the way of their determination and regular 

minimum requests of proper funds in which the banking societies should frame. 

In order to ensure the development in normal conditions with the ensurance of 

respecting the minimum statutory requests, the banking companies are ceaselessly 

preoccupied to ensure the necessary volume of proper funds. 

Proper funds of a bank are made up of those resources which are being of its disposal 

with a permanent lasting character. 

The importance of proper funds determination for the activity of a bank, as well as the 

necessity to assure a permanent efficient surveillance of the activity of every bank have 

determined the Romanian authority having responsabilities in the surveillance of banking 

field respectively the National Bank of Romania to regulate the structure of proper funds, the 

calculus methodology of proper funds and to establish the minimum requests the banking 

companies should accomplish at an individual level, as well as the acception of the notion of 

proper fund at a consolidated level.F 

121 

Proper funds of a banking company are made up of those patrimonial elements that are 

responsive to the following requests: are utilizable at any time and with priority in order to 

absorb the eventual losses, do not imply fixed costs for the involved banking company they 

are also effectively put at its disposal and wholly paid for. 

At the individual level proper funds of banking societies are made up of Level 1 

proper funds and Level 2 proper funds. The formalization of determination relation for 

banking proper funds is as follows: 

(1) Fp=Fp1 + Fp2 

in which: 

Fp = total of proper funds of a bank; 

Fp1 = Level 1 proper funds; 

Fp2 = Level 2 proper funds. 

Level 1 proper funds represent that component of proper funds made up of: 

121 Regulation no.18/23/14.12.2006 regarding the proper funds of credit and investments institutions , issued by 

the National Bank of Romania and the National Committee of Movable Values.


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• Registered capital subcribed and paid in, except for the cumulative preferential actions or, 

in case, the endowment capital put at the disposal of the branch in Romania by the mother 

society with the headquarters in a third state, outside the European Union (Cs); 

• The capital premii, fully cashed, afferent to registered capital (Pc); 

• Legal reserves, statutory and other reserves, as well as the profit (Rz); 

• Net profit of the last financial exercise, reported until its repartition according to 

destinations established by the general assembly of the shareholders, in the limit of the 

amount meant to be allocated to any of the destinations mentioned above (Pn); 

In order to determine the Level 1 proper funds, of the value total of the mentioned 

elements, the following elements are to be inferred: 

• The registering value in accountancy of the proper actions detained by the bank involved 

(Vac); 

• The reported result, representing loss (Prr); 

• Loss of current period registered until the date of proper funds determination (Prc); 

• Value of registering in accountancy of intangible assets (In). 

Making a synthesis, the calculus relation of Level 1 proper funds can be made as 

follows: 

(2) Fp1 = (Cs + Pc +Rz +Pn) - (Vac + Prr + Prc + In) 

Level 2 proper funds, taken into the calculus of total proper funds of a banking 

society are made up, at their turn, out of two assemblied components, namely: 

� Level 2 proper funds of basis (Fp2b), and 

� Additional Level 2 proper funds (Fp2s). 

The determination relation of Level 2 proper funds is: 

(3) Fp2 = Fp2b + Fp2s. 

Level 2 proper funds (Fp2b) are determined by totalizing the following elements: 

� Reserves from the reevaluation of tangible assets adjusted by the afferent fiscal 

obligations (Rzi); 

� Other elements that accomplish a series of statutory conditions, with the previous 

agreement of the National Bank of Romania (Aer); 

� Titles for an endless period and other instruments of the same kind which accomplish 

the general conditions of respecting their subordinate character (Vts) 

The calculus relation can be made this way: 

(4) Fp2b = Rzi + Aer + Vts 

The following specifications must be made with reference to the criteria the last two 

component elements of Level 2 proper funds of basis must accomplish: 

� Elements that can be taken into calculus of the indicator ”Level 2 proper funds of basis”, 

having the previous agreement of the National Bank of Romania, must accomplish a 

series of statutory conditions , that is to say: they have to be at the disposal of the 

respective banking company without restrictions to cover the risks specific to the banking 

activity, when the losses and value deficits have not been identified yet; to be refound in


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the book keeping and their level to be established by the leadership of the banking society, 

verified by independent auditors, communicated to the National Bank of Romania and 

subject to its surveillance. There can be included also the public and private non repayable 

subventions. 

� Titles for an endless period and other instruments of the same kind could be included in 

the calculus of Level 2 proper funds of basis providing that they should include the 

general conditions of respecting the subordinate character, as well as the following 

specific requests: 

� The repayment cannot be done at the holder’s initiative or without the previous 

approval of the National Bank of Romania; the repayment cannot be requested 

during the first 5 (five) years from the issue of titles, and subsequently the 

repayment can be accepted by the national Bank unless it is sure that the proper 

funds of the involved banking society remain adequate, for at least a future period 

of two years; 

� The issue agreement must ensure that the involved bank has the option to postpone 

the payment of afferent interest; 

� The creditor’s debt for the banking society must be entirely subordinated to the 

debts of all the other unsubordinate debtors; 

� The titles’prospectus of emission must specify the fact that the afferent unpaid 

main and interest are being at the disposal of the bank in order to cover the losses, 

in conditions of assurance of the activity continuity; 

� The amounts taken into account to have been entirely paid. 

Additional Level 2 proper funds (Fp2s) are made up of cumulative preferential 

shares for a determined period (Vap) and the capital under a shape of subordinate loan (Vis). 

The calculus relation can be made as follows: 

(5) Fp2s = Vap + Vis 

The two elements which make up Additional Level 2 proper funds can be taken into 

the calculus of the proper funds of banking societies unless they do have the agreement of the 

National Bank of Romania and in the conditions when the firm and stipulated by contract 

obligations assure that, in case of bankruptcy or liquidation of the respective banking 

company, these ones have an inferior rank in comparison with all the other creditors’debts 

and they shall be repayable only after all the other unrepayable debts have been already paid 

at that time. Therefore, the agreement stipulations must accomplish the general conditions 

referring to the subordinate debt, namely: 

i. The subordination has to be effective, in the sense that: the subordinate creditor’s debts 

have an inferior rank as compared to all the unsubordinate creditors, and in case of 

liquidation, the subordinate creditors must not be able to receive or retain any amount or 

assets until all the unsubordinate creditors shall have been paid or entirely indemnified; 

the creditors give up their right to compensate the amounts they owe to the banking 

company for the subordinate amounts the bank owes to them in its turn; and, 

ii. The agreement must not contain stipulations that can lead to the anticipate repayment or to 

the increasement of the initial costs of the debt, as: clause of simultaneous declaration of 

bonds exigibility following a guilty non-fulfilment of one of them; clause of negative lien, 

according to which the constitution of guarantees by the bank involved on any of its assets 

for obligations , titles and other debts constitutes itself as guilt case. 

These condtions, referring to the subordinate debt are valid for all the specific 

elements that can be taken into the calculus of Level 2 proper funds.


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In the determination of proper funds, the component elements of Level 2 proper funds 

are taken into a calculus, in certain statutory limits, as follows: 

� total of Level 2 proper funds cannot exceed 100% of Level 1 proper funds; 

� total of cumulative preferential shares value for a determined period and of capital shaped 

as subordinate loan that can be taken into account in the calculus of proper funds, cannot 

exceed 50% of value of Level 1 proper funds. 

It has to be underlined at the same time the fact that , in order to attain its targets of 

prudentiality, to determine the level of total proper funds which are taken into account, the 

statutory authority can also establish a series of deductions from the elements of proper funds 

mentioned above. This type of elements are designedly stipulated and regulated by the 

surveillance authority. 

The assurance by the banking societies of a proper funds level, which to respond to the 

statutory requests, represents an extremely important preoccupation of their management. The 

assurance of accomplishment of minimum requests of proper funds level is compulsory, and 

their level is determined by the volume of activity and risks which the developped activity is 

122 

exposed to. In accordance with the presentF 

F regulations, the banks have to dispose on a 

proper funds level situated permanently at a level at least equal to the sum of the following 

capital requests: 

� for the credit risk and the decreasing risk of debt value afferent to the whole activity 

except for the operations out of transactional portfolio, 8% of the total of values levelheaded 

at risk of calculated exposures, determined in accordance with the special 

regulations issued by the surveillance authority in this sense; 

� for the position risk, the discount risk and credit risk of the counter match afferent to 

the operations out of transactions portfolio, the capital requests also determined in 

accordance with punctual regulatings issued by the surveillance and regulating 

authority; 

� for the currency risk, wares risk and operational risk afferent to the entire activity the 

capital requests are determined separatedly in accordance with special regulations. 

A special attention is imposed to be given by the banking groups which, in order to 

determine the proper funds at a funded level, namely afferent both to proper activity and its 

branches which, in accordance with special regulations, find themselves in their consolidation 

area, must take into account the funded values of the elements that enter into the calculus of 

the proper funds at an individual level. 

122 The Regulation no.13/18/14.12.2006 regarding the determination of minimum requests of capital for the 

credit institution and investments companies, issued by the National Bank of Romania and the National 

Committee of Movable Values.


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REGULATION OF THE CONTROL EXERCISED BY CUSTOMS 

NATIONAL AUTHORITY 

Cristina Grozea, lect. dr. 

“Ovidius” University of Constanţa 

Ionel Bostan, prof. dr. 

Alunica Morariu, prof. dr. 


ABSTRACT :Investigative activities herein analysed –subsequent customs control and customs 

surveillance – belong to Customs National Authority respectively her division named Customs Control and 

Surveillance Division including Surveillance Department and Customs Control Department and Customs 

Offices, too. In comparison with the previous regulation the new norm (OANAF-ANV no.7.521 dated 10 th of 

July 2006 reagrding the aprooval of The Methodological Normes concerning surveillance and subsequent 

customs control achievement ,Official Gazette no.638 of 25 th of July 2006)introduces some elements specific to 

The European Union area. 

Clue words : customs control, customs institutions , state frontier , European Union frontier 

According to the normative setting that regards the standard domain², the safety device 

specialized in the prevention, finding and fraud penalization to customs settlements is able to 

undertake customs supervision actions run in order to ensure customs settings respect or other 

measures applicable to goods been under customs supervision. 

Control skill refers to the entire customs territory of Romania, and for corresponding 

structures from GCD, territorial skill is established by CNA). 

Programming of customs investigation activity 

The control is made especially for people defined at art. 4 from Law no. 86/2006 

concerning 

the customs Code of Romania, and depending on findings and necessities, it has extended at 

customs offices.


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Mentioned activities are organized and developed on the basis of annual and quarterly 

activity programs, approved by NCA board.³ Programmed customs controls are established 

through regional level quarterly activity programs, on the basis of the action and control 

national annual Plan objectives. 

Precedent objectives have to contain also the objectives stipulated in the assumed 

liabilities in the preparing process in the goal of UE enlargement or post- enlargement. 

On identification and objectives establishment it will use customs data and information, 

also the risk analysis. 

On situations in which in realization of thematic controls output the established terms 

can not be respected by program, customs control and supervision Direction director, 

respective executive director of regional customs direction, in motivated cases, can dispose 

the extension of control action duration. 

Inquired procedures 

Later customs controls can be programmed or unforeseen and can be executed on the 

basis of control/mission order. Control actions can be developped in the following forms: 

8. general control, which represents the verification activity of all customs 

operations for a determined period; 

9. partially control, which represents the verification activity of one or more customs 

operations for a determined period; 

In motivated cases, in order to apply the customs settlement in a correct and unitary 

way and other legal disposal, the control can be extended upon all customs operations. 

In duties achievement, later customs control and supervision departments can resort to 

unforeseen control - that is fact and documentary verification, especially as a result of an 

intimation or some clues concerning the existence of some facts of settlement violation or 

other applicable disposals, without previous notice of checked person –and of crossing 

control, that consists in documents verification and operations related to the ones held by 

others. 

At the end of unexpected and crossed control finding we complete a finding note or a 

control minute. 

In supervision actions and later customs control achievement we can apply the next 

following control methods: 

• control through sounding, which consists in selective verification of documents and 

significant operations activity; 

b) electronic control, which consists in accountancy control activity and of its resources, 

processed in an electronic environment, using analytical methods, evaluation and 

tests assisted by specialised informatics tools. 

Procedures and control methods using can be done individually or separately, 

depending on the goal, objectives, complexity, difficulties, the specific of developed activities 

and control period. 

Documents and significant operations selection is realised by the control authority and 

it will take into account the volume, the value, and their weight in people control activity. 

Effective program of customs supervision controls and later customs control 

At the beginning of any control action that concerns customs supervision or later 

customs control, control team members are obliged to present to the person they control the 

work identity card and control/mission order. The control beginning has to be registered in 

Unique Control Register, according to law.


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Later customs controls are realized, in general, at residence or at natural person’s 

residence, with his/her accordance, at social center, central center or permanent center from 

Romania or at his declared fiscal residence of juridical person and, according to the 

necessities, they can extend to the bias points, places or goods and assets store room. 

In case in which there is no room proper for later custom control, then this activity can 

be developed at customs authority centers from which control team members or in places set 

by control team, according to customs settlements or other legal disposals. 

We underline that control activity for supervision achievement and later customs 

control has to take place, in general, during people work program. 4 When they appreciate that 

there are serious clues concerning the theft attempt or the supervision from customs theft or 

from goods customs control, or of theft or documents destroying necessary to custom control, 

suddenly control actions in order to realize supervision and later customs control can be 

developped also outside the work program of verified people. 

Control team members can ask, in written form, the presence of natural person or legal 

representative of corporate body or other different people which have a direct or indirect link 

to operations that represent the object of international change of goods and assets at their 

center, in order to supply documents, information or explanations necessary during 

verifications. 

During later customs control development, the control team members can extend the 

control at any other people’s center which have a direct or an indirect link with operations, 

which represent the object of international goods and assets exchange or of other people 

which are the owners of some papers or who have some information related to these. 5 

During control actions development in order to realize later customs control and 

supervision, control team members can conclude intermediate control papers, before control 

ending, as if finding note and intermediate minute. 

Then, in order to determine customs settlements application way or other legal 

disposals in control actions, team control members can proceed to sample drawing in order to 

take some laboratory survey. On situations on which there are some hints that in production, 

depositing, marketing places and in means of transport there are some goods for which the 

customs settlements haven’t been respected or other applicable disposals, and control actions 

cannot be finished, which have to be continued in next working day, mentioned goods will be 

sealed making out ‘’ Minute of sealing/unsealing.’’ 

Control authority has the right to keep, in order to protect or avoid destroying, 

documents, papers, inscribed, registers or financial-accountant documents or anything other 

material element, which is the proof of setting up, registration or obligations payment resulted 

from judicial reports with customs authority by people of which customs declarations are 

verified or are related to goods under customs supervision, on a 30 days period. 

The proof of keeping the documents represents the inscribed delivery/return Minute, 

realized by the control authority in which there are specified all elements necessary to the test 

individualization or respective proof, also the explanatory note that these have been kept, 

according to legal disposals, by customs control authority. 

In case in which for customs situation establishment or of other nature, according to 

legal disposals, customs declarations assigned or legal representative of this offer to the 

control authority inscribed or other documents, in original, these will be given back to 

mentioned people, keeping the control minute in copy only the concern inscribed. 

Ultimately, we wish to emphasize that for customs nature aspects, members of control 

team can ask for explanatory notes to any other people which have a direct or indirect link 

with operations that represent the international exchange of goods realized by the verified 

company.


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NOTE 

¹ The decision of Customs general director number 633/2001 for technical Norms approval concerning later 

customs control and surveillance achievement, published in Official Monitor of Romania, Part I, number 150 

from 27 march 2000. We make reference to specific papers of declarations alignment or other later control, 

made for correct application of customs settlement or other legal disposals concerning entrance, going out, 

transit and goods final destination which run between customs territory of Romania and other countries, also 

goods stationary which don’t have Romanian goods status. 

² OANAF-ANV no.7.521 from 10.06.2006, for approval methodological norms concerning later customs control and 

supervision, M.Of. no. 638 from 25.07.2006. application of customs settlement or other legal disposals 

concerning entrance, going out, transit and goods final destination which run between customs territory of 

Romania and other countries, also goods stationary which don’t have Romanian goods status. 

³ National objectives, the priority in supervision and later customs control are established through action and 

control Annual National Plan. 

Bibliographie 

● I.Bostan, Alunica Morariu, Public Financial Right, Publishing House, Dacia, Cluj- 

Napoca, 2006 

● M. St. Minea, Taxation Policy in Europe, Pl. H. Rosetti, Bucuresti, 2006. 

● D.D. Saguna, Fiscal financial Right, Pl. H. All, Bucuresti, 2005. 

● Law no. 86/2006 concerning Customs code of Romania. 

● Application settlement of Customs code of Romania, approved by Government 

Resolution no. 707/2006. 

● No.7.521 ORDER from 10.07.2006 for methodological Norms approval concerning 

supervision and later customs control. 

● Settlement of Romanian customs code application, approved by Government Decision, 

no. 707/2006.


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Responding to global challenges: the GDP-linked bonds case 

Boariu Angela, conf.dr. 

Bilan Irina, prep.drd. 

Facultatea de Economie şi Administrarea Afacerilor 

Universitatea ”Al. I. Cuza” Iași 

Résumé: 

Même si la globalisation a, généralement, des effets positifs sur le rythme de croissance, elle peut aussi 

générer l’augmentation de l’instabilité économique, surtout pour les pays en voie de développement. Pour les 

pays endettés ou pauvres, cela peut avoir des conséquences négatives très importantes sur la capacité des 

gouvernements d’honorer le service de la dette publique, conduisant à des très côuteaux défauts de paiement et 

crises de la dette. Pour se rassurer contre les fluctuations économiques et éviter les crises, les gouvernements 

doivent diversifier leurs instruments de financement. Des tels instruments sont les obligations liées à la 

croissance du produit intérieur brut d’un pays. 

Une première partie de cet ouvrage envisage mettre en évidence la nécessité d’utiliser des tels 

instruments dans le contexte de la globalisation et la manière dont ils peuvent être utilisés. Dans la seconde partie 

on presente les avantages et désavantages des obligations indexées sur le PIB par rapport aux instruments 

conventionnelles d’endettement public, pour les authorités endettées, les investisseurs et pour le systhème 

financier international. Finallement, on présente l’expérience de quelques pays qui ont utilisé les obligations 

indexées sur le PIB, les résultats obtenus et on analyse les perspectives futures de ces instruments. 

1. What are GDP-linked bonds and why are they necessary? 

As numerous studies suggest, globalization generally has a positive impact on 

economies, as countries benefit from trade liberalization, the free movement of labour and the 

liberalization of capital markets. In these respect, it is appreciated that the spectacular growth 

of the countries of East Asia, which has raised GDP per capita by eightfold or more over the 

past thirty-five years, was largely based on globalization. 

While globalization generally brings benefits to economies, embracing globalization 

can also bring new risks, especially to developing countries. For example, the sudden reversal 

of capital flows, such as a recall of loans by international banks or a massive sale of emerging 

market stocks by international mutual funds, can spark or at least contribute to currency and 

debt crises. The prominent crises of the past decade can witness that: Mexico in 1994-95, the 

Asian financial-crisis economies in 1997-98, Russia in 1998, Brazil in 1998-2002, Turkey in 

1999-2002 and Argentina in 2000-2001. 

As globalization revealed its undesired effects, governments’interest in finding new 

instruments that could reduce country vulnerabilities and the frequency and severity of debt 

problems grew, especially in developing countries. Such instruments proved to be indexed 

bonds, such as inflation-indexed bonds, commodities-linked bonds and GDP-linked bonds. 

By tying the debt of countries to countries’ GDPs, the servicing of the debt would be 

higher in times of rapid growth and lower when growth is slow or negative. This way GDPlinked 

bonds help countries protect their economies from macroeconomic fluctuations. 

GDP -linked bonds could take a couple of forms: adjustment of coupon payments in 

line with growth or adjusted amortization schedule. The form that may be easier to introduce


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is a conventional bond that pays a coupon tied by a formula to growth rates of GDP. The 

coupon rate could be determined as follows: 

Coupon t = max [r* + (gt- g*), 0] (1) 

Where: 

r* = interest rate paid on plain vanilla bonds; 

gt = actual growth rate of GDP; 

g* = baseline growth rate of GDP. 

However, GDP-linked bonds should guarantee a minimum level of debt servicing, 

even if the economy stops growing. 

Although of great importance for developed countries too, growth-indexed bonds 

would be particularly advantageous for emerging markets, as many of these countries have 

volatile growth rates and are vulnerable to events outside of their control, such as slower 

growth in major export markets, natural disasters, and falling prices for key commodity 

exports. 

Developed economies can generally respond to these periods of slow growth and 

external events by lowering interest rates, reducing tax burdens, and/or increasing government 

spending. Emerging markets have less flexibility to use these traditional macroeconomic 

tools, however, since they tend to be more vulnerable to sudden shifts in capital flows and 

need to maintain market confidence. Growth- indexed bonds can therefore partly compensate 

for emerging markets’ limited ability to use traditional monetary and fiscal policy tools by 

providing an automatic mechanism by which to recover from recessions, respond to external 

events, and thereby stabilize growth rates. 

2. Benefits and concerns regarding GDP-linked bonds issuing 

As indicated in table 1, GDP-indexed bonds have important advantages when 

compared with conventional government debt instruments (such as plain bonds), both for 

borrowers, investors, as well as significant externalities for the international financial system. 

Table 1: Benefits and concerns regarding GDP-linked bonds issuing 

Benefits Borrowers - stabilize government spending and limit 

prociclicality 

- reduce likelihood of defaults and debt crises 

Investors - provide valuable diversification opportunity 

- reduce losses generated by defaults and crises 

Global financial system - reduce risk of crises and crises contagion 

Concerns Investors - moral hazard on country performance 

- insufficient liquidity 

- potential problems of GDP measurement 

- initial issues of pricing 

Issuers - aditional costs over standard bonds 

Source: adapted after Griffith-Jones (2006) 

For borrowers, issuing such bonds would help stabilise public spending throughout the 

economic cycle and limit the pro-cyclicality of fiscal pressures. Governments would service 

more debt at times of higher growth, when they could better afford to, and less in more 

difficult times. So will be reduced the need for drastic spending cuts when growth is slow, 

providing space for lower taxes, and new spending will be restrained when growth is rapid.


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This runs counter to the actual experience of emerging economies, which are often 

forced to undertake fiscal retrenchment during periods of slow growth in order to maintain 

access to international capital markets. They could also curb excessively expansionary fiscal 

policy in times of rapid growth. 

Although growth-indexed bonds could never compensate for unsustainable macro 

policies, by stabilizing debt ratios they would significantly reduce the occurrence of defaults 

and debt crises, extremely costly, both in terms of growth, production and in financial terms. 

Defaulting on debt is a lastresort that governments find highly undesirable and costly to the 

country’s international reputation. A temporary reduction of a country’s debt service when the 

economy deteriorates would facilitate more rapid recovery. 

Avoiding the costs associated with macroeconomic volatility would not only help 

stabilize economic growth, but this reduced volatility would further raise long-term growth 

rates, thereby improving standards of living and reducing poverty in the issuer country. 

Simulations show that the gains from using GDP-linked bonds can be substantial for 

borrowers. Research by Borensztein and Mauro [2] shows that, if half of Mexico’s total 

government debt consisted of GDP-indexed bonds, it would have saved about 1.6% of GDP 

in interest payments during the Tequila crisis in 1995. On similar basis, Argentina would have 

saved about 1.4% of GDP in interest payments in 2001 and about 4% of GDP in 2002 (see 

figure 1). 

Figure 1: Fiscal savings as % of GDP in Argentina and Mexico 

4 

3 

2 

1 

0 

-1 

-2 

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 

Mexico (average savings 0.4% of GDP) Argentina (average savings 0.2% of GDP) 

Source: adapted after Borensztein and Mauro (2004) 

For investors, defaults are costly as they result in expensive renegotiation and 

sometimes in very large losses. As GDP-linked bonds would help reduce the probability of 

default, effective total payments will tend to be higher than with conventional bonds. 

Furthermore, GDP-linked bonds would give investors the opportunity of taking a 

position on a range of countries’ growth rates, offering a valuable diversification opportunity. 

If GDP-linked bonds became widespread across countries, investors could take a position on 

growth worldwide – the ultimate risk diversification. 

For international institutions, there would be benefits from the decreased likelihood of 

debt crises. Reduced risk of crisis contagion would also benefit other countries and investors. 

These externalities and the fact that financial innovations are difficult to introduce may justify 

some initial public action (for example, from the World Bank) to help develop this market 

instrument. The World Bank could, for instance, make loans whose servicing would be linked 

to GDP. The loans could then be grouped, securitised and sold to the financial markets [6]. 

Finally, some other advantages of GDP-indexed bonds could be revealed. As Robert 

Shiller considers [8], they could prove to be a valuable saving instrument for retirement. The 

old generation deserves to be taken care of by the new generation, as it helped bild the


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country into something beneficial to it. Since GDP would be significantly higher and the 

GDP-linked bonds would pay significantly higher interest in the future, buying GDP-linked 

bonds would help an older generation get their fair share of the economy they helped build 

without unfairly burdening the next generation. 

Despite their potential advantages, the development of GDP-linked bonds is hindered 

by the concerns it reveals, both at a general level and, more specifically, for both investors 

and issuers. The most common concerns, as revealed by the Council of Economic Advisers 

[4], are: 

1. Accuracy of growth data. Many investors are concerned about the quality of GDP 

data, especially from emerging market statistics agencies, which is critical in determining the 

value of payments on growth-indexed bonds. 

2. Moral hazard on country performance and reporting. Some people have suggested 

that governments might adopt policies to slow growth or deliberately underreport growth in 

order to reduce their interest payments required on growth- indexed bonds. 

3. GDP revisions and methodological changes. GDP data is frequently revised and 

investors may worry that the revisions or any methodological changes in compiling the 

statistics could complicate payments on growth- indexed debt. 

4. Hard to price. These bonds are condsidered more difficult to price than plain- 

vanilla, fixedincome instruments. However, it is unclear why they would be substantially 

more difficult to price than other emerging market securities, such as inflation- indexed bonds 

and equities. 

5. Market illiquidity. As with most new securities, an important initial challenge would 

be to establish sufficient liquidity so that the instruments can be actively traded and investors 

do not require a large premium. 

6. Cost/premium over standard bonds. Economic theory suggests that the risk 

premium required for growth-indexed bonds should not be excessive and would primarily 

reflect the initial lack of liquidity, the novelty of these instruments and any pricing 

difficulties. 

However, none of these obstacles is considered insurmountable. For example, as far as 

accuracy of growth data is concerned, borrowing countries have overcome similar concerns 

with the measurement of inflation and successfully issued inflation-indexed bonds for years. 

In conjunction with the issuance of growth-indexed bonds, countries could improve their 

GDP measurement. 

As far as the market illiquidity is concerned, as already suggested, multilateral 

institutions could play an important role in overcoming this challenge. They could help by 

encouraging several countries to issue growth-indexed bonds around the same time in order to 

jump-start a larger market. Multilateral institutions could also consider initially purchasing a 

portion of the newly-issued bonds to guarantee a minimum size for the market. 

3. Previous experiences using GDP-linked bonds and futures perspectives 

The proposal for using GDP-indexed bonds is not new and a first wave of interest in 

indexing debt to GDP emerged in the 1980s, in the context of developing countries’debt 

crises, propounded by economists such as John Williamson. In later years, this has been 

encouraged by the work of economists such as Shiller and Borenzstein and Mauro. 

However, the idea of GDP-indexed debt has so far been implemented to a limited 

extent. Sovereign debt instruments indexed to GDP have not been widely employed in 

international capital markets. In comparison with other indexed bonds, only a few countries 

issued this type of instrument in the past, as indicated in table 2.


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Table 2: Previous attempts of issuing indexed bonds 

Type of indexed bonds Countries 

Inflation-indexed bonds Australia, Austria, Bolivia, Brazil, Canada, Chile, Colombia, 

Czech Republic, Denmark, Finland, France, Greece, Hungary, 

Iceland, Ireland, Israel, Italy, Mexico, New Zealand, Peru, 

Poland, S. Africa, Sweden, Turkey, UK, USA etc. 

Commodity-linked bonds Argentina, Australia, Brazil, Colombia, Chile, Israel, Mexico, 

Turkey, UK, Venezuela 

GDP-indexed bonds Bosnia and Herzegovina, Bulgaria, Costa Rica, Argentina 

Source: Durdu (2005), Shah (2005) 

In the early 1990s, Bosnia and Herzegovina, Bulgaria (1994) and Costa Rica issued 

bonds containing an element of indexation to GDP, as part of their Brady restructurings. 

These bonds included clauses or warrants that increased payments if GDP reached a certain 

threshold. Since the late 1990s, Bulgaria has already swapped a portion of its debt with nonindexed 

bonds. 

However, in general these instruments were not well-designed. For instance, in 

Bulgaria, the bonds were callable, which allowed the government to buy-back these bonds 

when growth exceeded the nominated threshold rather than pay an additional premium. 

Moreover, the bonds did not specify what measure of GDP should be used to calculate the 

threshold and, even more seriously, whether nominal or real GDP should be used [4]. Given 

these design problems, the past experiences with GDP-indexed bonds had mixed success. 

On the other hand, investors’ experience with Argentine GDP-warrants, issued as part 

of their debt restructuring in 2005, has been very positive: their price has been rising 

significantly since. 

Although not yet widely spread, GDP-linked bonds should be, in the future, a core 

element of government financing, both for developed and creditworthy developing countries. 

Developed countries are the best equipped to issue GDP-linked bonds immediately, because 

of the relatively high trust that is placed in their capital markets and in their GDP accounting. 

Their doing so would have a valuable demonstration effect around the world. 

GDP-indexed bonds may be particularly attractive for Economic and Monetary Union 

countries, given the argument that the “Stability and Growth Pact” tends to render their fiscal 

policies pro-cyclical. Moreover, these countries may find it easier to issue and sell these 

bonds to investors due to their more comprehensive and reliable statistics on GDP and its 

components. For these particular countries the bonds could be indexed on the economic 

growth of an economic zone, Euroland. 

Experiencing volatile growth and, sometimes, high levels of indebtness, developing 

countries stand to gain more from issuing these bonds and they could start issuing them now. 

The issuance of even small quantities of these bonds by creditworthy emerging economies 

would help set in motion an important process of financial development. 

The history of financial innovation is essentially one of learning by doing. Inflationindexed 

bonds met initial scepticism, relating to problems such as precise measurement of 

inflation. In fact, once these bonds started to be issued, inflation statistics improved further. 

Inflation-indexed bonds are now widely accepted across the world; in the UK, they represent 

around a quarter of government debt. A similar evolution can be envisaged for GDP-linked 

bonds. 

As far as Romania is concerned, although recent trends in economic growth seem to 

be favourable, it still is, as other developing countries are, exposed to high economic 

volatility. In consequence, it is necessary for Romanian authorities to diversify the debt


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instruments they employ, in order to prevent different risks. The experience so far indicates 

the use of relatively few instruments (fixed and variable interest rate bonds, denominated in 

national and foreign currencies, inflation-indexed bonds). In the future, as budget deficits are 

expected to grow, public authorities should seriousely consider issuing other new instruments, 

such as GDP-indexed bonds, in order to finance them. 


As past experiences have proved, although globalization generally leads to faster 

economic growth, it might also lead to higher economic instability, especially for developing 

countries. This could prove to have an important negative impact on the government’s 

capacity to service the debt, resulting in costly defaults and debt crises. 

In this paper, the authors have argued that bonds linked to the growth of a country’s 

gross domestic product can play a helpful role in order to reduce vulnerabilities and the 

imminence of debt crises. However, despite their desirable features, growth-indexed bonds 

only exist on a limited scale, pointing to the presence of a number of obstacles to their 

introduction, both for countries and investors. 

The authors of this paper adhere to the general idea that countries, especially 

developing ones, should start issuing bonds indexed to the rate of growth of GDP as quick as 

possible. However, the first step is always difficult. As indicated in the text, they agree that 

the involvement of the international financial institutions, such as the World Bank, is not only 

necessary but also compulsory in order to implement and help develop a liquid market for 

these new instruments. 

Bibliography: 

1. Borensztein, E., Mauro, P., Reviving the case for GDP-indexed bonds, IMF Policy 

Discussion Paper no. 10, 2002, available via the Internet: 

Hhttp://www.imf.org/external/pubs/ft/pdp/2002/pdp10.pdfH; 

2. Borensztein, E., Mauro, P., The Case for GDP-indexed Bonds, Economic Policy, Volume 

19, Issue 38, 2004, p. 166-216; 

3. Conceição, P., Mendoza, R. U., Merlen, S., Quantifying the efficiency gains from financing 

tools, Office of Development Studies, New York, 2005, available via the Internet: 

Hhttp://newpublicfinance.com/background/quantifying.pdfH; 

4. Council of Economic Advisers, GDP-Indexed Bonds: A Primer, Washington, D.C., 2004, 

available via the Internet: http://www.whitehouse.gov/cea/growth-indexed-bonds-whitepaper.pdf; 

5. Durdu, B. C., Are indexed bonds a remedy for sudden stops?, 2005, available via the 

Internet: http://www.princeton.edu/~gec/iusc/IBlatest.pdf; 

6. Griffith-Jones, S., GDP-Indexed Bonds: Making It Happen, DESA Working Paper no. 21, 

2006, available via the Internet: Hhttp://www.un.org/esa/desa/papers/2006/wp21_2006.pdfH; 

7. Shah, H., Design of sovereign debt instruments, ECCU Debt Management Workshop, 

International Monetary Fund, 2005; 

8. Shiller, R., Macro Markets: Creating Institutions for Managing Society’s Largest Economic 

Risks, Oxford University Press, New York, 1993; 

9. Williamson, J., Lessard, D., Financial intermediation beyond the debt crisis, The Mitt 

Press, New York, 1985.


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RISK ANALYSIS 

Florea Ianc Zaharica Ec. Dr. 

ABSTRACT : 

La deuxième étape du processes de management du risque, ľanalyse du risque, commence avec le 

developpement des scénarios possibles de production des partes par les faeteurs du risque antérieur. De même, il 

doit definir clairement les types des pertes qui suivent à les èvaluer. 

La dificulté réside en la manque ou en ľinsuffisance des disponibilités des dates de ľhistorique de 

ľorganisation et ďun grand nombre des variables inconnues qui entrent dans ľéquation du calcul de la 

probabilité. Si les facteurs du risque sont indépendants alors, dans la rélation de calcul du risque intervenirent des 

probabilités ďaparition de ceux. Si les facteurs du risque sont dépendants, alors intervenirent des probabilités 

conditionnée ce qui complique substantiel les calcules dans la détermination du risque global pour ľorganisation 

analysée. 

The second phase of the risk management process, risk analysis, starts by developing 

the possible scenarios of producing losses by the risk factors previously identified. Also, the 

types of losses that will be assessed must be clearly defined. 

The main objectives of this phase include the quantification of the occurrence 

probabilities and the size of the losses caused by risk factors, which is sometimes difficult to 

accomplish. The difficulty consists in the lack or insufficiency of the valid data availability in 

the organization history and the high number of unknown variables that are included in the 

equation of the probability calculation. If the risk factors are independent, then, in the risk 

calculation relation their occurrence possibilities will appear. If risk factors are dependant, 

then conditioned probabilities will occur, which complicates the calculations substantially in 

establishing the global risk for the analyzed organization. 

We appreciate that, generally, the risk factors that influence the apparition and 

development of risks within the microeconomic companies are: 

- the mechanical reliability of the endowments that represent the company’s logistics; 

- the complexity and hazard of the technological processes; 

- human reliability (operation errors, maintenance); 

- environment factors 9internal, external); 

- external causes (known and unknown, unpredictable); 

- other causes. 

The contribution of human errors may induce high range of incertitude in assessing 

the probability to produce a certain hazardous event. 

The second step of risk analysis is represented by the evaluation of possible losses 

size. The specialty literature presents several ways to express possible losses together with a 

whole typology of risk in accordance with the used criteria. 

A possible map of the risks specific to entities may be drawn, in our view, through the 

action of the following types of risks: property risks (fires, explosions, terrorist actions, 

transport, pollution etc), working risks (blockages, later losses, suppliers dependence), 

personnel risks (deaths, illnesses, invalidities, unemployment) and business risks (economic 

losses, inflation, competition, monopole, political decisions, modification of the consumption, 

strikes, disadvantageous contracts etc).


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The difficulty of the proportion is given by the denominator, respectively the 

quantification of the insecurity exposal measure. 

Any risk indicator expresses a pattern of the situation (victims/vehicle, lei/entity, 

lei/employee). It therefore results that the indicators interpretation and their comparison is 

possible not only in report with these patterns and the clear definition of the denominator has 

major implications in the conclusions that may be drawn regarding the effect of the safety 

measures. 

We do hereby appreciate that it is very important to make an absolutely necessary 

distinction, in risks assessment, between the situation risk and the subjects risk. 

The criteria used for measuring the possibilities of risk are: 

- appreciating the vulnerability of the entity; 

- appreciating the financial impact; 

- appreciating the internal control. 

The probability of risk differs from impossibility to certitude and it is expressed on a 

values scale on three levels: 

- low probability; 

- medium probability; 

- high probability. 

In order to appreciate the entity’s vulnerability a series of factors that have incidence 

over the field are assessed, like: human resources, the complexity of processing the existent 

operations and technical means. 

Vulnerability is expressed on three levels: low, medium and high. 

The financial impact is expressed on three levels also, namely: low, medium and 

important. 

The appreciation of the internal control is accomplished on the basis of an analysis of 

the entity’s internal control quality, on three levels: appropriate, not enough, with serious 

lacks. 

The same regulations stipulate the risk level establishment for every criterion, by 

using a values scale on three levels, namely: 

- for appreciating the internal control: appropriate internal control – 1 st level; not 

enough internal control – 2 nd level; serious lacks internal control – 3 rd level; 

- for quantitative appreciation: weak financial impact – 1 st level; medium financial 

impact – 2 nd level; important financial impact – 3 rd level; 

- for qualitative appreciation: low vulnerability – 1 st level; medium vulnerability – 2 nd 

level; high vulnerability – 3 rd level. 

In order to establish the final score of the used criterion, a weight factor and a risk 

level are given to every criterion. The product of these two factors gives the score for the 

respective criterion, and the sum of scores for a certain operation/auditable activity leads to 

the determination of the total score of the operation risk/the respective activity. 

The total score of the risk is obtained with the formula:


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(1) 

Where: T – the total score of the used criterion; 

Pi – the range of risk for every criterion; 

Ni – the level of risk for every used criterion. 

On the basis of the total scores obtained previously, the risks are divided into: low 

risk, medium risk, high risk. 

The activities operations are graded in decreasing order of the total scores and are 

written in the table Strong pints and weak points. It synthetically highlights the result of the 

assessment of every analyzed activity/operation/theme and allows the grading of risks in order 

to focus the activity mainly on checking the objectives that have a high and medium risk 

level. 

Within the reliability and risk analyses, qualitative methods are often used. The main 

objectives of the qualitative analyses consist in: 

- identifying and classifying possible hazards, risk areas and logistics that may critically 

damage people’s safety, property and environment; 

- identifying the working and/or maintenance procedures that may critically damage the 

company’s balance. Qualitative analyses are finished with measures of significant 

decrease of the risk and respectively, the increase of the logistics reliability, being of 

real use in making the detailed risk and safety quantitative studies. 

Qualitative analysis methods are divided into: direct methods (inductive) and indirect 

methods (deductive). 

Direct or inductive methods make the analysis starting from the causes towards the 

effects. 

For the indirect or deductive analyses, one starts from the effects towards the causes. 

Risks checklists gather the experts’ experience in different fields of activity. Lists 

include the general and specific risk factors for certain categories of systems, processes and 

technologies that make a valuable information support for identifying the main risks 

associated to organizations. Risks checklists have been made for many hazardous technical 

activities and systems. 

We must say that the procedure is applied for the analysis of every factor separately. 

Although the structure of the risk checklist is quite broad, the list cannot be 

mechanically applied for all cases, but for every case separately, starting from such lists, one 

will retain only those events that correspond to the analyzed system. Consequently, the list 

with the pertinent events made for the analyzed risk factor will be different from the generic 

list from the checklists. 

The HAZOP analysis pattern is an abbreviation from Hazard and Operability and 

takes into consideration the study of hazardous and working phenomena. It was introduced by 

Imperial Industries (I.C.L. Ltd) in Great Britain as a method of analyzing plants, technologies 

and processes in the chemical industry, in order to appreciate the possible hazards for the 

employees and the public. 

The HAZOP method is especially applied for the technical systems with a high 

automation degree, where the activity is continuously flow and consists in detailed description 

of the normal working of a technological process, its decomposition in a number of 

successive operations and evaluation of the possible influence of faults, upon those operations 

with some guide-words (key-words). Every key-word assigns a certain fault of the operation 

from its normal working.


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The application of the HAZOP method requires the presence of some specialists that 

know or are familiar with the company’s projection and working. 

The experts’ team is formed of 5-6 persons with technical training and it is often 

managed by a reliability expert engineer and method application expert. 

The experts’ leader prepares the team activity in time and has the role of a moderator 

for the discussions between the team members. From practice the necessity of the existence of 

a team secretary has appeared, a secretary assigned with the management of the possible 

hazardous events notified by the team members, meeting organizations and communications 

between member teams. 

The results of the HAZOP study are represented by the necessary data for the next 

phase of the risk management, respectively the risk control and management phase. 

Just like the HAZOP method, the fast systematization method was grounded and 

developed by the same company in Great Britain, in order to identify and grade the risks 

associated to the process plants in the existent chemical products factories. 

This method has the advantage that unlike the HAZOP method it is less expensive and 

less lasting. Risks classification may be fast accomplished, on the basis of a table, where risks 

are ordinated by their seriousness according to an indicator named “frequency-guide”, for 

grading the risks and classify them. 

The application duration of the method differs from a company to another in 

accordance with the company’s complexity and it is usually placed within 8-40 hours. 

In accordance with the size of the frequency established by the study team members, 

reported to the frequency-guide, the priority type or degree will be established in order to 

detail the losses generator event through other methods. 

If the frequency determined for a risk factor is higher that the frequency-guide, then it 

is required to study it in the first place. 

The Preliminary Hazard Analysis – PHA is a mainly inductive working technique 

whose object is oriented towards the identification of the events that may lead to accidents 

within the technical systems. The methods consists in identifying the hazardous situations and 

the events that lead to losses for a system, subsystem, component and their phases. 

The method starts with the identification of the risks in a system and continues with a 

graded analysis of the events that may transform a possible hazard into an accident, on the 

basis of the produced effects. Then one passes to the grading of the identified hazards and 

establishing the safety measures for avoiding accidents. 

The score method mainly uses the reliability and maintenance indicators of the 

analyzed system (subsystem) and consists in allocating some number coefficient, with values 

from 1 to 4, for the parameters that are being assessed, in order to identify the critical points 

of the processes run within a company. 

The parameters used and the association criteria for the number values are: 

- reliability – 1 value is given for an average working duration between the 

performances higher than 10 6 hours and 4 value for less than 10 3 hours; 

- maintenance – 1 for an average reparation duration less than an hour and 4 for more 

than a day; 

- safety – for the personnel and equipment; 1 for neglecting hazard and 4 for 

potentially catastrophic accident; 

- hazard class – is based on the most serious effect on the personnel or equipment – 1 

for safe and 4 for catastrophic; 

- damaging level – 1 for local damage, 2 for process stopping, 3 for critical stop, and 4 

for plant eviction; 

- effect upon the output – 1 for no effect and 4 for total output stop; 

- redundancy – 1 for 100% redundancy (automated or manual), 2 and 3 for partial 

redundancy (easy decrease of performances) and 4 for no redundancy systems (elements);


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- complexity – 1 for simple system and 4 for very complex system (with many 

controls, interfaces with other systems); 

- environment- 1 for the situations when working is not influenced by the environment 

and 4 for the situations when environment has a catastrophic effect on equipments, plants, 

logistics working; 

- contamination – 1 for contamination insensibility and 4 for the case when 

contamination (equipment or personnel) leads to a catastrophic effect. 

The method requires the registration of the parameters and values of every parameter. 

On the basis of these values, partial and total score are calculated for the analyzed system 

(subsystem). 

The partial score, also named the hazard score, results from the sum of the score given 

to the six parameters mentioned above. The total score results from the sum of the scores of 

the ten parameters mentioned above. In accordance with the value of the score, over 15 points 

at the partial one and over 25 points at the total one, we may establish the need to study the 

reliability and risk analyses through quantitative methods. 

BIBLIOGRAPHIE 

I. BOOKS 

● Greceanu-Cocoş V. – “The Audit Investigation for Public Institutions”, 

Adevărul Publishing House, Bucharest, 2001. 

● Comănescu M. – „European Management”, The Economic Publishing House, 

Bucharest, 1999, page 72. 

● Băcanu B. – „Strategic Management”, Teora Publishing House, Bucharest, 

1999, page 111, 122-123. 

● Munteanu A. – “Accounting Information System Audit”, PoJirom Publishing 

House, Iaşi, 2001. 

● Stoian A., Ţurlea E. – “The Financial and Accounting Audit”, Economica 

Publishing House, Bucharest, 2001. 

● Boulescu M., Marcel G., Mareş V. – “Fiscal Control and Financial-Fiscal 

Audit”, CECCAR Publishing House, Bucharest, 2003. 

II. NORMATIVES 

10. G.O. no. 119/31.08.1999 regarding the internal inspection, internal audit 

and preventive financial control within public institutions, as amended and 

completed by Law no. 301/2002 

11. G.O. no. 75/1999 regarding the activity of financial audit, as amended and 

completed by Law no. 133/2002. 

III. PROFESSIONAL STANDARDS 

3. The Chamber of Auditors – Financial Audit - 2002 

4. The Chamber of Auditors – Minimum Audit Standards - 2001 

IV. Reviews 

2. Accounting, Expertise and Business Audit no. 1-12/2001, CECCAR;


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ROMANIA IN THE PROCESS OF HARMONIZATION WITH 

INTERNATIONAL ACCOUNTING STANDARDS 

Gheorghe Holt, prof. univ. dr. 

Gabriela Buşan, lect. univ. dr 


ABSTRACT: 

In today's world of global economic interdependence and rapidly changing technology, accounting has 

come to play a major role. The last two decades have witnessed many dramatic development in the world 

economic environment. The rapid growth of international trade and internationalization of firms, the 

developments of new communication technologies, the emergence of international competitive forces is 

perturbing the financial environment to a great extent. Under this global business scenario, the residents of the 

business community are in badly need of a common accounting language that should be spoken by all of them 

across the globe. A financial reporting system of global standard is a pre-requisite for attracting foreign as well 

as present and prospective investors at home alike that should be achieved through harmonization of accounting 

standards. Accounting Standards are the policy documents (authoritative statements of best accounting practice) 

issued by recognized expert accountancy bodies relating to various aspects of measurement, treatment and 

disclosure of accounting transactions and events. 

The aim of setting standards is to bring about a uniformity in financial reporting and to 

ensure consistency and comparability in the data published by enterprises. 

Accounting standards are being established both at national and international levels. But 

the variety of accounting standards and principles among the nations of the world has been a 

sustainable problem for the globalize business environment. 

The ultimate objective of harmonizing accounting practices among countries is to foster 

international comparability of accounts. There are several standard setting bodies and 

organizations that are now actively involved in the process of harmonization of accounting 

practices. The most remarkable phenomenon in the sphere of promoting global harmonization 

process in accounting is the emergence of international accounting standards. 

IAS serves the purpose of reducing diversity in accounting practices but invites 

qualititative differences of the financial accounting and reporting system. These differences 

may be reduced if a happy marriage between the national and international accounting 

standards are arranged by the recognized professional accounting bodies in the world. 

Accounting standards vary from one country to another. There are various factors that 

are responsible for this. Some of the important factors are legal structure, sources of corporate 

finance, maturity of accounting profession, degree of conformity of financial accounts, 

government participation in accounting and degree of exposure to international market. 

Diversity in accounting standards not only means additional cost of financial reporting but 

can cause difficulties to multinational groups in the manner in which they undertake 

transactions. It is quite possible for a transaction to give rise to a profit under the accounting 

standards of one country where as it may require a deferral under the standards of another. 

International accounting standards serves the purpose of reducing diversity in 

accounting practices but invites qualititative differences of financial accounting.


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The vision of a harmonized accounting world may inspire many minds but in the 

practical field it is hard to go about embracing a situation where accounting principles and 

procedures are perfectly harmonized among countries through out the world. 

The development of harmonized accounting rules and principles should be accompanied 

by a uniformity of approach among countries towards education and training of professional 

accountants. Further more, the harmonization of accounting rules and principles among 

countries should also be accompanied by inter country harmonization in auditing principles 

and standards. 

Many of the initial hurdles have been overcome and much progress towards 

harmonizing accounting principles andprocedures among countries has already been 

achieved. The technical advancements and the transmission of information, people, goods and 

services have brought the world closer together. Growth in international trade and capital 

flows have triggered a rising economic integration. Because of these developments there has 

been an international homogenising effect upon many customs, practices and institutions. In 

business life it has led, among other things, to a desire to harmonise Accounting Standards 

among countries. 

International businesses are no longer confronted only with Accounting problems, 

which end at domestic borders. When companies cross borders they are confronted with new 

cultures, challenging new laws and different political systems. 

International enterprises are confronted with the problem that Accounting rules differ 

around the world. As a consequence of this they have often to do their financial statements 

twice: once in the home country in accordance with the home-country rules and once abroad 

in accordance with foreign rules. This practice includes the risk that the same problems are 

treated differently around the world. 

In the last year’s international companies, financial analysts, several international 

organisations as for example the International Accounting Standard Board (IASB) and other 

actors have put efforts in order to achieve a harmonisation of Accounting Standards. The aim 

of those was to avoid diversity of financial statements, to reduce extracosts, arising from 

drawing up different financial statements, and to win foreign investors. 

Our research focused on the necessity to continue the development of the accounting 

system in Romania as a normal process, determined on the one hand by the development of 

the capital market, and on then other hand by the program of the legislative harmonization in 

order to join the European’ Union, as well as by the economic globalization imposing the 

comparability of the accounting information in time and space. 

The development of the accounting system was imposed by the requirement for the 

Romanian economic entities to be able to establish closer relations with internal and 

international counterparts. This openness determined the development of the Romanian 

accounting system based on some principles and accounting regulations stated in the 

European Directives and in the international Accounting Standards issued by the International 

Accounting Standards Board. 

Consequently, the Ministry of Public Finance, in correlation with the changes 

encountered by the Romanian economy starting with 1990, initiated a development process 

for the accounting system in Romania based on some principles and accounting regulations 

stated in the European Directives and in the international Accounting Standards issued by the 

International Accounting Standards Board. This way was assured the passing from a system 

which provided information for taxation and statistic purposes, mainly for the Government 

and its institutions to a system providing the necessary information for investors and other 

categories of users. 

The accounting reform in Romania started with the Accounting Law no. 82/1991 

focused on improving the Romanian accounting system based of some principles and rules


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stated in the European Directives in order for the financial statements of the economic entities 

to respond to the requirements of large categories of users. 

The accounting system established by the Regulation for implementing the Accounting 

law, approved by Government Decision no. 704/903, applicable starting with 1994 was based 

on the provisions of Fourth Council Directive without assuring the conformity with this 

directive. 

In 1997 has been launched the Program for Accountancy Development in Romania with 

the support of the Department for International Development of the United Kingdom 

Government. This project intended to evaluate in what degree the accounting system in 

Romania can provide relevant and trustful financial information, able to meet the 

requirements of both internal users and to the international capital providers, the development 

of a long term program for the accounting system and the implementation of this program. 

This way, the analysis pointed out the fact that a significant progress was made in 

implementing the provisions of the Fourth Council Directive but it is necessary also a 

supplementary development of the Romanian accounting regulations in order to finalize the 

implementation. Strengthening the relations with the European Union in order to assure this 

joining process imposed the continuous development of the Romanian accounting system in 

order to assure a better harmonization with the provisions of the European Directives and with 

the International Accounting Standards. 

This harmonization was achieved by: 

� Order of the Minister of the Public Finance no. 403/1999 on approving the Accounting 

Regulations harmonized with the Fourth Council Directive and withm International 

Accounting Standards 

� Order of the Minister of Public Finance no. 772/2000 on the consolidated accounts; 

� The Emergency Government ordinance no. 75/1999 on the financial audit; 

� Order of the Minister of Public Finance no. 94/2001 on approving the Accounting 

Regulations harmonized with the Fourth Council Directive and with International 

Accounting Standards; 

� �Order of the Minister of Pub lic Finance no. 306/2002 on approving the abridged 

accounting regulations harmonized with the European Directives; 

The application of the new accounting regulations require a lower level for the 

accounting regulations, this time using the professional judgment, compaired with the 

accounting regulations approved by the Government Decision nr. 704/1993. 

This way, the economic entities apply at this moment the Accounting Regulations, 

harmonized with the Fourth Council Directive and with International Accounting Standards, 

approved by the order of the Minister of Public Finance no. 94/2001, with subsequent changes 

and addition of abridged accounting regulations harmonized with the European Directives, 

approved by the Order of the Minister of Public Finance no. 306/2002 with subsequent 

changes, depending on some criteria like turnover, total assets and average number of 

employees. 

These accounting regulations establish principles and basic rules, form and content of 

the annual financial statements with the general purpose assimilation of the European 

Directives and continuing harmonization with the International Accounting Standards. 

They are focused on preparing, presenting, approving and publishing the financial 

statements of the entities. 

The evaluation made by the World Bank, the Report on Observance of Standards and 

Codes (ROSC), pointed out the progress already achieved in Romania during the last ten 

years, in order to bring the national legislation in line with the European Union Directives and 

with International Accounting Standards, to improve the financial reporting in Romania and 

to improve the process for publication and filing the individual financial statements.


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In spite of all these, the Accounting law and the accounting regulations issued in this area 

include a series of specific requirements for accountability which can be in conflict with the 

requirements of the European Directives and/what with International Accounting Standards 

and can undermine the efforts of the Government for the harmonization with the European 

Directives and implementation of credible accounting standards. At the European level, 

harmonization is made based on the three pillars of the European legislation in this field, 

respectively, the Fourth Council Directive 78/660/EEC on the annual accounts of certain 

types of companies, the Seventh Council Directive 83/349/EEC on the consolidated accounts 

and Eighth Council Directive 84/253/EEC on the approval of persons responsible for carrying 

out the statutory audits of accounting documents. 

The analysis of the concordance tables of the national accounting regulations with the 

Fourth Council Directive 78/660/EEC on the annual accounts of some types of commercial 

entities and the Seventh Council Directive 83/349/EEC on the consolidated accounts pointed 

out some unconformities of the national accounting regulations with the European directives. 

In order to eliminate these unconformities, Order of Minister of Public Finance no. 1775/2004 

on some accounting regulations implemented the provisions of the Fourth and Seventh 

Directives in the national accounting legislation. 

Starting from the requirements to assure the conformity of the national accounting 

regulations with the European Union regulation, starting with the financial year 2006, the 

legal persons applies accounting regulations harmonized with the European directives, in 

accordance the provisions of the Order of the Ministry of Public Finance no. 907/27.06.2005 

on approving the categories of legal persons which applies accounting regulations in 

accordance with the International Financial Reporting Standards, respectively accounting 

regulations in accordance with the European Directives. 

As a particularity, the credit institutions will prepare starting with the year 2006 a set of 

financial statements in accordance with the accounting regulations harmonized with the 

European Directives, respectively the banking directives and another distinct set of financial 

statements in accordance with the International Financial Reporting Standards. These 

financial statements in accordance with IFRS will be prepared for the needs for other users of 

the information contained. 

The Public Interest Entities, excepting the credit institutions, starting with year 2006 can 

prepare also a distinct set of financial statements in accordance with the International 

Financial Reporting Standards for their own need for information for the users, other than 

those for the state authorities, in accordance with their option, and if they have the 

corresponding capacity for implementation. 

As a conclusion, starting with the year 2006, the legal persons applies for their 

individual financial statements accounting regulations conform to the European Directives. 

Starting with 1 January 2006 there were two categories of accounting regulations, 

respectively, accounting regulations conform to the International Financial Reporting 

Standards and accounting regulations conform to the European Directives (applicable by the 

legal persons which don’t satisfy the criteria established for the application of the accounting 

regulations conform to the International Financial Reporting Standards) and the consolidation 

will be made in accordance with the category of the accounting regulations they apply. 

Besides the effective transposition of the texts of the Directives in the national 

accounting regulations, in order to apply those articles of the Directives allowing Member 

States options as far as concerns some rules and accounting treatments, the Ministry of Public 

Finance will develop some norms in this direction. Because of reasons of caution, a large part 

of the European Union Member States applies national accounting regulations conform to 

European directives when preparing individual financial statements, and International 

Financial Reporting Standards are used when preparing consolidated financial statements.


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Member States of the European Union identified the risks which can appears from applying 

International Financial Reporting Standards as primary basis for accounting and expressed 

reluctance in their application, considering the complexity and innovation of IFRS. 

At the same time, the application of the International Financial Reporting Standards 

involves costs and supplementary resources in order to establish procedures, accounting 

policies and other evaluations required by these. 

Also, an essential problem is the existence of some legal provisions contained in the 

national legislation which are in conflict with the accounting treatments prescribed by the 

IFRS (for example, the national legislation on the public assets of the state). 

The entities must allow enough resources and to have the necessary procedures in 

order to continue the observance of the reporting requirements. 

As far as concerns the application of IFRS in Romania, the of the Ministry of the 

Public Finance for the credit institutions, insurance and reinsurance companies and companies 

supervised and regulated by the National Commission for Securities to apply the accounting 

regulations was made together with the regulators of these sectors, respectively with the 

National Bank of Romania, Insurance Supervision Commission and National Commission for 

Securities, the only institution which are able to evalua te the capacity to implement the new 

accounting regulations as well as the possibility to develop new specific pronouncements and 

practical guides. 

When developing the Order of the Ministry of Public Finance no. 907/27.06.2005 on 

approving the categories of legal persons that apply the accounting regulations conform to the 

International Financial Reporting Standards, namely accounting regulations conform to the 

European Directives the European regulations prevailed. The available information, published 

to date pointed out the fact that some countries postponed the date for the application of IFRS, 

and a large part of the countries which applies these regulations starting with 2005 applies 

IFRS only for preparation of the consolidated financial statements. Consequently, the 

preparation of the individual financial statements is based on the national accounting 

regulations in most countries. 

Considering the necessity to respect the engagements and the correlation with the 

technical capacity to grant a correct application of IFRS, in the future the regulations must to 

make the necessary decisions as far as concerns the application of IFRS by the regulated 

companies. 

The option to apply IFRS represents a complex process which could be accompanied 

by a particular effort for the financial environment in order to gradually prepare the market 

and to evaluate its impact on the consolidated financial statements. 

In this direction, function to the requirements of the European Union for regulation 

and to the evaluations made by the institutions involved, Ministry of Public Finance, National 

Bank of Romania, Insurance Supervision Commission and National Commission for 

Securities will establish the conditions to apply the International Financial Reporting 

Standards starting with the financial statements of 2007. 

The two most significant impediments to convergence identified by the survey appear 

to be the complicated nature of particular IFRS (including financial instruments) and the taxorientation 

of many national accounting systems. Other barriers to convergence include 

underdeveloped national capital markets, insufficient guidance on first-time application of 

IFRS. Recognizing that the move to the market economy was a primary driver of change, the 

paper considers the economic and social context of Romania and the potential conflicts 

arising where the growing importance of the global market, political and international 

developments influence the shaping of strategy in matters of accounting. A strategy shaped in 

this way must also cater for the specific needs of the many small companies in transition 

economies.


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Key to the reform process in Romania has been the recognition that a controlled 

phasing-in of change, accompanied by training, is necessary to give the reform process a 

chance to succeed; however, this leads to tensions arising between professional associations, 

which wish to become self-regulatory, and governments, who need to retain a measure of 

control to ensure that all elements of the reform are in harmony. The paper concludes that the 

accounting developments from 1996 avoided some of the pitfalls experienced earlier in other 

transition economies and also shortened some of the development process by making changes 

in parallel rather than in sequence. 

At this time Romania is across some ireversible and highly interest processes for the 

accounting: the number and power of international companies is increasing; the globalisation 

of the economies, mostly the financial market; the increasing of the stock capitalisation and 

the development of new financial products. In this circumstances, the production and the 

communication of relevant, credible and comparable financial informations which uses a 

common accounting language are essential to the business environment. 

The unique solution for the achievement of these requirements is the harmonisation of 

the romanian accounting with the common aquis disposals and, in the same time the effective 

application of IFRS. Parallel with the fundamental changes in the Romanian economy, 

processes of harmonizing accounting with principles and rules of the European Directives and 

IAS started in the 1990. Many new accounting rules were issued between 1990 and 2001, 

which have progressively transformed the Romanian accounting system. 

During the initial stage of developing Romanian accounting towards a market-based 

accounting, three lines of argument emerged. Some specialists considered that the former 

accounting system could, in essence, remain subject to certain necessary changes; others 

believed that the new Chart of Accounts should be introduced on the basis of the French 

model (Feleaga and Ionascu, 1993); and some sought the new US-inspired system (Richard, 

1995). The reform of the Romanian accounting system has been partially based on the 

regulations of a market-driven economy before the Second World War (Duţia, 1995). At the 

same time the accounting system reform was supported by professional institutions from 

France and Belgium, and financed through the European Union (Duţia, 1995). 

Second stage in the reform of the Romanian accounting system was the establishment 

in 1997 of the Romanian Accountancy Development Programme (RADP), sponsored by The 

British Know How Fund. The Programme has been co-ordinated and implemented by The 

Institute of Chartered Accountants of Scotland, in collaboration with the Romanian Ministry 

of Finance. The long-term objective identified was to enhance compliance of national 

Romanian provisions with the 4th European Directive and with the IAS framework. It was 

recognized that a short-term priority was to address the needs of publicly traded companies 

(and certain other public interest entities). The plans were also made to dissociate accounts 

prepared for tax purposes from the general-purpose accounts. 

In 2001, Ministerial Ordinance No. 94 was passed implementing the provisions of the 

EU 4 th Directive and requiring all companies within the scope of the Ordinance to apply 

International Accounting Standards. It also requires all companies within its scope to have 

their annual financial statements audited. The IAS were translated and published in Romanian 

language in September 2000. 

The implementation of a market-driven accounting system now requires the 

development of the professional practices in accordance with the accounting regulations, the 

organizational improvement of professional bodies, and the intensive training of accountants 

and auditors. Despite the implementation of the legal framework, the accounting practices are 

still subject of debate among professionals, regulators and academics. The financial reporting 

is considered by entrepreneurs to be cumbersome, and the training of accounting experts and 

auditors professionals is proceeding at a slow pace.


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At this time, Romania is across some ireversible and highly interesting processes for the 

accounting: the number and power of international companies is increasing; the globalization 

of the economies, mostly the financial market; the increasing of the stock capitalization and 

the development of new financial products. In this circumstances, the production and the 

communication of relevant, credible and comparable financial informations wich uses a 

common accounting language are essential to the business environment. The unique solution 

for the achievement of these requirements is the harmonization of the Romanian accounting 

with the common acquis disposals and, in the same time the effective application of 

International Accounting Standards.


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31BROMANIAN 

FINANCIAL MARKET AND THE INFORMATIONAL 

EFFICIENCY 

DIMA BOGDAN, Assistant Professor, PhD, West University of Timisoara 

BARNA FLAVIA, Lecturer, PhD, West University of Timisoara 

PIRTEA MARILEN, Assistant Professor, PhD, West University of Timisoara 

Abstract: 

Many financial studies are based on the efficient capital markets hypothesis. In this context, testing the 

existence of this concept becomes an interesting field of study for the emerging financial market. 

The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with 

institutional and structural deficiencies, like the Romanian one, and to propose an alternative approach to the 

problem. The main features of our analysis are an empirical test for the efficient market hypothesis in the 

Romanian financial market case. 

The output of this approach could be resumed by the thesis that, even in a situation when the financial 

market is affected by severe dysfunctions, there is a possibility to build an "optimal" portfolio. 

1. THE CONCEPTUAL FRAMEWORK: EFFICIENT CAPITAL MARKET 

HYPOTHESIS 

The concept of efficiency was introduced in the late 1960s (FAMA [1969]) and the 

prevailing view prior to that time was that markets were inefficient. Inefficiency was 

commonly believed to exist in that period in United States and United Kingdom stock 

markets. Numerous researchers tried to test the efficiency of different markets. For example 

KENDALL [1953] suggested that changes in UK stock market prices were random. Later 

work by BREALEY AND DRYDEN and also CUNNINGHAM found that there were no 

significant dependences in price changes suggesting that UK stock market was weak form 

efficient. Other studies of capital markets (FIRTH [1976, 1979, and 1980]) have pointed a 

semi-strong form efficiency of the same market. KAM, BENTON AND MING-SHIUN PAN 

[1997] realized a much-extended study starting from a sample of eighteen capital markets 

trying to test the efficiency. 

Generally speaking, informational efficiency of a financial market represents the 

capacity of security prices to reflect instantly and fully all-relevant available information 

affecting these securities. In other words this means that no excess return is possible to make 

in such an efficient market. For our purpose, it is important to identify the character of the 

efficiency of the allocation of the capital connected with this informational element. 

According with Fama, depending on completeness and rapidity of incorporation of 

information in securities prices, there are three levels of informational efficiency: 

• Weak form, in which the information set is just historical prices. The weak form 

efficiency is characterized by the instantly and fully reflection of all information regarding 

past history of securities prices in their current prices. 

• Semi-strong form, characterized by the integration in prices of all the publicly available 

information (e.g., annual dividends or earnings announcements, etc.). The semi-strong


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• form efficiency is the situation characterized by instantly and fully incorporation of all 

publicly available information related to securities in their prices. 

• Strong form, concerned with the problem of investors or groups that have monopolistic 

access to any private information, could use it in order to obtain abnormal earnings. If it is 

not possible, the market is efficient in the strong form. The strong form efficiency is an 

ideal and theoretical situation characterized by instantly and fully reflection of all 

information related to securities, public and private (those private are usually available 

only for insiders), in their prices. 

The empirical evidences show that the random walk hypothesis is “almost 

approximately true”. More precisely, if the financial assets returns are partial predictable, both 

on the short time, and on the medium and long time, the degree of predictability is generally 

low comparative with the high volatility of these returns. 

A random walk is a usual example of a non-stationary series: 

where 

ε t is a casual perturbation with stationary character. The series yt present an upward 

variance in time, while its 1st difference is stationary because: 

2. METHODOLOGY AND RESULTS 

In order to test for the EMH, we try to figure out if the BET-FI’s dynamic could be 

described as a random walk process: 

where rt is the return of the stock market index BET FI defined in a usual manner as: 

BETFI 

t 

rt 

= log( 

BETFI 

t−1 

) * 100 

and ε is the stationary random disturbance term. 

It should be noticed that the financial sector of the Bucharest Stock Exchange (BVB), 

reflected in the BET-FI index, is dynamic taking into account the registered evolutions 

and is attractive both for the individual and the institutional investors. This first sector 

index of the BVB offers to the investors a synthetic image about the evolution of the 

quotations of the shares issued by the financial investment companies that are transferred 

on the regulated market administrated by the BVB. Taking into account how the BET-FI 

index is calculated, it is an index of prices ponderated with the capitalizing of the "free 

float” of the companies that are part of it. 

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The random walk test for logarithm values of the stock market index BET FI tends to 

suggest that the hypothesis of “informational efficiency” in its weak form is confirmed. 

Final level Root MSE z-Statistic Probability 

ε 11.33175 0.023105 490.4528 0.0000 

Credibility function (log) 4001.555 Akaike informational criteria -4.684491 

Schwarz informational criteria -4.681304 

Hannan-Quinn informational 

criteria -4.683311 

8 

4 

0 

-4 

-8 

BETFI- estimat "one step ahead" 

250 500 750 1000 1250 1500 

Variabile reziduale 

Nivel actual 

Nivel estimat 

This global analyze must be detailed in order to identify the eventual structural changes 

that took place in the analyzed period of time. The importance of such a detailed analyze 

consists in the fact that a measure of the institutional, structural and functional degree of 

maturity of a market consists in the distribution of the market indexes as much as possible 

according to the „normal” distribution model: if the resemblance in the distribution of the 

market indexes to the „normal” distribution is profound, then one could say that the analysed 

market reached a more profound maturity of its specific mechanisms. A useful strategy in this 

direction is to follow the bellow steps: 

1) Build an „asymmetry index” ( 

IA t ) for example according to the following equation: 

1 

IA 

t = * 

N 

2 ( skew ) + ( kurt − 3 ) 

t 

9 

t 

2 

12 

11 

10 

9 

8 

7 

6 

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where „N” is the number that ate used to calculate the distribution parameters Skewness and 

Kurtosis; 

2) Apply a test of „structural rupture” to this index in order to identify the sub-periods 

where the structural changes occur. 

Using N=250, a sub-period of one year of transactions and using the Chow test on 6 

such sub-periods on the „asymmetry index” built on the closing values of the BET-FI, we get 

the following results: 

Chow's Breakpoint Test 

F-statistic 1.815199 Probability 0.092541 

(Log) Credibility function 10.90179 Probability 0.091459 

Both reported values allow us to eliminate the zero hypothesis of the absence of 

structural changes in the proposed index during the analyze horizon of time (31/10/2000- 

12/10/2007), Therefore, we can presume that the distribution of the BET-FI index changed, 

under the impact of a certain process of functional consolidation without over-passing a 

certain “critical point”. 

In order to identify the position of the financial sector in respect to other sectors and in 

respect to the whole market, it is useful to perform a co-integrated analysis between the BET- 

FI index and the other indexes of the market (BET and BET-C). The JOHANSEN co 

integration test’s results for the analyzed period are as follows: 

1. The JOHANSEN co integration test for BET-FI / BET (deterministic quadratic trend 

in data- constant and in the co integration relations – linear trend in VAR) 

Trace Test 

Number of co 

integration 

relations Trace 0.05 

Eigenvalue Statistic Critical Value Probability** 

None * 0.013122 24.28621 18.39771 0.0067 

1 at the most 0.001068 1.817309 3.841466 0.1776 

The Trace Test indicates a co integration relation for a trash-hold of probability of 0.05 

* indicates the rejection of the hypothesis for a trash-hold of 0.05 

** Values p MacKinnon-Haug-Michelis (1999) 

Maximum Eigenvalue Test 

Number of co 

integration 

relations Max-Eigen 0.05 


None * 0.013122 22.46890 17.14769 0.0077 

1 at the most 0.001068 1.817309 3.841466 0.1776 

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The Max-eigenvalue Test indicates a co integration relation for a trash-hold of probability of 

0.05 



2. The JOHANSEN co integration test for BET-FI / BETC (without a deterministic trend 

in the data – without constant and trend in the co integration relations – without trend 

in VAR) 

Trace Test 

Number of co 

integration 

relations Trace 0.05 


None * 0.127269 106.1659 12.32090 0.0001 

1 at the most 0.002648 2.028101 4.129906 0.1820 

The Trace Test indicates a co integration relation for a trash-hold of probability of 0.05 



Maximum Eigenvalue Test 

Number of co 

integration 

relations Max-Eigen 0.05 


None * 0.127269 104.1378 11.22480 0.0001 

1 at the most 0.002648 2.028101 4.129906 0.1820 

The Max-eigenvalue Test indicates a co integration relation for a trash-hold of probability of 

0.05 



The cointegration analysis can be completed by taking into account the registered 

spread between the indexes. More exactly, the more this spread can be described more 

adequately as a random walk, the more we can presume that the co integration relation is 

more intense: 

spread 

ε = α + ε 

t 

t 

= ε 

t 

t −1 

+ δ 

t 

1. Spread BET/ BET-FI 

Method: Maximum likelihood (Marquardt) 

Coefficient Standard error z-Statistic Prob. 

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α -43.00442 17.49834 -2.457629 0.0140 

Final State Root MSE z-Statistic Prob. 

ε -73919.91 718.8817 -102.8263 0.0000 

2. Spread BETC/ BET-FI 

Method: Maximum likelihood (Marquardt) 

Coefficient Standard error z-Statistic Prob. 

α -43.00442 17.79165 2.417113 0.0156 

Final State Root MSE z-Statistic Prob. 

ε -46918.95 22005.30 2.132166 0.0330 

By analyzing these results, we can conclude that the existence of a co integration 

relation is suggested for both pairs of indexes but the empirical form of this relation is 

different. More exactly, the connection between BET-FI and BET-C seams to be simpler in 

respect to the one that prevails in the relation with BET where the mediating factors 

complicate the correlations that exist between the indexes. 

Another aspect that needs to be taken into account regards the evolutions that took 

place in the intraday volatility of the BET-FI index, evolutions that are susceptible to show 

the “short-term” changes that took place in the way the index’ components were transitioned. 

A way of reflecting this volatility can be represented by the “designing” of a “volatility 

indicator”: 

Vol 

i 

= 

H 

K 

i 

∑ 

i= i Ci 

− L 

i 

where 

H, L 

represent the maximum (minimum) level of the index during the day and C 

represents the closing value of the index. 

The reason for designing such an indicator is simple: the bigger the registered 

difference between the minimum value and the maximum value of the index during a day is, 

the more entitled we are to suppose that the price of the shares included in the index’ structure 

have a bigger magnitude of the daily values. In order to see the “short term” dynamics, we do 

a summing up of the differences that have as reference a “short transitioning cycle”. 

So, by setting K = 6 we get the following properties of the volatility index for the 

analyzed period: 

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Graph 1 

The histogram of the volatility index’ values 

300 

250 

200 

150 

100 

50 

0 

0.00 0.05 0.10 0.15 

3.FINAL REMARKS 

Serie: Indice de volatilitate 

Observatii: 1708 

Medie 0.027653 

Mediana 0.023171 

Maximum 0.179252 

Minimum 0.000000 

Abatere 

standard 0.019774 

Skewness 2.022023 

Kurtosis 10.57298 

Jarque-Bera 5245.288 

Probabilitate 0.000000 

The description of the EMH is “in the line of literature”. But there is nothing more. Or, 

the Romanian case could enlighten the difficulties to treat the operational and informational 

efficiency in the condition of a “turbulent” capital market, in a non entire crystallized stage of 

development, with (relative) important and quickly changes in structures and mechanisms, 

asymmetric and imperfect information, non-accurate rules of functioning and not wellcontoured 

support institutions. 

The analyze done in the present paper suggests the following aspects: the financial 

sector of the market reflected by the BET-FI index can be described „up to a point” as being 

„informational efficient” (in the weak way of the concept), but the assembly of the weak 

characteristics does not fully respect the demands raised by such a characterization; the 

existing connections between the BET-FI index and the other indexes are relatively 

significant but present certain differences as a result of the sector asymmetry registered in the 

Bucharest Stock Exchange; 

Taking into account all of these results, we can conclude that the financial sector is a 

dynamic one and has registered important evolutions in the analyzed period. Still, these 

evolutions cannot characterize a “maturating process” completely finalized. 

More generally, it is necessary to build a more accurate description of: 1) 

expectations; 2) prices mechanisms; 3) effects of institutional imperfections, in order to depict 

a clearer image of an evolving capital market. 

References: 

1. BEECHEY M, GRUEN D, VICKERY J, The Efficient Market Hypothesis: A survey, RBA 

Research Discussion Papers, rpd200-01 

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2. COOPER,K.S, DONALD R.F, The capital market place, 5th ed.Reading, MA:Addison- 

Wesley, 1996 

3. FAMA E.,FISHER L.,JENSEN M.,ROLL R., The Adjustment of Stock Prices to New 

Information, International Economic Review, X, February, 1969 

4. FAMA E.F., Efficient Capital Markets: A Review of Theory and Empirical Works, Journal 

of Finance 25, May1970 

5. FAMA E Forward Rates as Predictors of Future Spot Rates, Journal of Financial 

Economic ,October 1976. 

6. FAMA E. Efficient Markets: II, Fiftieth Anniversary Invited Paper, Journal of Finance 46, 

December 1991, 1575-1617 

7. KAM,C.C.,BENTON ,E.,MING-SHIUN PAN, International Stock Market efficiency and 

Integration: A study of Eighteen Nations, Journal of Business, Finance &Accounting, 24, July 

1997 

8. LELAND,H.E, PYLE,D.H, Informational Asymmetries, Financial Structure, and Financial 

Intermediation, Journal of Finance, 26 (June1971) 

9. STANCU I.(coordonator), Articole fundamentale în teoria financiară, ASE,Bucureşti, 

1998 

10. WUNDER,G, MAYO,H Study supports Efficient Market Hypothesis, Journal of Financial 

Planning, July 1 

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MARKET STRATEGIES AND THE GLOBAL MARKET OF INSURANCES 

Văduva Maria, Lecturer Ph. D„Constantin Brâncuşi” University 

ABSTRACT: 

La stratégie de marché représente un élément clé de la stratégie générale du développement de la 

compagnie étant souvent la composente la plus importante. 

La stratégie de marché définit l’attitude de la société d’assurance face à ses clients mais aussi face à ses 

concurrents, fournisseurs, distributeurs. 

L’action d’établir les stratégies de marché des sociétés d’assurance dépend de l’évolution du marché 

des assurances qui est influencée par les reglements du pays. 

La tendence de globalisation du marché des assurances est dÚterminée par des facteurs comme: le 

développement du commerce mondial, l’entrée sur des marchés étangèrs des clients organisationnels des sociétés 

des assurances, le besoin des sociétés d’assurance de dérouler une activité plus éfficiente. 

On account of the economic circumstances characterized through market 

globalization, strengthened and convergence and all the more the developing of some 

distribution channels, the traditional strategies adopted by the insurance companies are not 

efficient as they use to be. 

A company settles its own strategy depending on the established objectives, its 

existent resources as well as the evolution of the external environment. 

The market strategy defines the attitude of the company towards its clients but also 

towards the competitors, suppliers and distributors. 

The market strategy of an insurance company depends on the evolution of the 

insurance market, which is in turn strongly influenced by each country regulations. 

The denomination of valid market both for the countries in which more insurance 

companies operate and those in which virtually there is a state organization. 

The number of the contracts concluded in a certain domain of the insurances, the 

volume of the insurances bonuses cashed, the quantum of the assumed duties by the insurance 

and the volume of the paid requital are among the indices characterizing the insurance market. 

Globalization encourages the insurance companies to look for business opportunities 

on the emergent markets, leads to the increase of the competition, incurs capital and knowhow, 

and speeds up the products innovation and also the distribution channels. 

The globalization trend of the insurance market is determined by a series of factors: 

the growth of the international trade, the penetration of organizational clients on the market, 

the need of the insurance companies to ensure a more efficient activity. 

The insurance companies which deal with commercial insurances become the first to 

penetrate the new markets thus following their organizational clients. 

The increase of the insurance demand on the emergent markets (Asia, Latin America 

and Central and Eastern Europe) offered new opportunities to the great insurance and 

reinsurance companies. 

435

The great companies can choose either for extending activities or for strategies of 

maintaining activities on actual market or limiting activities. 

Within the context of global development of markets, the extending strategy of activities 

on the new market must be adopted by those companies which are not satisfied with the last 

positions in the international hierarchy. 

As a consequence of the high potential of the emergent markets, both the great insurance 

companies and the reinsurance ones have focused their attention upon them trying to value the 

emerged opportunities. 

The strategy of maintaining the activity is a strategy which has been adopted by many 

American companies that preferred to focus their attention upon the internal market only. 

Meanwhile the European companies entered the American market due to the fact that they came 

from smaller countries and they could not afford to remain on the internal markets only. 

Such strategy has been adopted by the Japanese insurance companies that because of the 

economic difficulties have not shown a special interest either towards the markets of other 

developed countries or the developing ones in Asia they only being concerned with the internal 

markets. 

The strategy for a limited activity has been adopted by those companies that have 

problems on certain markets or find other more profitable areas for developing. 

Strengthening has become a phenomenon on insurance markets. The insurance companies 

consider acquisitions, strategic merging and alliances efficient means of extending of market 

quota, of increasing the insurance capacity, of obtaining the scale economies. 

Merging is a way through which the insurance companies are after obtaining a higher 

quota on the market. This is also a modality to penetrate other financial sectors. 

In order to penetrate new markets, to launch new products easier or to improve their 

competence, the insurance companies have to learn to strategic alliances. 

Fewer and fewer companies have the necessary resources to face the tough conditions of 

the global economy by themselves. Those companies lacking the internal resources necessary to 

be successful on the international markets may look for cooperation with other companies. 

Strategic alliances are useful for those markets that have high penetration costs and that 

have restrictions with regard to foreign investments. 

The necessity of strategic alliances is explained by Steve Robinson: in certain areas of the 

world as for instance Persian Golf or areas in Oceanic Asia and Eastern Europe, it is unpractical 

and sometimes impossible to set up a company without a local partner. 

The aim of strategic alliance is to improve the competitive position through maintaining 

or increase the number and the importance of competition advantages. 

Alliances may be established among companies with same domain of activity – the 

advantage lying in mixing of forces and resources of the two companies – and through companies 

with different domains of activities – the advantage lying in the fact that the two companies’ 

resources support each other. 

Thus, in order to increase their growing possibilities, the companies have begun to direct 

more and more their activities towards cooperation strategies, concluding different strategic 

alliances. The number of strategic alliances is increasing, and in certain industries the strategic 

alliances have become the main means to face to competition. 

Each country has special control bodies necessary to maintain a healthy competitive 

environment. 

The convergence tendency is the result of the fact that the strict difference among the 

banking activities, insurance activities, transactional activities and estate security activities has 

been wiped away.


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A phenomenon which is developing nowadays is that of acquisitions on financial markets 

and merging between banks insurance companies. 

Convergence does not necessarily mean that the competition is higher in more financial 

market shares. 

The clients are ready to accept the products of non-traditional suppliers on condition they 

are quality products at competitive prices. The online distribution changes decisively the process 

of transaction with the client, altering the expectations in what the acquisitions of financial 

products is concerned. 

Thus traditional companies have to compete with non-traditional ones and all the more 

have to persuade their clients that they are able to satisfy all their requirements concerning the 

financial services. 

Depending on the specific relations of the company with the environment, there are two 

possibilities: promoting competitive relations, traditional relations or partnership relations. 

Partnership has different forms: particular with each component of the internal 

environment, preferential with their clients, cooperation with the suppliers and with the 

competitors of the strategic alliances, tolerant. 

A company that wish to remain a successful competitor for a long term has to try to 

minimize the painful impact of profit cycles upon the own activities. It has to use the competitive 

opportunities, offered by the profit cycles, has to overcome its competitors in each phase of the 

cycle. 

Another strategy, which may be adopted by the individual companies in order to obtain 

the competitive advantage is that of selling non-different products and compete on price basis. In 

order to earn a market quota and to create profits in time, the company has to own the price 

advantage. 

The producer with the lowest cost of a non-different product can overpass his competitors 

in any phase of the cycle because he may offer to the client anything he requires, the lowest price. 

Concerning the insurances, a structure of low costs may imply a certain geographic area, 

in a low costs labour market or utilizing a more efficient distribution system. Even if the products 

are different, the competitors tend to replace the products offered by the companies having low 

costs. Even in this case, the companies with the lowest costs have to find new methods to 

diminish the costs, to surmount the competitors and keep on offering the lowest prices to its 

buyers. 

The companies of goods insurance and civil liability which in the past had the higher 

increasing rhythm and obtained higher profits than the average were able to differentiate their 

products and services comparing to the others and at the same time obtain low costs. Usually they 

used a combination of two elements – type of client insurance or market share. Differentiation 

and low prices support each other. A limit of profit over the average through the applying of one 

of the strategies allows the accomplishment of investments and applying the other strategies. 

A successful company on a cyclic competition does not try to find either the external 

cause of the cyclic profit in the insurance industry or impossible solutions. A successful company 

self- analyze itself, goes on doing research and finds better and less expensive methods to satisfy 

the need of insurance of the society. 

Bibliography: 

1


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Alexa C., Ciurel V., Sebe E., Mihaescu A. M Insurances and reinsurances in International 

Trade, All Publishing House Bucuresti, 2001 

Costantinescu D.A. Marinaica D.Insurance and the Management of Risk , Technological Printing 

House Bucuresti, 2000 

Petrescu E. C. Marketing of Insurances, Uranus Printing House, Bucuresti, 2005 

Vaduva M. Insurances, Mirton Printing House, Timisoara, 2005 

Vaduva M. Reinsurances, Mirton Printing House, Timisoara, 2005 

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THE ALIGNMENT OF THE ROMANIAN SOCIAL INSURANCE 

LEGISLATION TO RELATED COMMUNITARY REGULATIONS 

Stegăroiu Valentin, university lector drd., 

TITU MAIORESCU UNIVERSITY BUCHAREST 

ECONOMIC SCIENCES FACULTY Tg-Jiu 

Being a Member State (MS) of the European Union (EU) starting with January 1 st 2007 is a 

crucial moment in Romanian history which requires great efforts in the process of 

implementation of the communitarian regulations in the field of social insurance. Therefore, 

Romania is required to enforce communitarian regulations of coordination in domains such as 

social security for migrating workers. 

Concerning the alignment of the Romanian pension legislation to the communitarian one, 

Law no. 19/2001 has been adopted, with regard to the public pension system and other social 

insurance rights that came into effect come April 2001. This normative act marks the beginning 

of the process mentioned beforehand and, through its content, it introduces for the first time the 

possibility that other citizens of different states or stateless individuals can benefit from the 

public pension system as long as they reside in Romania, with the obligation of contributing to 

the social insurance state budget. 

The regulations introduced with the pension law have reformed the pension system and they 

have prepared the Romanian social insurance legislation for the application and implementation 

of communitarian regulations referring to the enforcement of social insurance systems for 

employees, for freelance workers and their families, who travel within the community. 

In conformity with the stipulations of the social insurance bilateral agreements made by 

Romania up to its adherence, modifications to the social insurance law were necessary to control 

the situation of migrating workers: the elimination of discriminatory stipulations regarding 

citizenship, the acknowledgement and summation of insurance periods, creating the cooperation 

between national authorities and institutions responsible with the administration of insurance and 

with establishing the modalities of payment for the administration of social insurance. 

To benefit from the social insurance of pensions, one must not necessarily be a Romanian 

citizen or even reside in Romania, but the law stipulates that the beneficiaries must have an 

insurant status, and the rights and responsibilities which it implies can be transferred in the MS 

where the insurants reside, in the conditions stipulated by accords and conventions made by 

Romania, in the currency of the respective state or another currency which is agreed upon. 

The social insurance pensions of the state are defined as monetary rights given to employees 

at the end of a determined period of activity and when they are of the age specified by the law or 

in the case of total or partial loss of their working ability, and to their descendants. 

From this definition derive the three types of pensions offered by the social insurance system 

of the state: the pension for the amount of work and age limits, the pension for disability, the 

pension for descendants. 

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The reform in the public system of social insurance has imposed four principles: the 

uniqueness of the pension, meaning that a person can receive only one full social insurance 

pension, the indexation and compensation of the pensions – a mechanism put into effect after 

1990 through governmental decisions that modified pensions by forfeiter increases or by gradual 

or uniform percentages, tax deduction for pensions – like all other social insurance rights, 

pension are tax deducted according to modern regulations, the irrevocability of the right to a 

pension – is part of the indescribable rights (according to this principle, once the conditions 

stipulated by the law are met, the right is not lost as long as a request for pension has been 

submitted), the impossibility of cession of pension – right to pension cannot be ceded (once the 

owner is awarded a pension, he/she may dispose of it freely, while the pensions can be owned 

within the condition stated in the common law). 

In the Romanian public pension system, there are the following categories: 

- pension for the quantum of work and age limit; is given to the insurants who meet the 

requirements for the minimal age limit and work quantum. The standard age for 

retirement is 60 for women and 65 for men, while the period for reaching this age is from 

April 2001 to March 2005, henceforth starting from the age of 55 for women and 60 for 

men. For now, the work quantum a person must complete before receiving a pension 

without being of age is 25 years for women and 30 for men. This quantum is expected to 

grow during 13 years up to 30 years for women and 35 for men. 

- pension in advance; the insurants who have exceeded the quantum of work by at least 10 

years can apply for pension in advance with at least 5 years ahead before reaching the 

standard age. The value of the pension in advance is the same as the one for the pension 

for the age limit. When one reaches the standard age, the partial pension in advance 

becomes pension for the age limit, by eliminating the decession made for the partial 

pension in advance and by adding another possible work quantum made during this 

period. 

- pension for disability; or the pension for the loss of the working ability is given to people 

who have suffered work-related accidents during their employment or have suffered from 

work-related diseases, leading to the partial or total loss of their working ability. Also 

entitled to this pension are people who are not insured at the time of the occurrence of 

their disability but who have accomplished at least half of the standard work quantum. 

- pension for descendants; the people who are entitled for this type of pension are related to 

the deceased by marriage or by first degree kin (children), with the condition that the 

deceased met all the requirements for receiving pension. Children are entitled to this 

pension: until they are 16 of age; if they continue their studies in a legally organized form 

of education, until these studies are finished, but not later than 26 years of age; all during 

the period of disability of any degree, if this occurred during the above mentioned 

situations. 

The law regarding private compulsory pension funds and the law regarding occupational 

pensions help protect the supplementary rights to pension for the working or independent 

insurants moving inside the E.U. The enforcement of these laws was a prerequisite condition for 

the integration of Romania, which has been continually delayed (it is expected to come into effect 

sometime in 2008). 

The law regarding private compulsory pension funds (Pylon II) is a compulsory component 

of the reform in the pension system in Romania and it aims at supplementing the pension given 

by the public system. By adopting the legal context, Romania has transposed the Council 

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Directive 98/49/CE from June 29th 1998 concerning the protection of the rights to pension for 

the working or independent insurants moving inside the E.U. 

The private pension represents the monthly sum paid to a participant all during his life or to 

an appointed beneficiary. The pension fund is formed through a civil society contract and is 

handled by an administrator, or a stock based commercial society, whose sole objective is the 

administration of the pension funds. Participation to this fund is compulsory to everyone up to 35 

years of age and newly arrived in the work market and optional for other categories of people up 

to 45 years of age, who are already insured and contribute to the public pension system. 

Participation in this type of fund is individual, based on a document signed by the administrator 

and the participant, the latter therefore accepting to transfer 2% in the first year, and gradually it 

will increase by 0,5% annually, up to 6% in 2016. 

The right to a private pension is effective, based on an application submitted by the 

participant, when the cumulative conditions are met: the age stipulated by the public pension 

system; the payment of minimum 60 monthly contributions; the personal amount is at least equal 

to the sum necessary to obtain the minimal occupational pension stipulated by the law. In the 

case of permanent disability, the participant can benefit from a personal amount without 

complying with the above mentioned stipulations. 

The optional component – Pylon III – optional pensions. The legislation for this component 

has been stipulated in Law no. 204/2006 that sets the principles for the creation of optional plans 

of occupational pensions and the creation of the funds for occupational pensions, the principles 

for the organization and proper function of the administrators, the regulation and careful 

surveillance of the system. Therefore, by paying their contributions, the employees will be able to 

have a supplementary income when they retire. 

The contribution to this fund, up to 200 Euro from the yearly income, is deducted from the 

brute income to the completion of the deductions from the social insurance contributions 

stipulated by the law. The expenses of the employer with the contributions due for the 

occupational pension’s fund, up to 200 Euro a year for every participant, are deductible from the 

calculation of the taxable profit. The participation to this fund is optional, and unlike private 

pensions, there is no age limit, and the employer and the union has the right to put forward an 

optional plan for occupational pensions or the representatives of the employees through the 

collective contract of work at the level of an unit, group of units or a branch, as well as the 

employer, alone or in association with other employers. 

In the matter of help for unemployment, this was aligned to the communitarian regulations, 

one first change being that of the removal of discrimination referring to foreign citizens, the 

Romanian law stipulating that foreigners looking for a job in Romania can benefit from the same 

treatment as local citizens. 

As far as the law is concerned, the insurants of the public social insurance for unemployment 

system can be Romanian citizens who work or have their own incomes in Romania, as well as 

Romanian citizens who work abroad, foreign citizens, who, during their residence in this country, 

are employed by a Romanian employer or have income of their own, while being under the 

obligation of paying their contribution to the social insurance for unemployment and having the 

right to benefit from an unemployment allowance. 

The Romanian social insurance for unemployment law also stipulates that the sums that mark 

the unemployment allowance can be transferred to the countries where the insurants set their 

residence, with the sole condition that the countries take part in the international agreements and 

conventions as Romania. 

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In conclusion, it can be stated that at the date of Romania’s adherence to the aspects of 

European democracy, the entire Romanian legislation of social insurance has been adapted and 

aligned to the communitarian regulations concerning the coordination of social insurance 

systems, but there are more improvements necessary, from the adaptation of the institutional 

context to the technical aspects, and the development of the administrative capacity of the social 

insurance rules, as the effective coordination of the these systems also entails the creation and 

development of responsible institutions. 

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THE APPLICATION OF OPTIMUM CURRENCY AREA CRITERIA TO 

CROATIA 

Tanja Broz, The Institute of Economics Zagreb 

ABSTRACT 

This paper investigates if Croatia would benefit from the introduction of euro. Croatia has been gravitating towards 

Europe for decades, especially towards Germany. The same period, until the introduction of Stabilisation program in 

late 1993, was characterised by hyperinflation which caused loosing the trust in domestic currency. Also, Croatia is a 

small country in territory and in economic power, so one could argue that loosing monetary independence would not 

hurt it. But what if Croatia does not have synchronised business cycle with the euro area? Then a single monetary 

policy would not be of benefit to it and Croatia is too small country to have powerful voice in ECB. The theory of 

optimum currency areas can help to find the answer to those concerns. 


This paper investigates if Croatia would benefit from introduction of euro. Croatia has been 

gravitating towards Europe for decades, especially towards Germany. The same period was 

characterised by hyperinflation which caused loosing the trust in domestic currency. Also, 

Croatia is a small country in territory and in economic power, so one could argue that loosing 

monetary independence would not hurt it. But what if Croatia does not have synchronised 

business cycle with the euro area? Then single monetary policy would not be of benefit and 

Croatia is too small country to have powerful voice in ECB. The theory of optimum currency 

areas (OCA) can help to find the answer, but first it is necessary to see macroeconomic situation 

in Croatia since its independence. 

The rest of paper is organised as follows. Chapter 2 explains some elements of macroeconomic 

situation in Croatia, chapter 3 gives more details about foreign trade, while chapter 4 applies 

OCA criteria to Croatia. Last chapter concludes. 

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2. Macroeconomic situation since Croatian independence 

Before it declared independence in 1991, Croatia was a part of Yugoslavia together with other 

5 republics. After 1991 Croatia exists as an independent state with its own government and 

central bank. First few years were very difficult for Croatia due to war for its independence, 

but also due to break up of Yugoslavian and east European market. War ended in 1995, but 

during the war Croatia experienced severe economic instability, which however started in the 

whole Yugoslavia in 1980’s. During the war, third of Croatian territory was occupied and 

most industries in those areas were destroyed. This period was also characterised by 

123 

124 

hyperinflationF 

F, severe fall in industrial productionF 

F and GDP and supply side shocks. In 

order to stabilise the economy, government employed Stabilisation program in October 1993. 

The program had 3 phasesF 

125 

F, but only the first one – reduction of inflation – had noticeable 

results. Program was well communicated with the public and public had faith in government’s 

determination to reduce inflation. The most important anchor was the exchange rate, because 

of very long relationship between Deutch mark and domestic currency. The choice of the 

anchor was natural, since hyperinflation lasted for long period of time and people started to 

use Deutch mark as a reference currency. Thanks to the strong belief in the program, inflation 

decreased immediately and in several months in 1994 we also recorded deflation. In the same 

time instead of planned slow depreciation of domestic currency against Deutch mark, 

126 

exchange rate started to appreciate.F 

F Reason for that can be found in increased credibility of 

domestic currency, so people wanted to hold now Croatian dinars, instead of Deutch mark. 

Disinflation was successful and the economy was stabilised – GDP and industrial production 

started slowly to rise. However, since the government and central bank were very afraid of 

127 

inflationF 

F, other phases of stabilisation program were neglected, so there was no strong 

support to developmental goals. The result of that, but also of crisis of banking sector and 

structural problems, was a deterioration of economic situation which started in 1997 and 

Croatia entered into recession which started in the last quarter of 1998 and lasted until the 

third quarter of 1999. Improvement in economic situation was followed by recovery in 

household consumption, exports and tourism. Through the whole period after the stabilisation 

program, inflation remained stable, below 5% annually, except in 1998, when it was 5.7% 

(Table 1). After the stabilisation program, focus of public was on exchange rate, which was 

perceived as the main anchor. For that reason, exchange rate against Deutch mark and latter 

128 

on against euro was carefully managed, which can be seen from Figure 1.F 

Latest data show continuing improvement in economic activity. Seasonally adjusted GDP is 

constantly rising from the end of 2001 (Figure 2) and similar but more volatile trend is 

recorded for seasonally adjusted industrial production (Figure 3). Also, before the 

introduction of euro in 12 EU countries, Croatian citizens mostly saved their money in 

deutschemarks, but they often did not put the money in the banks, but rather they saved it in 

123 

Before the introduction of Stabilisation program in 1993, monthly inflation rate amounted to 30% (Crkvenac, 

1997). 

124 

Industrial production in 1993 was in real terms 42.5% lower than in 1990 (Crkvenac, 1997). 

125 

First phase included fast disinflation, second structural changes in the economy and third economic 

development. 

126 

Creators of stabilisation program thought that exchange rate would continue to depreciate, but with slower 

rate. They even announced tablita for the first 3 months in which they announced future expected exchange rates. 

However, the opposite situation happened and they abandoned the use of tablita. 

127 

Monetary policy was tight and taxes were also increased. 

128 

Lowest value of exchange rate was 6.584 kunas for 1 euro in April 1995, which was 9,5% lower that average 

exchange rate in selected period and highest value was 7.7408 in February 2000, which was 6.4% higher than 

average exchange rate. 

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the “mattresses”. After the introduction of euro, some of the money that was put in the banks 

was withdrawn, but the money that stayed helped in credit growth that occurred afterwards. 

Expansion of credit stimulated consumption and eventually growth. Also, since banks 

perceive households as less risky, because of good collaterals, they were more prone to give 

credits to them then to business sector, which caused the change in structure of credits (Figure 

4). In May 2003 credits to households got ahead of credits to business sector and they 

remained higher so far. Although the introduction of euro helped in credit expansion, it cannot 

explain the whole increase. Since most banks are owned by foreign banks (mainly Austrian 

and Italian), banks were able to get credits from abroad with lower interest rates and place 

them in Croatia with much higher interest rates. This banks’ activity together with the 

government which used more favourable conditions in European market to issue Eurobonds, 

caused rapid increase in external debt (Figure 5). After government realised that external debt 

is going out of control, they started to issue bonds on domestic market, which, among other 

factors, caused the appreciation pressures on the exchange rate. Other factors that made 

pressure on appreciation of exchange rate in the whole period after Stabilisation program are 

inflows of foreign currency, mostly through tourism and FDI, households’ transfers and 

credits. However, stability of the exchange rate was not perceived good for all agents. 

Exporters complained that exchange rate is overvalued and that they cannot be competitive in 

the world markets. Arguments for that exporters see in the starting phase of stabilisation 

program. As was previously mentioned, creators of the Stabilisation program thought that 

exchange rate will continue to depreciate, but they hoped that exchange rate will depreciate 

with much slower rate after the introduction of the program. So, they induced initial 

devaluation of domestic currency by 19.8%. After that costs were adapted to this new level of 

exchange rate, but since the program was credible, people wanted to hold domestic currency 

and demand for it increased causing appreciation of exchange rate instead of expected 

depreciation. All of this caused real appreciation of domestic currency and exporters started to 

ask for depreciation (they are doing so even today) so that they could be more competitive. 

So, instead of adapting to this situation and trying to be more productive, they want to become 

competitive in artificial way. But, since even today exchange rate is perceived as nominal 

anchor and since most of households and government liabilities are tied to euro, large 

129 

depreciation would very likely cause inflation.F 

F Also, as Barro and Gordon (1983) and 

Kyland and Prescott (1977) argue, a discretionary decision of monetary authorities will result 

in higher inflation in the future, at the same rate of unemployment. 

Other matters of concern in Croatia are the following: unemployment remains high, structural 

changes are still necessary, legal system calls for transformation and corruption still exists. 

All of this means that macroeconomic stability is not the only important factor and that 

Croatia has still to work very hard to prove itself to Europe. 

3. Trade between the EU and Croatia 

Croatia is a small economy, which implies that it has to import a lot, since it cannot 

competitively produce all it needs. So, in order to import required goods, Croatia needs also to 

export, so that it can earn foreign currency with which it can pay for its imports. If a country 

does not export enough goods, it can have surplus in service sector and in transfers or it need 

to have surplus in capital account. 

129 However, it is true that Croatian central bank shouldn't have allowed tiding liabilities to euro and that they 

should have considered exit from this kind of exchange rate regime, but now it is not acceptable to most agents 

to have high depreciation of domestic currency, because this would have negative impact on their wealth. 

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Since independence, Croatia had surplus in balance of foreign trade only once - in 1992. After 

that Croatia has continuous deficit in balance of foreign trade (Figure 6). Deficit in balance of 

foreign trade is not something bad if import is used in export sectors or if it is used for 

developmental goals. But if a country imports mainly consumer goods, then import will not 

130 

increase export production, but will increase debt that has to be returned.F 

F This is what is 

happening in Croatia. Maybe the reason for that can be found in the fact that Croatia was part 

of communist country for decades, so that people could not have all consumer goods they 

wanted, but also government can be blamed because of no development and export strategy. 

Croatia’s exports stayed almost unchanged in dollar terms for more than a decade, while 

imports rose causing widening of deficit of foreign trade balance. Only in the last couple of 

years exports (but also imports) increased dramatically. However, dollar depreciation against 

the euro contributed to the large part of this increase, since Croatia mainly exports in euros 

and reports export and import data in dollar terms. 

Main Croatian trading partners are EU and Bosnia and Herzegovina. In the EU, the most 

important partners are Italy, Germany and Slovenia. Since Italy and Germany have euro, with 

Slovenia introducing it in 2007 and Bosnia and Herzegovina has currency board with euro, it 

is noticeable that euro is the most important currency in the foreign trade for Croatia. This can 

also be seen from exports and imports by type of currency. About two thirds of exports and 

about three quarters of imports are invoiced in euros, which as well implies that the euro is by 

far the most important currency in the foreign trade. 

4. How well Croatia apply to different criteria of optimum currency 

areas? 

Discussion about common currency areas usually rests on the theory of optimum currency 

131 

areas, which was created by Mundell (1961) and supplemented by many other authors.F 

F For 

that reason in this chapter we will explore several optimum currency area criteria and their 

application to Croatia. 

Openness 

132 

Openness can be measured as a share of foreign trade in GDP.F 

F Smaller countries are 

usually more open to trade than larger countries. Some reasons for that were already described 

(smaller countries can hardly be self-sufficient). So, if country needs to import a lot, it has to 

export in order to have foreign currency to pay for imports. When exports and imports in 

small economy are summed, we get usually relatively high share of GDP. Table 2 shows data 

for Croatia. After decrease of share in the middle of the 90’s, Croatia increased openness in 

the new millennium and now openness ratio amounts to more than 110%. This number means 

nothing if it not compared with other economies. Economies like EU or USA have openness 

ratio of less then 25, so compared with them Croatia is a very open economy. On the other 

hand, Belgium has even higher degree of openness. It can be concluded that smaller 

economies are in the same time more open. Also, when the economy is more open, then larger 

part of it is influenced by changes in exchange rate. So, if country has a dominant trading 

partner, it would be of benefit to it to peg its currency to trading partner currency. Croatia 

indeed has a dominant trading partner – EU – and this fact is now even more pronounced 

since EU 12 (13 now with Slovenia) introduced a single currency. Hence, if we look only to 

130 This is true if service balance is not positive enough to pay for goods deficit. 

131 Survey of optimum currency areas literature can be found in Broz (2005). 

132 Even though Mckinnon (1963) defines openness as a ratio of tradables to non-tradables, it is hard to get those 

data. So, we used here share of foreign trade (exports plus imports) in GDP as a measure of openness. 

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this criterion, it is possible to conclude that Croatia should peg its currency to euro and when 

the time comes it should introduce the euro. 

Size of the economy 

Croatia is a very small economy comparing to USA, Germany or Japan, but also comparing to 

Spain, Switzerland and Belgium. In 2004 GDP (in current prices) in the USA was 9433 

billion euros, in Germany 2216 billion, Japan 3690 billion, Spain 837 billion, Switzerland 289 

billion and in Belgium 288 billion, while Croatian GDP was 27.6 billion euros (Eurostat and 

Croatian national bank). Croatian GDP is only 0.3% of USA GDP and 9.6 % of Belgium. 

Small economy, which is often relatively open, has higher import dependence then large 

economy. Hence, changes of the exchange rate have larger impact on the economy. If in 

relatively large economy, with import dependence of 10%, there is 30% depreciation, this will 

increase costs of production by 3% due to increased prices of inputs. On the other hand, the 

same depreciation in a small economy with import dependence of 50% will mean increase of 

production costs by 15%. Since Croatia is a small economy with high import dependence, it 

would benefit from stability of exchange rate, according to this criterion. 

Diversification of export 

The less diversified is the economy, the more attractive is flexible exchange rate. Table 3 

shows diversification of Croatian export and import structure. It is noticeable that category 

machinery and transport equipment are the most important. Almost third of total export falls 

in this category, which is substantial amount. Also, it is important to notice that main part of 

this category is ship building. In the same category of import structure, import of cars is the 

most important. It is also of interest to mention that cars are mainly bought on credit or 

leasing. Other important categories are miscellaneous manufactured articles, manufactures 

goods classified chiefly by material and mineral fuels and lubricants. However, even though 

Croatian export structure has one category that is more represented, this category does not 

comprise of major part of total exports. Countries with share of 80% of one product in total 

exports are considered to be not diversified, and that is considerably higher than Croatian 

machinery and transport equipment category. For that reason it is possible to conclude that 

Croatia is a diversified economy and that it would benefit from the single currency, so that it 

should join the EMU, once it joins the EU. 

Labour mobility 

As Mundell (1961) points out, labour mobility is a mechanism which could meliorate the 

impact of adverse shocks and restore equilibrium. Croatia, as most of Europe, does not have 

very mobile work force. The only mobility that is recorded is toward capital city Zagreb. 

Zagreb has about 1 million inhabitants (almost a quarter of the total population) and it is the 

richest part of Croatia. Government and all ministries are placed in Zagreb, even Ministry of 

tourism and Ministry of agriculture are in Zagreb, despite the fact that most of tourism 

revenues are generated at the coast and agriculture is the most important activity in Slavonija 

(eastern part of Croatia). Also, even though government introduced some tax measures in 

order to attract firms and labour force to depopulated areas, some regions (i.e Lika) are still 

almost completely depopulated. In this situation it is naturally to expect that adverse shock 

could hit different regions and that labour mobility will not help to meliorate the shock. 

Capital mobility 

Croatia has convertible current account of balance of payments, but it does not have yet 

complete convertibility of capital account. However, with Croatia’s path towards the EU, it 

will have to eliminate all the barriers and investment will be easier. This will enable Croatian 

citizens as well as foreigners to diversify their incomes and assets. But, until Croatia does not 

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enter the EMU, there will be exchange rate risk present in the economy, which will increase 

uncertainty of potential profit on investment and put pressure on exchange rate. Hence, unless 

Croatia does not adopt some sort of rigidly fixed exchange rate regime until the introduction 

of euro, it would be better to have floating exchange rate regime so that potential exchange 

rate crisis can be avoided. After the introduction of euro, a single currency will enhance 

capital mobility between Croatia and the rest of EMU since there will not be exchange rate 

risk any more. 

Credibility 

Croatia has a long history of inflation. Now, since the Stabilisation program we have low 

inflation for more than a decade. Also, monetary authorities behave very responsible since the 

introduction of the program and they did not show any signs of weakness. Government now 

cannot take any credits from the central bank and central bank is carefully monitoring 

inflation developments. However, one might conclude that Croatians still do not have trust in 

domestic currency, since most of savings is in foreign currencies or tied to them (Figure 7). 

The reason for that could be this long history of inflation. So, in order not to repeat the 

history, one might say that Croatians would prefer fixed exchange rate regime and that 

introduction of euro would be of benefit to them. 

Level of eurisation 

Data show that Croatia has high level of unofficial eurisation, since most of residents’ savings 

is in foreign currency (mainly euros) and Croatians use foreign currency, mostly euro, for 

larger purchases like houses and cars. Figure 7 shows deposits in domestic and foreign 

currency. Deposits in foreign currency are significantly higher than in domestic currency as it 

was explained in previous section. On the other hand, salaries are expressed in kunas, so 

change in exchange rate affects value of income, but at the same time citizens are hedged with 

their savings. As well, credits for larger purchases like houses and cars are tied to foreign 

currencies, mostly to euro and to smaller amount to Swiss frank, which enhances level of 

eurisation. Since the level of eurisation is rather high, it would not be difficult to completely 

abandon domestic currency and introduce euro. 

Shocks 

It is important to see what kinds of shocks are hitting Croatia. There are different types of 

shocks. If a country is facing foreign nominal shocks, having a fixed exchange rate will be 

attractive. On the other hand, if what a country is facing are real shocks (domestic or foreign), 

a flexible exchange rate would be more feasible. In Croatia, nominal shocks are more 

pronounced than real shocks. One of the most important nominal shocks are capital inflows 

and Europeans are the most important investors. Oil shock can be presumed as a real shock, 

but this shock is hitting all countries in the EU, not only Croatia. Further, for more than a 

decade export was stagnant no matter what happened. Only in the last two years it increased 

dramatically, but major part of that can be explained with depreciation of dollar. So, it can be 

said that no major real shock in form of aggregate demand shock hit Croatia since 

independence. Hence, it can be concluded that single monetary policy that ECB conducts for 

whole EMU could be of benefit for Croatia, if mainly nominal shocks from EMU hit Croatia. 

Business cycle synchronisation 

Among many criteria for joining/forming a common currency area, one has quite an 

influential status in the recent years and that is the synchronisation of business cycles. This 

means that if the business cycles of members of a common currency area are synchronised, 

the cost of not having its own monetary policy that would fight against disturbances is 

minimised. There are many methods which can be used to determine if countries have 

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synchronised business cycles, but VAR approach is most commonly used. Examples include 

Boone (1997), Frenkel and Nickel (2002) and Fidrmuc and Korhonen (2003). Also, method 

that is widely used to determine existence of business cycle synchronisation is cointegration 

(eg. Korhonen, 2003 and Broz, 2006). Croatia is rarely found in samples, so here we will 

present results from Broz (2006). The result of the cointegration test has shown that there is 

no cointegration between Croatian and the euro area in terms of industrial production so that 

variables in question can move independently of each other and can drift apart. This result 

implies that Croatian and the euro area’s business cycles are not synchronised. So, one of the 

OCA criteria is not satisfied and in this context this means that Croatia and euro area do not 

form an optimum currency area and that in the long run ECB monetary policy may not suite 

Croatia. Hence, Croatia would not benefit from the introduction of euro at this time. 

Endogeniety 

Endogeniety of optimum currency areas is a relatively new idea presented by Frankel and 

Rose (1997). As they point out, theory shows that increased trade in common currency area 

can cause either increased industrial specialisation between regions, in goods in which they 

have comparative advantage, which results with asynchronous business cycles resulting from 

industry specific shocks, or increased trade can result with increased correlation between 

business cycles if common demand shocks prevail or if intra-industry trade accounts for most 

of the trade. Their standpoint is the latter one and they argue that international trade patterns 

and international business cycle correlations are endogenous, so it represents a simple 

application of the famous Lucas critique. This standpoint can help Croatia to think about the 

euro, even though present research show limited synchronisation of business cycles between 

Croatia and the euro area. Introduction of euro would increase trade integration between them, 

which could increase intra-industry trade and thus Croatia could find itself in the acceptance 

area. This indicates that Croatia could satisfy the OCA criteria ex post, even though it did not 

ex ante. 

5. Conclusion 

Inspection of most OCA criteria suggest that Croatia should introduce euro as soon as 

possible or at least peg its currency to euro. However, business cycle synchronisation criterion 

133 

suggests the opposite and it can be said that this criterion includes several criteria in itself.F 

F 

According to this criterion, monetary policy of the euro area would not suite Croatia. 

However, this is not so difficult to accept. The reason why Croatia and the euro area are not 

cointegrated in this respect can be found in convergence theory. As Croatia is at lower level 

of development than EU average, convergence theory implies that Croatia is expected to grow 

much faster and needs to have higher growth rates. This means that their industrial production 

indices will diverge from each other, until Croatia comes to euro area’s level of development. 

So, if Croatia would join the euro area now, different states of the economy would require 

different monetary policy. 

Hence, even though traditional OCA criteria suggest that Croatia should peg its currency to 

euro and introduce euro as soon as possible, we would advocate, according to business cycle 

synchronisation criterion, that Croatia should deal with the problems that it has by itself and 

use monetary policy as an instrument of economic policy as long as it can. Later on, when 

133 The synchronisation of business cycles is an important element in the research of, for example, the 

endogeneity of OCA criteria (Frankel and Rose, 1997), intensity of bilateral trade and correlation of business 

cycle (Frankel and Rose, 1996), monetary integration as disciplinary effect (Buti and Suardy, 2000) and 

specialisation hypothesis (Krugman, 1993). 

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Croatia will be completely ready and when Croatian and euro area’s business cycles will be 

more synchronised, it can start to think about the euro. 

6. Bibliography 

1. Barro, R. and D. Gordon (1983), “Rules, Discretion and Reputation in a Model of Monetary 

Policy”, Journal of Monetary Economics, 12, pp. 101-121. 

2. Boone, L. (1997), “Symmetry and Asymmetry of Supply and Demand Shocks in the 

European Union: a Dynamic Analysis”, CEPII document de travail, No. 97-03. 

3. Broz, T. (2006), “Integration of economic activities between Croatia and euro area”, mimeo. 

4. Broz, T. (2005), “The Theory of Optimum Currency Areas: A Literature Review”, Privredna 

kretanja i ekonomska politika, 104, pp. 52-78. 

5. Buti, M., and M. Suardi (2000), “Cyclical Convergence or Differentiation? Insights from 

the First Year of EMU”, Revue de la Banque/Bank- en Financiewezen, 2-3/00, pp. 164-172, 

March. 

6. Crkvenac, M. (1997), “Ekonomska politika”, Informator, Zagreb 

7. Croatian Central Bureau of Statistics, Hwww.dzs.hrH 

8. Croatian National Bank, Hwww.hnb.hrH 

9. Eurostat, Hwww.eurostat.intH 

10. Fidrmuc, J. and Korhonen, I. (2003), “The euro goes East – Implications of the 2000-2002 

economic slowdown for synchronisation of business cycles between the euro area and 

CEECs”, BOFIT Discussion Papers, No. 6. 

11. Frankel, J. and A. Rose (1996), “A Panel Project on Purchasing Power Parity: Mean 

Reversion Within and Between Countries”, Journal of International Economics, 40, pp. 

209-224. 

12. Frankel, J. and A. Rose (1997), “Is EMU more justifiable ex post than ex ante?”, European 

Economic Review, 41, pp. 753-760. 

13. Frenkel, M. and Nickel, C. (2002), “How Symmetric Are the Shocks and the Shock 

Adjustment Dynamics Between the Euro Area and Central and Eastern European 

Countries”, IMF Working Paper, No. WP/02/222. 

14. Korhonen, I. (2003), “Some Empirical Tests on the Integration of Economic Activity 

Between the Euro Area and the Accession Countries”, Bank of Finland, mimeo. 

15. Krugman, P. (1993), “Lessons of Massachusetts for EMU” in F. Torres and F. Giavazzi 

(eds.) Adjustment and Growth in the European Monetary Union, Cambridge University 

Press, New York. 

16. Kydland, F. and E. Prescott (1977), “Rules Rather than Discretion: The Inconsistency of 

Optimal Plans”, Journal of Political Economy, 85, pp. 473-491. 

17. McKinnon, R. (1963), “Optimum Currency Area”, American Economic Review, September, pp. 

717-725. 

18. Mundell, R. (1961), “A Theory of Optimum Currency Areas”, American Economic Review, 

pp. 657-665. 

14

Appendix 


ISSN: 1842-4856 

Table 1. Selected economic indicators of Croatian economy 

GDP (million EUR, current 

prices) a 

1997 1998 1999 2000 2001 2002 2003 2004 

17.790 19.281 18.679 19.976 22.177 24.220 25.526 27.629 

GDP per capita (in EUR) 

GDP - year-on-year rate of 

3.891 4.284 4.102 4.560 4.998 5.451 5.747 6.224 

growth (in %, constant 

prices) 

6,8 2,5 -0,9 2,9 4,4 5,2 4,3 3,8 

Average year-on-year 

inflation rate b 

3,6 5,7 4,0 4,6 3,8 1,7 1,8 2,1 

Current account balance 

(as of % GDP) 

-12,3 -6,8 -7,0 -2,5 -3,7 -8,7 -7,3 -5,2 

Exports of goods and 

services (as of % GDP) 

40,3 39,8 40,9 47,1 48,7 45,9 51,5 51,5 

Imports of goods and 

services (as of % GDP) 

56,8 49,1 49,3 52,3 54,6 57,0 59,5 58,8 

External debt (as of % 

GDP) 

38,0 47,6 54,1 60,6 60,7 62,2 77,6 82,1 

Exchange rate on 31 

December (HRK : 1 EUR) 

Consolidated central 

6,9472 7,3291 7,6790 7,5983 7,3700 7,4423 7,6469 7,6712 

government deficit (as % of .... .... -6,5 -7,1 -5,4 -5,0 -4,9 -4,7 

GDP) c 

Unemployment rate (ILO, 

persons above 15 years of 

age) d 

9,9 11,4 13,6 16,1 15,8 14,8 14,3 13,8 

a Calculated by applying the average annual exchange rate (HRK/1 EUR) to the GDP in kuna 

terms. b Inflation rate was measured by the RPI in the 1994-1998 period. From 1999 on, it is 

measured by the CPI. c On a cash basis. d Unemployment rates as at November 1996 and as at 

June 1997. 

Source: Croatian national bank, Hwww.hnb.hr 

Table 2. Foreign trade (goods and services) as a percentage of GDP 

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 

Exports of goods and 

services (as of % 

GDP) 

Imports of goods and 

56.8 48.8 37.7 38,7 40,3 39,8 40,9 47,1 48,7 45,9 51,5 51,5 

services (as of % 

GDP) 

53.0 45.4 49.5 48,0 56,8 49,1 49,3 52,3 54,6 57,0 59,5 58,8 

Sum of exports and 

imports 

109.8 94.2 87.2 86,7 97,1 88,9 90,2 99,4 103,3 102,9 110,9 110,3 


15


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Table 3. Exports and imports by commodity sectors (based on SITC) 

SHARE OF GROUP IN 

THE TOTAL EXPORTS 

SHARE OF GROUP IN THE 

TOTAL IMPORTS 

2003 2004 2003 2004 

Food and live 

animals 

9,06 6,30 7,04 7,17 

Beverages and 

tobacco 

2,63 2,38 0,82 0,74 

Crude materials, 

excluding fuels 

5,65 5,59 2,29 2,13 

Mineral fuels and 

lubricants 

Animal and 

9,62 11,33 10,94 11,98 

vegetable oils 

and fats 

0,22 0,16 0,29 0,31 

Chemicals 

Manufactures 

9,59 9,37 10,98 11,16 

goods classified 

chiefly by 

material 

Machinery and 

14,05 14,82 18,73 19,65 

transport 

equipment 

Miscellaneous 

29,47 32,25 37,05 34,92 

manufactured 

articles 

Commodities and 

19,58 17,76 11,59 11,89 

transactions, 

n.e.c. 

0,13 0,01 0,25 0,05 

Author’s calculation based on Croatian Central Bureau of Statistics 

Figure 1. Exchange rate against euro and US dollar 

9,3 

8,8 

8,3 

7,8 

7,3 

6,8 

6,3 

5,8 

5,3 

4,8 

1.1.1994 

1.5.1994 

1.9.1994 

1.1.1995 

1.5.1995 

1.9.1995 

1.1.1996 

1.5.1996 


1.9.1996 

1.1.1997 

1.5.1997 

1.9.1997 

1.1.1998 

1.5.1998 

1.9.1998 

1.1.1999 

1.5.1999 

1.9.1999 

1.1.2000 

1.5.2000 

1.9.2000 

1.1.2001 

1.5.2001 

1.9.2001 

1.1.2002 

1.5.2002 

1.9.2002 

1.1.2003 

1.5.2003 

1.9.2003 

1.1.2004 

1.5.2004 

HRK/EUR 

HRK/USD 

1.9.2004 

1.1.2005 

1.5.2005 

1.9.2005 

16


ISSN: 1842-4856 

Figure 2. Croatian GDP index, original series and seasonally adjusted, 1997 = 100 

140 

120 

100 

80 

60 

Original series 

Seasonally adjusted 

1tr94 

3tr94 

1tr95 

3tr95 

1tr96 

3tr96 

1tr97 

3tr97 

1tr98 

3tr98 

1tr99 

3tr99 

1tr00 

3tr00 

1tr01 

3tr01 

1tr02 

3tr02 

1tr03 

3tr03 

1tr04 

3tr04 

1tr05 

Source: Croatian Central Bureau of Statistics and author’s calculation 

Figure 3. Croatian industrial production index, original series and seasonally adjusted, 2000 = 

100 

140,0 

130,0 

120,0 

110,0 

100,0 

90,0 

80,0 

70,0 

60,0 

1.1.94 

1.7.94 

1.1.95 

1.7.95 

1.1.96 

1.7.96 

1.1.97 

1.7.97 

1.1.98 

1.7.98 

1.1.99 

1.7.99 

1.1.00 

1.7.00 

Original series 

Seasonally adjusted 

Source: Croatian Central Bureau of Statistics and author’s calculation 

1.1.01 

1.7.01 

1.1.02 

1.7.02 

1.1.03 

1.7.03 

1.1.04 

1.7.04 

1.1.05 

17


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Figure 4. Credits to households and business sector, in million kunas 

80.000,0 

70.000,0 

60.000,0 

50.000,0 

40.000,0 

30.000,0 

20.000,0 

10.000,0 

0,0 

12.93. 

10.94. 


Figure 5. Croatian external debt 

30.000,0 

25.000,0 

20.000,0 

15.000,0 

10.000,0 

5.000,0 

0,0 


Credits to households 

Credits to business sector 

03.95. 

08.95. 

01.96. 

06.96. 

11.96. 

04.97. 

09.97. 

02.98. 

07.98. 

12.98. 

05.99. 

10.99. 

03.00. 

08.00. 

01.01. 

06.01. 

11.01. 

04.02. 

09.02. 

External debt 

02.03. 

07.03. 

12.03. 

05.04. 

10.04. 

03.05. 

08.05. 

12.98. 

03.99. 

06.99. 

09.99. 

12.99. 

03.00. 

06.00. 

09.00. 

12.00. 

03.01. 

06.01. 

09.01. 

12.01. 

03.02. 

06.02. 

09.02. 

12.02. 

03.03. 

06.03. 

09.03. 

12.03. 

03.04. 

06.04. 

09.04. 

12.04. 

03.05. 

06.05. 

09.05. 

18


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Figure 6. Croatian imports, exports and balance of trade 

20.000.000 

15.000.000 

10.000.000 

5.000.000 

0 

-5.000.000 

-10.000.000 

Exports 

Imports 

Balance of trade 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 


Figure 7. Deposits in domestic and foreign currency, in millions of kunas 

100.000,0 

90.000,0 

80.000,0 

70.000,0 

60.000,0 

50.000,0 

40.000,0 

30.000,0 

20.000,0 

10.000,0 

0,0 


Time and Savings Deposits with Banks 

Foreign Currency Deposits with Banks 

12.93. 

09.94. 

01.95. 

05.95. 

09.95. 

01.96. 

05.96. 

09.96. 

01.97. 

05.97. 

09.97. 

01.98. 

05.98. 

09.98. 

01.99. 

05.99. 

09.99. 

01.00. 

05.00. 

09.00. 

01.01. 

05.01. 

09.01. 

01.02. 

05.02. 

09.02. 

01.03. 

05.03. 

09.03. 

01.04. 

05.04. 

09.04. 

01.05. 

05.05. 

09.05. 

19


ISSN: 1842-4856 

THE COST OF CURRENCY RISK MANAGEMENT FOR THE 

ROMANIAN COMPANIES 

Sorin Gabriel Anton, prep. drd. 

Universitatea „Al. I. Cuza“ Iaşi 

ABSTRACT: Im Rahmen der finanziellen Globalisierung konfrontieren die rumänische Firmen mit 

grösseren Risikos. Zur Zeit sind das Zinsrisiko und das Währungsrisiko die Risiken, die auf den rumänischen 

Markt am prägnantesten sich offenbaren. Die vorliegende Arbeit nimmt ihr vor, die Hauptkosten zu analysieren, 

die im Managementsverfahren der finanziellen Risiken vorkommen. 


Risk management is described in the financial literature as being concerned with 

identifying and managing a firm’s exposure to financial risk; financial risk is defined as the 

variability in cash flows and market values caused by unpredictable changes in the 

commodity prices, interest rates and exchange ratesF 

Financial risk management has become a booming industry starting ’90 as a result of 

the increasing volatility of financial markets, financial innovations (financial derivatives) and 

the growing role played by the financial products in the process of financial intermediation. 

Forward contracts, futures, options, swaps, and other, more complex financial instruments 

allow today firms to transfer risks to other economic agents who are able or more willing, to 

bear them. 

Risk management is nowadays considered as a key activity for all companies. Many of 

the disastrous losses of the 1990s, such us those at Orange County in 1994 and Barings bank 

in 1995, would have been avoided if good risk management practices have been in placeF 

There are two approaches of the risk management process: the traditional one and the 

ERM. The traditional approach, a segmented and compartmentalized one, consists in the 

following: different risks are delegated to different specialized persons who use different 

instruments to tackle these risks. For example, the property and liability risks are the 

responsibility of the risk manager. In the same time, the treasurer is responsible to manage 

financial risks (such as exchange rate, interest rate, and credit risk) using different types of 

derivatives contracts (options, forwards, futures, and swaps). 

In the second approach, called Integrated Risk Management (IRM) or Enterprise Risk 

Management (ERM), all the risks are assembled in a strategic and coordinated framework. 

Enterprise risk management requires an entity to take a portfolio view of the risk. Corporate 

Risk Management is subsequently motivated by market imperfections, such as asymmetric 

information, transactions costs, non-neutral taxes and limited access to external financing. 

The main reasons for using risk management, as there are presented in the financial 

literature, are: 

134 Kaen, F., Risk Management, Corporate Governance and the Public Corporation, in Frenkel, M.; Ulrich, H.; 

Markus,R., Risk Management. Challenge and Opportunity, Second Revised and Enlarged Edition, Springer, 

2005. 

135 Hull, John C., Risk Management and Financial Institutions, Pearson Education, New Jersey, 2007, p.1. 

134 

F. 

135 

F. 

20


ISSN: 1842-4856 

- risk management can be used to reduce the expected tax burden; because the risk 

management enables a company to use more debt, it represents a way of reducing 

taxes by letting a firm to borrow more money and to obtain interest expense tax 

shields; 

- risk management can reduce the costs of financial distress and bankruptcy; 

- risk management can be used to encourage and protect firm specific investments; 

- risk management can lead to transaction cost savings; 

- risk management can be used to align the interests of management with those of the 

owners of the company; 

- risk management can be used to design management compensation plans that hold 

management accountable only for the factors under their control; 

- risk management can be used to assist firms in developing financial plans and funding 

programs; 

- risk management can be used to stabilize cash dividends; 

- risk management can help the companies to cope with capital market imperfections. 

Figure 1 Economic Motives for Corporate Risk Management 

Reducing 

Transaction 

Costs 

Transaction 

Cost of Hedging 

Reducing 

Corporate 

Tax Burden 

Transaction Cost 

of Financial 

Distress 

Shareholder Value Creation with 

Corporate Risk Management 

Coordinating 

Financial and 

Investment 

Policies 

Resolving the 

Risk Preference 

Problem 

Shareholders 

vs. 

Management 

Evaluating 

Management 

Performance 

Raising 

Efficiency of 

Financial 

Contracting 

Selecting the 

Optional 

Risk Portfolio 

Debtholders 

vs. 

Shareholders 

Resolving the 

Underinvestment 

Problem 

Resolving the 

Asset 

Substitution 

Problem 

Source: Hommel, Ulrich, Value-Based Motives for Corporate Risk Management, in 

Frenkel, M.; Ulrich, H.; Markus,R., Risk Management. Challenge and Opportunity, 

Second Revised and Enlarged Edition, Springer, 2005, p. 458. 

21


ISSN: 1842-4856 

The ability to manage risks is a source of competitive advantage and a way to increase 

the shareholder value for non-financial and financial corporations. A survey of finance 

professors’ views on derivatives conducted by the International Swaps and Derivatives 

Association (ISDA) in March 2004 revealed that ninety-eight percent of respondents agreed 

that managing financial risk more effectively is a way for companies to build shareholder 

value. The flexibility that derivatives offer in customizing a company’s risk profile was 

commonly cited as a benefit for the firms. Many participants also noted that derivatives allow 

companies to assume only the risks that add value and enable them to focus on their primary 

business or core competence instead of worrying about fluctuations in financial markets. 

Studies undertaken on the financial crisis show that in the case of small and medium 

enterprises the bankruptcy costs are proportionally higher, which suggests that SME’s should 

use more derivatives in order to manage financial risks. Smith and Stulz argued that risk 

management has as main effect the reduction of the default probability of the firm. 

2. Risk Management in the Romanian Companies 

The globalization of financial markets has made the companies more exposed to 

financial risks. The Romanian economy is now connected with the global economy. The trade 

with the European Union (the EU) represents more than 70% and, therefore, Romanian firms 

are dealing with foreign currency quite extensively. Numerous industries are exposed to 

currency risks, especially those that export most of their products or import the majority of 

their raw materials. Many Romanian companies had very important financial problems 

starting the end of 2004, when the exchange rate was left to vary freely. 

Foreign exchange risk, currency exposure, currency risk and exchange risk are all 

alternative terms, which mean the additional variability in a company’s earnings due to 

unexpected currency fluctuations. There are three types of exposure: transaction exposure, 

translation exposure, and economic exposure. Transaction exposure results from foreign 

currency denominated contracts of imports, exports or international financing transactions 

with a defined maturity. The translation exposure (also known as accounting or balance sheet 

exposure) comes from direct investment and consolidation of foreign subsidiaries financial 

statements. It represents the risk that domestic currency values of assets and liabilities would 

differ when translated at the foreign exchange rates at a future date. The economic or business 

exposure is defined as the percentage change in economic value of the firm resulting from a 

1% change in the exchange rate. 

There are two main hedging techniques: internal and external. Internal hedging 

techniques (such as appropriate pricing, leading and lagging receipts and payments to match 

currency inflows and outflows) minimize the amount of currency bought or sold in foreign 

exchange transactions and work best when exposures have been identified as fully as possible. 

External hedging techniques are used when it is almost certain that there will be residual or 

net exposures that can be hedged only by using external providers. External hedging uses 

foreign exchange hedging instruments such as forward and futures contracts, options and 

swaps. 

The unpredictable movements in exchange rates and commodity prices in the last 

three years in Romania have produced important losses to import/export companies. For 

instance, suppose a Romanian exporter who expects to receive a €200 million payment for 

goods in three months. Suppose also that the price of the EUR is today RON 3.50. If the EUR 

were to fall by 10 percent over the next six months, the exporter would lose RON 70 million. 

But by selling futures on EUR, the exporter locks in the current futures exchange rate. In 

the case when the exchange rate drops massively, exporters will be protected against risks, 

22


ISSN: 1842-4856 

because they will get an equivalent profit on the futures market, which will compensate the 

losses on the currency market. 

Under the conditions of a high volatile exchange rate, the management of currency 

risk is a must for the Romanian companies in order to stay competitive or to survive. In 

Romania, the companies have the possibilities to hedge against currency risk with the help of 

forward contracts, futures, swaps and options. Currently, transactions with futures and options 

contracts take place at the Sibiu Monetary and Financial Stock Exchange (SMFSE). Here, 

investors can trade futures and options on futures on currencies (RON/USD, RON/EUR, and 

EUR/USD) with maturities of 3, 6, 9, and 12 months. Contracts can be concluded at any date 

included in the maturity period. The hedging operation offers the possibility of „blocking the 

exchange rate“ in exchange of immobilizing an amount of 10% of the sum which had to be 

immobilized on the currency market. 

The costs implied by the management of currency risks using futures contracts are 

lower than in the case of forward contracts, the margins being smaller. For example, if a 

company wants to manage the currency risk using a forward contract, the cost represents the 

sum blocked (approximately 10% of the total transaction) and the interest rate for the contract 

maturity. In the case of the future contract, the cost is only 2.5% for 1.000 EUR hedged (the 

value of a futures contract). As a consequence, the use of futures contact in hedging the 

currency risk is higher than usage of forward contract and swap, but, comparing with the 

other countries it is still low. By far the most commonly traded derivatives at the SMFCE 

were in 2004 the futures on currency, which held over 86% of the total trading contracts. The 

theory suggest that growth in derivatives activity takes off, whenever an increase in the 

exchange rate volatility is sufficient to induce local entities to seek protection against it. In 

2005 the transactions with currency futures accounted only 5% (35.813 contracts) of the total 

trading contracts 

On the OTC market, the financial-banking institutions should help their clients by 

offering appropriate instruments to hedge risks when companies are unable to do that on their 

own. In recent years, the variety of saving and investment products available to retail 

customers has improved. Financial institutions are recognizing the increasing demand from 

companies for better risk management tools. Most of the main banks offer currency 

derivatives, but some limitations on maturity and size of contracts exist, preventing the 

effective application of such instruments. As you can see in table 1, the most offered 

instruments are forward and swaps on currency and interest rate. Not only the number of 

banks which are offering these instruments is very low, but also the size of the contract (at 

least 500, 000 EUR at BCR) are limitations for small and medium enterprises. 

Table 1 Derivatives Offered by the Romanian Banks 

BANK CURRENCY INTEREST RATE 

BCR Forward, swap Forward 

(FRA) 

rate agreement 

ABN AMRO Forward, swap, plain vanilla Forward, plain vanilla 

ING Bank Forward - 

Banca Transilvania Forward - 

UniCredit 

Romania 

Forward - 

Volksbank 

Romania 

Forward - 

Citibank Forward, options - 

23


ISSN: 1842-4856 

Sources: Romanian Banks' websites 

However, foreign currency hedging by non-financial firms has increased in importance 

in recent years. The current state is that banks have to work individually with each client in 

order to offer customized products. The insufficient demand hindered the development of 

independent derivative market, and banks had to charge additional premiums for offering 

customized products. 

The costs of implementing risk management projects are quite high for the Romanian 

companies. The costs include the personnel education/qualification and the implementation of 

internal control system needed for participating on the derivatives markets. The required 

margins and the minimum capital required are, on the same time, costs included by the use of 

derivatives. Smith and Stulz (1985) showed that small and medium enterprises have problems 

regarding the personnel needed for an efficient risk management program. 


In Romania, the currency risk represents a challenge for any firm in this period 

characterized by a high fluctuation of the exchange rate. Taking risks must be seen as the 

essence of corporate activity. The risk management function must be implemented without 

inducing excessive additional expenses. At the moment, the currency derivatives are not very 

popular in the Romanian capital market as a result of a wide range of factors. First, the most 

used method for exporting companies is the internal resources to reduce foreign exchange 

risk. Second, wider use of derivatives is hindered by relatively high costs, lack of knowledge 

and experience in using derivatives, mistrust in banks, lack of legal aspects, and complicated 

accounting procedures. 

4. Bibliography 

1. Anton, Sorin Gabriel, Risk Management with Financial Derivatives în Central and 

Eastern Europe : A Comparative Study, in the volume of the International Conference 

“From Transition to Sustainable Development: The Path to European 

integration” organized by the University of Sarajevo, 12 -13 October 2006, ISBN : 

9958-605-90-2; 

2. Bărbuneanu Raluca (2006) – “Protecţie faţă de capriciile valutelor”, Piata financiară, 

nr 3/2006, Bucureşti; 

3. Beike, Rolf; Barckow, Andreas, Risk-Management mit Finanzderivaten, Third 

Edition, Oldenbourg Verlag, Munchen, 2002. 

4. Effenberger, D., Kreditderivate: Wirkung auf die Stabilitat der Finanzmarkte, 

Deutsche Bank Research, Frankfurt am Main, 2004. 

5. Hommel, Ulrich, Value-Based Motives for Corporate Risk Management, in Frenkel, 

M.; Ulrich, H.; Markus,R., Risk Management. Challenge and Opportunity, Second 

Revised and Enlarged Edition, Springer, 2005, p. 455-478. 

6. Hull, John C., Risk Management and Financial Institutions, Pearson Education, New 

Jersey, 2007. 

7. Hull, J., Options, Futures, and other Derivatives, Sixth Edition, Prentice Hall, New 

Jersey, 2006. 

8. Kaen, F., Risk Management, Corporate Governance and the Public Corporation, in 

Frenkel, M.; Ulrich, H.; Markus,R., Risk Management. Challenge and Opportunity, 

Second Revised and Enlarged Edition, Springer, 2005. 

24


ISSN: 1842-4856 

9. LiPuma, Edward; Lee, Benjamin - Financial Derivatives and the Globalization of 

Risk, Duke University Press, Durham, 2004. 

10. McDonald, R., Derivatives Markets, Pearson International Edition, 2006. 

11. Nocco, Brian; Stulz, Rene, Enterprise Risk Management: Theory and Practice, 

Journal of Applied Corporate Finance, Volume 18, Number 4, 2006, pp. 8. 

12. Rudolph B., Hofmann, B.,Schaber, A., Schäfer K., Kreditrisikotransfer: Moderne 

Instrumente und Methoden, Springer Verlag, Berlin, 2007. 

13. Smith, C.W., Stulz R.M., The determinants of Firms’ Hedging Policies, Journal of 

Financial and Quantitative Analysis 20:391-405. 

14. Stulz, Rene, Risk Management & Derivatives, Southwestern College Publishing, 2003. 

15. Thouraya, Triki, “Research on Corporate Hedging theories: A Critical Review of the 

Evidence to Date”, Department of Finance and Canada Research Chair in Risk 

Management, HEC Montreal, Working Paper 05-04, 2005. 

25


ISSN: 1842-4856 

THE DETERMINATION OF THE OPTIMAL FINANCIAL 

STRUCTURE FOR FINANCING AT THE MICROECONOMICAL 

LEVEL 

Professor doctor Gabriela Dobrotă 

Junior assistant Maria Felicia Chirculescu 

"Constantin Brâncuşi" University 

Irrespective of the form of organization, of the business segment of the enterprise, the optimal financial 

structure pursues the optimization of the rapport between the internal and borrowed financing sources, so that the 

global cost of capitals is as reduced as possible. 

Currently, enterprise financing represents an issue of great interest at the 

microeconomic level. The enterprise financing conditions are part of the debates, as well as 

the question if they have sufficient internal funds to conduct their activity in conditions of 

maximum efficiency, thus being able to face competition. 

The financing sources used by an enterprise can be grouped in: 

� internal sources; 

� attracted sources; 

� borrowed sources. 

Each method of financing has certain features that are considered in adopting the 

financing decision, therefore: 

� the internal sources confer advantage because they are the safest financing source, 

they determine financial autonomy and eliminate the risk of fortuitous withdrawal of capital; 

� the attracted sources, although they have the advantage that in certain cases they 

do not imply costs, they have the disadvantage to be at the enterprise's disposal for a short 

period of time; 

� the borrowed sources present the advantage of their variation and mobility. 

Therefore one can notice that each of these financing sources has advantages, 

disadvantages and limits. 

If the financing method adopted by the enterprise is considered, then one can speak of 

internal financing (self-financing) and external financing. 

The option of the enterprise for profit reinvestment (internal financing) has the main 

advantage that it does not present the obligation of remuneration or refund of financing 

sources. Nevertheless, the major disadvantage comes from the conflict that may occur 

between the enterprise interests on the one hand and the shareholders' interests, on the other 

hand. While the main objective of each enterprise is to maximize its value, shareholders are 

interested in obtaining dividends, and this operation generates for the enterprise a decrease of 

self-financing possibilities. 

The external financing allows the constitution of resources either by capital increase 

(new cash contributions and/or in-kind contributions), or by indebtness (bank credit, bond 

credit, leasing). 

From the point of view of taxation, the difference between external and internal 

financing is given by the interest expense deduction. In order to determine correctly the 

impact of these expenses on the cost of borrowed capital we must take into account the fact 

26

that not all interest expenses can be considered as deductible expenses from the fiscal 

point of view in determining the income tax (fiscal economy can be achieved only in the case 

of deductible expenses). 

Resorting to loans to cover the financial requirements is also accompanied by 

incurrence of additional costs. Although at a first analysis the loan cost is given by interests, 

we should not ignore the fact that resorting to loans also leads to performing loan related 

costs, such as commissions, as well as other amounts due to the bank on the occasion of loan 

contracting. 

The amount of the borrowed capital cost is given by the moment of instalment refund 

and by the interest expense measure. Nevertheless, because taxation acts in the economic life 

as well, with an impact on the capital cost by means of the income tax, the capital cost can be 

reduced because the interest is an element of cost that diminishes the taxable income and 

implicitly the income tax. 

D × ( 1− 

t) 

CKimp = × 100 

Kimp 

(1) 

where: 

CKîmp represents the cost of the borrowed capital; 

D – the amount of the interest paid in a period of time; 

Kîmp – the sum of borrowed capital that generates interest in the period of time 

considered; 

t – income tax rate. 

In Romania, the interest expenses can be classified in two categories: 

� fiscally deductible interest expenses (Dded); 

� fiscally non-deductible interest expenses (Dneded). 

Thus the interest expenses (D) are expressed as a sum of deductible and nondeductible 

expenses. In this case equation (1) becomes: 

Dded 

× ( 1− 

t) 

+ Dneded 

CKimp 

= 

× 100 

Kimp 

(2) 

From equation (2) the following can be drawn up: 

� the cost of the borrowed capital is influenced by the tax rate, within the meaning of 

reduction, only for deductible expenses; 

� the higher the weight of deductible interest expenses, the lower the cost of the 

borrowed capital, because only for this part of expenses one benefits of tax economy. 

Similarly, an important part in determining the cost of capital is also given by the 

moment in which the interest due for the borrowed capital becomes fiscally deductible. In 

Romania the interest is deductible in the taxable year in which it is due. 

We must consider that not only the borrowed amounts generate an additional cost, but 

also the company's internal capacities, because the purpose of shareholders' capital investment 

in the enterprise is to obtain profit from these investments. 

The cost of companies' capitals is represented by the profitability ratios requested by 

shareholders for the sums invested. The profitability of the sums invested by shareholders is 

influenced by the amount of the dividends received, to which, when shares are not acquired 

for speculative purpose as well, the profit resulted from transactions can be added. 

Supposing that shares are acquired for long term, excluding the share buy-back 

operations, sale of owned shares, their voluntary acquisition or liquidation, shareholders shall 

obtain profit only from dividends. 

In this situation, the value of a share is given by the present value of the flow of future 

dividends and it is established as follows:


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Div1 

Div2 

V0 

= + + ... 2 

1+ 

ke 

( 1+ 

ke 

) 

(3) 

where: 

V0 represents the value of a share; 

Div1, Div2, … – the dividend paid at the end of period t; 

ke – profitability ratios requested by shareholders. 

The use of such a method for determining the cost of companies' capitals is difficult to 

achieve, it is viable only in the case when the future dividends are known. In this case the 

discount rate that equals the present value of dividends with the current price of the share 

shall be the profitability ratio requested by shareholders. The amount of the future dividends 

can be known, possibly, only in the case of preferential shares, otherwise the annual amount 

of the future dividends can be only estimated. 

In addition to equation (3) some adjacent methods can also be used, bringing new 

elements in estimating the profitability ratio expected by shareholders. 

In the same time, as for the cost of equity, a particular influence on its profitability 

degree is also exerted by taxation. The profitability requested by shareholders, resulted from 

the dividends distributed, can influence the cost of equity only in the extent in which the 

profit distribution policy is first of all cantered on giving a certain dividend and then, in the 

extent in which undistributed profit remains, on distribution by destinations. However, if the 

profit distribution policy does not intend to provide a certain dividend, but its priority is the 

distribution by other destinations, the dividend being residual, the cost of equity is influenced 

by the profit distribution policy and not by the shareholders' expectations related to obtaining 

profitability. 

If in the analysis of taxation influence on the cost of equity the following hypotheses 

are used: 

� all shares were acquired when the company was set up, without subsequent 

transactions; 

� shares were acquired with the purpose to obtain profit from the dividends 

obtained; 

� shares offer the possibility to obtain preferential dividends; 

� the amount of the preferential dividend is established at the net value; 

� all shareholders are represented by natural persons; 

� dividends are distributed yearly; 

� the growth rate of the annual net dividend is constant – marked with "g" (the 

influence given by inflation is also included in this rate); 

� the income tax rate is marked with idiv; 

� the dividend per share is marked with D, 

then the monetary cost incurred by the company to pay for a share for the first year since its 

operation is given by the following product: 

D x (1 + idiv) (4) 

Starting with the second year from the setting up, the monetary cost related to the 

remuneration given to obtain a share shall be increased with the growth rate of the net 

dividend, therefore the monetary cost is given by the equation: 

[ D × ( 1+ 

g) 

] × ( 1+ 

idiv 

) 

(5) 

Using the same algorithm, the growth rate of the net dividend being maintained 

constant in the year n, the monetary cost for the company given for a share is: 

n [ D × ( 1+ 

g) 

] × ( 1+ 

idiv 

) 

(6) 

For the firm, the cost of equity for a share is established as a ratio between the gross 

dividend and the value of the share. If we analyze a firm whose shares are not transacted on


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the market, the value of the share is identified with the accounting value of the share, 

determined as a ratio between the company's own capital, on the one hand, and the number of 

shares, on the other hand (in the case of enterprises whose shares are transacted, the value of a 

share is given by the relation: market capitalization / number of shares). 

Since the accounting value of a share can change from one year to another (as a 

consequence of change of the own capital value), as well as the dividend tax rate, if we mark 

with Vn the accounting value of a share in the year n since the company setting-up and with 

Vn+1 the net accounting value of the share in the year n+1 since setting-up, and with idiv n the 

dividend tax rate in the year n and with idiv n+1 the dividend tax rate in the year n+1, then the 

cost of equity can be determined as follows: 

� for the year n the cost of equity is given by the equation: 

n 

D × ( 1+ 

g) 

× ( 1+ 

idivn 

) 

ken 

= 

Vn 

(7) 

� for the year n+1 the capital cost is given by the equation: 

n+ 

1 

D × ( 1+ 

g) 

× ( 1+ 

idivn+ 

1) 

ken+ 

1 = 

Vn+ 

1 

(8) 

Based on the equations (7) and (8) one can determine the relative change of the capital 

cost as follows: 

n+ 

1 

n 

D × ( 1+ 

g) 

× ( 1+ 

idivn+ 

1) 

D × ( 1+ 

g) 

× ( 1+ 

idivn 

) 

− 

Vn+ 

1 

Vn 

Δke 

= 

× 100 

n 

D × ( 1+ 

g) 

× ( 1+ 

idivn 

) 

V n 

(9) 

Δk 

e 

⎡ V 

= ⎢ 

⎣V 

n 

n+ 

1 

+ 

× 

1+ 

i 

1 in+ 

1 

n 

× 

⎤ 

⎥ 

⎦ 

( 1+ 

g) 

−1 

× 100 

Based on the hypotheses previously mentioned, the following conclusions can be 

drawn up from equation (10): 

� the cost of equity is influenced within the meaning of reduction when the 

accounting value of a share increases from one year to another and is influenced within the 

meaning of increase if the accounting value of a share records a reduction; 

� the increase of dividend tax rate results in the increase of the cost of equity, while 

the reduction of dividend tax rate determines the decrease of the cost of company's capital; 

� the change within the meaning of increase of the gross dividend distribution rate 

results in the increase of the cost of equity. 

In order to establish the influence exerted by the change of dividend tax rate on the 

cost of equity, we shall start from the hypothesis that the growth rate of dividends is equal to 

zero and there is no variation in the accounting value of a share from one year to another. 

Therefore, if g =0 and Vn=Vn+1, the equation (10) becomes: 

⎛1 

+ in+ 

1 ⎞ 

Δk 

= 

⎜ × 100 

1 ⎟ 

e 

(11) 

⎝ + in 

⎠ 

For instance in Romania the dividend tax rate in the case of natural persons recorded a 

series of changes, currently being of 16% (since 2006), when in 2004 it was of 5%, and in 

2005 of 10%. Starting from these changes, the influence exerted by the change of dividend 

tax rate on the cost of equity can be established as follows: 

(10)


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Table no. 1 

Year Dividend tax rate Influence on equity (as weight 

compared to the previous year) 

2004 5% - 

2005 10% 4,76% 

2006 16% 5,45% 

Based on the table data and on the hypotheses previously mentioned, we can notice 

that the changes of dividend tax rates applied in Romania results in the increase of the cost of 

equity. 

The influence on the cost of equity in the case of enterprises whose issued shares give 

right to preferential dividend is generally valid only in the case of influence given by the 

change of dividend tax rate. But at the level of each enterprise the global influence is also 

influenced by establishing or not establishing a growth rate of the net dividend, as well as by 

the amount of this growth rate. Similarly, the influence also appears according to the amount 

of the enterprise earnings and to the distribution policy of the net profit remained after 

dividends distribution. 

In the case the share capital of a company is not made of shares that give right to 

preferential dividend (regardless if the shares are transacted on the capital market or are 

owned only with the purpose to obtain dividends) and the dividend distribution policy is 

subordinated to the distribution policy on the other destinations (residual dividend distribution 

policy), the change of dividend tax rate is not a determining element of the cost of equity, 

because in this case, the cost is influenced by the profit distribution policy and not by the 

dividend tax rate. 

Therefore the enterprise decision for the business segment implies the analysis of the 

relation between permanent capital and short-term capital, the analysis of weight of sources 

from the permanent capital in the total of balance of financial liabilities, in order to make 

possible the value maximization of the enterprise, but also the company specific factors that 

influence the decisions concerning the capital structure, as follows: 

� shareholders and managers. Their attitude that influences directly the financing 

option is the one relating to holding the company control and to risk. Therefore, in the case of 

companies with many shareholders, the option for additional sales of common shares 

influences only to a little extent the control on the company; while the owners of small 

companies avoid the issue of ordinary shares, thus ensuring a continuous control. 

� creditors. Creditors' attitude has impact on the capital structure, because if 

managers try to obtain a high level of the indebtness degree, creditors either do not wish to 

accept the situation or can accept it but with a higher price, that is with an interest rate 

applicable to the higher capital borrowed. But, since it is well-known that the interest rates 

cannot raise unlimitedly, because they increase the bankruptcy risk, creditors adopt the 

solution to limit the amount of the credits granted, which is reflected with a rationalization of 

indebtness. 

� stability of the income obtained from the activities carried out. Companies which 

have such stability have the possibility to use the borrowed capital in a larger proportion than 

those characterized by sales instability. 

� assets structure. Companies which have assets can establish security interests for 

the amounts granted by creditors, they have a greater access to mortgage loans, for which the 

interest rate practiced on the market usually records a relatively reduced level. The degree of 

assets diversification represents a proper guarantee for credit contracting. 

Taking into account the importance of the capital structure for every company, it is 

necessary to consider the criterion of resource destination as well, therefore each company


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must adopt the financing decision based on the financial requirements, according to their 

permanent or temporary nature. 

Besides the factors previously mentioned, those of macroeconomic nature also have a 

particular impact on the business segment, since in choosing the optimal structure of the 

company's capital, one cannot leave out the influence of inflation and of cyclic factors, such 

as the periods of economic boom and recession. 

Bibliography: 

1. Dragota V. and collaborators, Management financiar [Financial Management], vol II, 

Economic Printing House, Bucharest, 2003 

2. Moldovan Nicoleta Claudia, Costul şi structura capitalului societăţii comerciale [Cost 

and Structure of Company's Capital], West University Printing House, Timişoara, 

2004


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THE EXCISES IN ROMANIA, 2007 YEAR 

Gabriela Buşan, lect. univ. dr. 

Alina Georgiana Holt, prep. univ. 


ABSTRACT: 

Excises are special consumption fees that are payable to the state budget for the following products 

derived from domestic production or from import. In the field of excise duties the acquis contains harmonised 

legislation as regards mineral oils, tobacco products and alcoholic beverages. Community legislation establishes 

the structure of the duty that should be charged, together with a system of minimum rates for each product group. 

Under the Community excise legislation, goods are subject to duty when they are produced within the 

Community or imported from a third country. However, the duty is payable only to the Member State in which 

the goods are consumed, and at the rates applicable in that Member State. The cornerstone of the excise system 

for movement of harmonised excisable goods between Member States is the tax warehouse, where goods subject 

to excise duty can be produced and stored under suspension of the duty. As a result of the introduction of the 

single market, all fiscal controls at the Community's internal frontiers were abolished by 1 January 1993. 

The Community legislation in the area of administrative co-operation and mutual 

assistance provides tools to circumvent tax evasion and tax avoidance extending across the 

frontiers of Member States. It allows Member States to gather information about tax subjects 

from other Member States by exchange of information both automatically and on request. 

Finally, the acquis in the area of direct taxation mainly concerns some aspects of corporation 

taxes and capital duty. The measures in the field of corporation tax aim at facilitating 

administrative co-operation between national tax authorities and at removing obstacles to 

cross-border activities between enterprises. The Code of Conduct for business taxation 

represents a political commitment by Member States to tackle potentially harmful tax 

measures. Member States are committed to not introducing new tax measures which are 

harmful within the meaning of the Code and to examine their existing laws and practices with 

regard to the principles of the Code and to amend them where necessary as soon as possible. 

A strong and well-equipped administration is required for the application and 

enforcement of the taxation acquis. 

The products provided previously are subject to excises at the moment of their 

production in Romania or at the moment of their import to the country. The excise is 

chargeable at the moment of release for consumption or when losses or shortages of excisable 

products are discovered. 

Release for consumption means: 

a) any exit of excisable products from a suspension regime; 

b) any production of excisable products outside a suspension regime; 

c) any import of excisable products, if the excisable products are not placed under a 

suspension regime; 

d) the use of excisable products within a fiscal warehouse, other than as a raw 

material; 

e) any holding outside a suspension regime of excisable products that have not been 

introduced in the excise system, in accordance with the present title. The production of 

excisable products outside a fiscal warehouse is prohibited, the holding of an excisable


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product outside a fiscal warehouse is prohibited, if the excise for such product has not been 

paid. 

Moment of chargeability of excises 

For any excisable product, the excise becomes chargeable on the date when the 

product is released for consumption in Romania. 

In the case of loss or shortage, the excise for an excisable product becomes chargeable 

on the date when the loss or shortage of the excisable product is discovered. 

Excises are computed at the rate and the rate of exchange in force at the moment when 

the excise becomes chargeable. 

Payment of excises to the state budget 

Excises are to be paid to the state budget on or before the 25 th of the month that 

follows the month in which the excise becomes chargeable. By way of derogation from 

previously paragraph, in the case of the import of an excisable product that is not placed 

under a suspension regime, the moment of payment of the excise is the moment of the 

registration of the customs import declaration. 

Other excisable products 

The following products are subject to excises: 

� green coffee roasted coffee, including coffee with substitutes soluble coffee, 

including blends with soluble coffee, 

� natural fur products, with the exception of rabbit, goat and sheep; 

� articles from crystal within 

� jewelry from gold and/or from platinum with the exception of wedding bands; 

� cars, including used cars that are imported, 

� perfumery products within 

� video cassette recorders or players, including receivers of videophonic signals,; audio 

combines 

� dual-cassette recorders with radio or compact disc player 

� video and photo cameras; digital photo cameras; 

� microwave ovens; 

� air conditioning units for walls or windows, formed as a single unit, hunting guns 

and guns for personal use, other than guns used for military or for sport 

� yachts and motor boats for recreation within 

Level and computation of excises 

(1) In the case of green coffee, the excise is to equal the equivalent in ROL of 850 euro 

per ton. 

(2) In the case of roasted coffee, including coffees with substitutes, the excise is to equal 

the equivalent in ROL of 1250 euro per ton. 

(3) In the case of soluble coffee, including blends of soluble coffee, the excise is to equal 

the equivalent in ROL of 5 euro per kilogram. 

(4) The level of excises for other products: 

Nr Type of product or group of product Excise (%) 

1 Natural fur products (with the exception of 

rabbit, goat and sheep) 

40 

2 Articles from crystal 1) 

50


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3 Jewelry from gold and/or from platinum, with 

the exception of wedding bands 

4 Perfumery products 

4.1 Perfumes 

of which: 

- eau de perfume 

4.2 Eau de toilette 

of which: 

- eau de cologne 

5 Video cassette recorders or players, including 

receivers for videophone signals; audio 

combines 2) 

20 

30 

20 

10 

6 Dual-cassette recorders with radio or CD player 15 

7 Video and photo cameras; digital photo 

cameras 

25 

8 Microwave ovens 15 

9 Air conditioning units for walls or windows 15 

10 Hunting guns and guns for personal use, other 

than guns used for military or for sport 50 

11 Yachts and motor boats for recreation 25 

Payers of excises 

Payers of excises are economic agents – legal persons, family associations and 

authorized physical persons – that produce or import such products. 

Chargeability 

The moment of chargeability of excises occurs: 

� for products from domestic production, the date of actual delivery, the date of granting 

products as dividends or as payment in kind, the date on which consumed for 

advertising and publicity, and the date of alienation or use for any purpose other than 

selling; 

� for imported products, the date of registration of the customs import declaration. 

Excise declarations 

Any economic agent payer of excises is required to submit to the competent fiscal 

authority an excise declaration for each month, regardless whether excise is payable for such 

month. The excise declaration is to be submitted to the competent fiscal authority by the 

economic agents payers on or before the 25 th of the month that follows the month to which the 

declaration refers. 

Conversion to ROL of amounts expressed in euro 

The amount in ROL of excises and taxes owed to the state budget, determined as 

provided in the present title in euro equivalent per unit of measure, is to be determined by 

transforming the amounts expressed in euro equivalent based on the exchange rate for 

currency communicated by the National Bank of Romania for the last day of the month that 

precedes the start of the calendar quarter. This rate is to be used for the entire duration of the 

following quarter. 

Obligations of payers 

(1) Economic agents payers of excises and the tax on oil and natural gas from 

domestic production are required to register with the competent fiscal authority, according to 

legal provisions on this matter. 

5 

15


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(2) Economic agents are required to compute the excises and the tax on oil and natural 

gas from domestic production, as the case may be, to record them distinctly in the invoice, 

and to remit them to the state budget by the established term, being responsible for the correct 

computation and full remittance of the amounts payable. 

(3) Payers are required to maintain records of excises and taxes on oil and natural gas 

from domestic production, as the case may be, according to the provisions of norms. 

By way of derogation until January 1, 2007, the storage of mineral oils under an 

excise suspension regime is allowed only in a fiscal warehouse of production. 

By way of derogation until January 1, 2007, the delivery of mineral oils from a fiscal 

warehouse of production is to be made only at the moment when the purchaser presents a 

payment document that attests to the payment to the state budget of the amount of excises 

related to the quantity that is to be invoiced. On the occasion of the submission of the monthly 

excise declaration, the possible differences between the amount of excises paid to the state 

budget by the beneficiaries of products and the amount of excises related to the quantity of 

mineral oil actually delivered by economic agents producers in the course of the preceding 

month are to be rectified. 

In the case of the import of excisable products subject, until January 1, 2007, each 

order of marks is to be approved by the competent fiscal authority only if the importer 

presents proof of payment to the account of the state budget of an amount equal to the amount 

of excises corresponding to the quantity of products for which marks are requested. 

The Romanian excise duty legislation is almost in line with the EU Directives 

regarding excise duty. However, certain changes to the current legislation will be introduced 

before the accession date. This is not only as a consequence of the fact that no intra 

community provisions were included (not needed until the Accession), but to the different 

approach of the Romanian legislation as compared to the EU's. 

It will be necessary to bring the Romanian legislation regarding excise duty in line 

with the EU Directives. In particular, the changes (where needed) mainly refer to issues such 

as: 

-Creating a system based on which the suspensive arrangement covers manufacture, 

storage and movement of the excisable goods by implementing new control procedures on 

trade and movement of the excisable goods and by introducing a new tax warehouse regime; 

- Adhering to the minimum EU excise duty rates (unless a derogation applies); 

- New provisions for excisable goods subject to marking; 

- Implementing direct refund of excise duty; 

- New concepts – fiscal representative, registered and non-registered traders; 

- New compliance rules. 

The EU Directives on excise duty only create a mutual framework for manufacturing, 

distribution and transport to ensure the free movement of excisable goods. However, please 

bear in mind that the operational rules and control procedures are established by each member 

state. Thus, the conditions under which the tax warehouse operates as well as the day-to-day 

operational rules differ significantly between the member states. This is also the case for 

Romania . 

However, the main rules regarding the tax warehouse are so implemented, in all 

member states that it applies, for the manufacturing and storage of excisable goods under 

suspensive arrangements from the excise duty perspective. The same applies to the 

transportation system under suspension regime for excise duty purposes (transport under an 

administrative accompanying document) which ensures that the excisable goods can also 

move within a member state or between member states without payment of excise duty. 

Therefore, the excise duty becomes due when the excisable good is release for consumption.


ISSN: 1842-4856 

59BRomania 

has a strong, stable tobacco market with minimal yearly fluctuations 

According to official statistics, Romanians are heavy smokers. This situation is not 

new or transient, but traditional, with a well-established pre-revolutionary history. This 

history is, however, one of marked domination by national manufacturers. At the beginning of 

the 1990s, Romania' s opening to foreign investments brought it within reach of the most 

important international tobacco product manufacturers, which found in this country a tobacco 

market that was already strong, yet far from saturation and with huge potential. This opening, 

supported by weak tobacco-related legislation, led to an interest in tobacco at the beginning of 

the 1990s. Romanians were fascinated by the array of cigarettes and brands on offer, which 

were promoted with aggressive advertising. Romanians quickly turned towards the new 

brands as a result. For many years, advertising tobacco through all media and without 

boundaries raised the curiosity of many non-smokers, especially young ones. Youth smoking 

was prevalent, and the overall smoking prevalence in Romania is now forecast to grow. 

BRomanian smokers trading quantity for quality 

60 

While at the beginning of the review period, economy and mid-priced brands had 

practically sliced cigarette sales into two halves, the situation in 2006 was quite different, as 

consumers began to demand higher quality products. Premium products share of cigarette 

sales in Romania increased in 2006, while economy products saw their volume share decrease 

by double digits during the same year. As for mid-priced products, due to their wide diversity 

and availability, they accounted for a large proportion of volume sales. Mid-priced products 

underwent a transformation during the review period -- considering the wide range of brands 

included in this platform, it can be segmented into upper (Pall Mall, Winston, Lucky Strike) 

and lower mid-priced brands (Viceroy, L&M, Monte-Carlo, Winchester). While, during the 

review period, especially at the beginning, most popular mid-priced brands were the lower 

cost ones, by 2006 the majority of sales were generated by upper mid-priced brands, 

especially mid tar versions. 

61BDue 

to heavy excises, prices for tobacco products will match EU levels by 2010? 

The value of excises for tobacco products varies from one type of product to another, 

but with one common aspect -- values are continually rising, in order for excises to reach a 

level suitable for the EU. By 2010 it is estimated that the tax for every 1,000 cigarettes would 

be five times greater than the taxes in 2002. By 2010, Romania is expected to align itself with 

EU prices for cigarettes. Romanian authorities keep raising taxes, by improving the laws that 

stipulate their most appropriate value at a certain point. Consequently, at least three times a 

year, excises rocket and this will become even more frequent and powerful. Legal cigarette 

companies maintain that for every percent they lose to contraband sales, the Romanian state 

loses EUR6 million. 

62BIllicit 

trade is becoming a serious problem 

The selling of contraband cigarettes has intensified in Romania as a result of tax 

increases and porous border controls. According to the director of JTI, Gilga Lazar, it is 

estimated that illegally sold cigarettes account for around a third of the market. 

Approximately half of the cheap cigarettes that are sold in Romania come from contraband 

sales. They are usually brought from the Republic of Moldova and the Ukraine; countries 

where the taxes are three times cheaper than they are in Romania. Over the forecast period it 

is estimated that contraband sales will increase in correlation with higher taxes. 

While international cigarette makers that make higher quality products can overcome 

contraband sales, cheap, local cigarette producers such as Carpati and Snagov can no longer 

compete against contraband cigarettes that are of much higher quality and the same price. 

63BRomanian 

Consumers are becoming more Health Conscious 

In response to the growing health awareness among Romanian consumers, both 

because of improvements in lifestyle and public campaigns against smoking, cigarette 

manufacturers have launched new, "healthier" varieties of their products. In 2006, low tar


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cigarettes were more popular than ever before, seeing high growth over the previous year. 

Filtered cigarettes control the vast majority of sector sales and this figure is expected to 

increase over the forecast period. 

In the field of excise duties the acquis contains harmonised legislation as regards 

mineral oils, tobacco products and alcoholic beverages. Community legislation establishes the 

structure of the duty that should be charged, together with a system of minimum rates for each 

product group. Under the Community excise legislation, goods are subject to duty when they 

are produced within the Community or imported from a third country. However, the duty is 

payable only to the Member State in which the goods are consumed, and at the rates 

applicable in that Member State. The cornerstone of the excise system for movement of 

harmonised excisable goods between Member States is the tax warehouse, where goods 

subject to excise duty can be produced and stored under suspension of the duty. As a result of 

the introduction of the single market, all fiscal controls at the Community's internal frontiers 

were abolished by 1 January 1993. 

The Community legislation in the area of administrative co-operation and mutual 

assistance provides tools to circumvent tax evasion and tax avoidance extending across the 

frontiers of Member States. It allows Member States to gather information about tax subjects 

from other Member States by exchange of information both automatically and on request. 

Finally, the acquis in the area of direct taxation mainly concerns some aspects of corporation 

taxes and capital duty. The measures in the field of corporation tax aim at facilitating 

administrative co-operation between national tax authorities and at removing obstacles to 

cross-border activities between enterprises. The Code of Conduct for business taxation 

represents a political commitment by Member States to tackle potentially harmful tax 

measures. Member States are committed to not introducing new tax measures which are 

harmful within the meaning of the Code and to examine their existing laws and practices with 

regard to the principles of the Code and to amend them where necessary as soon as possible. 

A strong and well-equipped administration is required for the application and 

enforcement of the taxation acquis. 

Transitional arrangements requested Romania: reduced VAT on restaurants; zero 

VAT rate on R&D activities; level of VAT turnover threshold for SMEs; lower excise duty 

rates on cigarettes; lower excise duty rates on alcohol and alcoholic beverages; lower excise 

duty rates on mineral oils. 

Romania still has to make substantial efforts in order to reach a satisfactory level of 

alignment, in particular on VAT and excise duties, where the level of minimum rates for all 

products is still particularly low. The administrative capacity is also weak. 

Romania obtained the following transitional periods/transitions: 

- a derrogation for the maintenance of the taxable level at EURO 35,000 annual 

turnover for VAT payers, 

- a derrogation for applying the exemption with right of deduction to the international 

transport of passengers, 

- 3 years transitional period, until 31 December 2009, to reach the minimum excise 

duty rates on cigarettes 

- a derrogation for granting a special regime of excise duties for the fruit spirit drinks 

obtained by farmers and used for their own consumption equivalent of 50 litres spirits/ 

household/ year with a concentration of 40% vol, by applying a 50% rate of the Romanian 

standard excise duty.In certain cases when the excises duties become due (e.g. the certified 

administrative accompanying document is not received in due time from the beneficiary, in 

case of losses/shortages, the exempt/out of scope destination of product is changed) 

companies should submit with the tax authorities an excise duty return. Moreover, the excise 

duties should be paid within 5 days. For soluble coffee mixtures, excise duties will be due 

only for the quantity of the soluble coffee within the mixture. Traders purchasing non-


ISSN: 1842-4856 

harmonised excisable products (e.g. coffee, perfumes, jewellery, and furs) are entitled to a 

refund of the excise duties paid, if the products are exported, supplied to another EU Member 

State or returned unchanged to the supplier. The conversion into RON of the excise duty 

amounts assessed in EURO is to be made using the exchange rate established in the first 

working day of October of the previous year and published in the Official Journal of the 

European Union. 

Bibliografy: 

Tax News, Issue no. 134, Week 23, 2005 / Numarul 134, Saptamana 23, 2005 

Taxnewsflash, july, no. 138 

Fiscal code , Heading VII “Excise duties”


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THE FISCAL AND CUSTOMS CONTROL IN EUROPEAN 

CONTEXT 

Ciurlău Loredana, assistant professor candidate for a doctor's degree 

"Constantin Brancusi" University from Targu Jiu 

Abstract: The containing area of the European Union’s financial interests in Romania aims two aspects, 

on the one hand, the financial assistance from the European Union, in this regard we must assure an efficient use 

and administration of the received funds, and on the other hand Romania’s contribution to the communitarian 

budget, under the form of self resources, in this regard the European Union becomes directly interested in 

fighting against fraud and fiscal evasion in our country. The enforcement of the administrative capacity, in the 

context of the basic politics in the field of the statistics regarding the customs, the added value tax and the gross 

national income, supposes an adequate collecting and control capacity of the added value tax and the customs 

taxes, including instruments for making the payment and fighting against fraud and evasion, and also of 

calculation of the national gross income in a correct and exhaustive way. 

The integration in the European Union, supposes a strong limitation of the fiscal evasion 

and fraud, which generates the sketching of some series of important measures in this sense. 

A far as the general policy measures that are to be taken in the period before Romania’s 

integration in the communitarian space, they must consider the elements which should allow a 

complete analysis of the fiscal evasion phenomenon. 

The role of the European authorities in the domain of fighting against the financial 

interests of the European Community is a consequence of their responsibility regarding the 

achievement of the Communitarian Budget. Thus, in 1999, the European Commission 

consented the creation of the Office of Fight Anti-Fraud (OLAF). The OLAF authorities are 

related to the detection and control of fraud in the customs domain, the illegal appropriation 

of the subventions and the fiscal evasion, but also to fight against the corruption and against 

any illegal activity that could affect the financial interests of the Community. 

OLAF assures for the European member states, the support Commission among the 

certified national authorities. According to its responsibilities, OLAF undertakes ad-hoc 

controls and inspections within the member states. The actions of detection of the fraud taken 

together with the national investigation services are very efficient. 

As for the financial and fiscal control from Romania, it has to identify the best 

instruments and indicators, which should assure the functioning of the economical system in 

legal parameters, under the impact of the possibility of effectuating the control – in other 

words, of the preventive measures– than under the one of the actually made control. The 

origin of the control must be directed towards the control through exception, and less on the 

permanent and excessive control. 

The control strategies must be elaborated in a more flexible vision, which should trace 

the fiscal evasion cases after making some risk analyses, regarding the domains which block 

the normal collecting of the public incomes. 

In order to cover the various types of fraud, two complementary concepts cover the 

financial process within the Union: the incomes and the expenses. 

From the expenses perspective, we understand by fraud any deliberate act or omission 

related to the use or the presentation of false, incorrect or incomplete documents and 

situations, which lead to the fraudulent covering or incorrect retention of funds from the


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general communitarian budget or the fraudulent investment of these funds in other purposes 

than the ones they have initially been allocated. 

As for the incomes, we understand by fraud the deliberate action or omission of the use 

or the presentation of false, incorrect or incomplete documents and situations, the 

concealment of information violating thus a specific obligation and the fraudulent investment 

of the legally obtained benefits, which lead to the illegal diminishment of the general 

communitarian budget or its administration in the name of the European Community. 

The adequate protection of the financial communitarian interests must take assure not 

only against the fraud, but also against informalities. One of the instruments of fight against 

the fraud is the internal audit. This procedure has the purpose to protect the public funds 

against the losses which cab occur because of the errors and/or the frauds. 

Another preventive measure against the fraud, is that of the financial control, made by 

the Ministry of Public Finances, when there are fraud clues or other violations of the financial 

legislation within the public institutions. 

The measures against the fraud are stated by the Customs Code, which stipulates that the 

use of false acts and/or the transport or the presentation of commercial documentation, while 

customs declarations are given, having as effect nominative reductions of the taxes, represent 

a crime. A supplemental measure in fighting against frontier fraud is the existence of the antifraud 

service within the Surveillance Direction of the Customs. 

The accounting law stipulates that the aware effectuation of the inexact registration, and 

also the conscious omission of the registrations in the accountability, having as consequence 

the falsification of incomes, of the financial expenses, and also the assets and of the liabilities 

which are reflected in the balance and represent an infraction of intellectual false. 

Once Romania has adhered to the European Union, there are many important changes 

which interfered in the fiscal system, changes which essentially influence the development of 

the economical autochthonous life. 

There are fields where the changes are radical and very important, changes which started 

to be felt even from January 1 st , 2007. These are the fields with direct impact on Romania’s 

functioning in an enlarged context and regulated as the one of the European Union is. 

Romania’s fiscal integration strategy in the European context, started from 2003, through the 

two codes: the Fiscal Code and the Fiscal Procedure Code, both of European inspiration, 

elaborated on model established by the European Union. From January 1 st , 207, Romania 

adopted the European Customs Code, our country becoming pat of a much greater customs 

system, with mutual rules which must be corroborate and strictly applied, reporting and being 

under the direct guidance of the customs regulation organisms with the headquarters at 

Bruxelles. 

Once Romania was integrated in the European structures, legislative modifications 

regarding the commerce with the member states appeared. The merchandises circulate freely, 

without seal and customs control, reaching directly to their destination place. We are talking 

about both the merchandises with original communitarian character, and also about those who 

were produced in a third state, but which have been introduced in free circulation in the 

European Union, moment where the customs taxes have been paid and they have acquired 

communitarian character. 

Another important tax suffered changes from the very first day of the adherence that 

was the value added tax, to which we had to apply the European mechanism instead of the 

national one. In other words, Romania is no longer a solitary entity in applying this tax, but it 

is a member of a union with harmonized system, still the value added tax remains a national 

tax within the Union, being collected at each country’s level and not centralized, being 

necessary thus, changes in the fundaments and the principles of the application of the specific 

internal legislation.


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Thus, we do not perceive VAT at the transactions between the payers registered in 

different member states, but only at the internal transaction of the member states. 

Another benefit of Romania’s adherence to the European Union from the fiscal 

perspective, is that of the elimination of a certain type of difficult bureaucracy, which was 

cultivated by the local fiscal authorities, referring here to the fiscal invoices and the working 

modalities with these documents, but the result as far as the control is concerned is minimum. 

By applying the European directive, first of all we have renounced to the bureaucracy 

specific to the fiscal documents, by renouncing to them, and secondly, we have transferred the 

responsibility of declaring the VAT transactions towards the companies. 

The fiscal authority saves thus control resources immobilised in pursuing the fiscal 

documents, and the companies are directly interested in the exact declaration of the VAT 

transactions. The intracommunitarian transactions between VAT payers, are pursued through 

cross control, at the level of the European Union. 

The OLAF activities are focused on the tracing and monitoring of the customs fraud, 

the fraudulent appropriation of subventions and fiscal evasion, if it is affected the 

communitarian budget, and also on the fight against the corruption and other illegal activities 

which damage the communitarian financial interests. 

The OLAF activities involve especially: 

� The effectuation of administrative investigations to fight against fraud, 

corruption and other illegal activities; 

� The granting of assistance from the Commission in cooperation with all the 

member states, in the sphere of the fight against fraud; 

� The preparation of the legislative and normative initiatives of the Commission, 

having as objective the prevention of the fraud; 

� The effectuation of other operational activities of the Commission, related to 

the fight against the fraud. 

Control of the respect of legality and regularity in the use and administration of the 

funds coming from the non reimbursable financial assistance granted to Romania by the 

European Commission, and also of the afferent co-financing funds have as purpose: 

� The identification of informalities, of the defected financial administration and 

of frauds; 

� The establishment of eventual prejudices; 

� The establishment of the persons guilty of producing the prejudices. 

Constitute object of the control and recovery of the budget debts, the amounts paid 

undeservedly of communitarian funds and/or from the afferent co-financing, as a consequence 

of the informalities and/or of fraud, their accessories, namely interests, delay penalties, as it is 

the case and also the banking costs. 

The budget debts resulted from informalities and/or frauds, as a consequence of the 

improper use of communitarian funds and of the afferent co-financing funds, represent 

amounts to be recuperated at the budget of the European Community, and also at the budgets 

the funds were advanced from, co-financed as follows: 

� The state budget; 

� The state social securities budgets; 

� The special funds budgets; 

� The budgets of the state treasury; 

� The budgets of the autonomous public institutions; 

� The budgets of the public institutions totally or partially invested from the 

state budget, the budget of the state social securities and the special funds budgets, as it is the 

case;


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� The budget of the funds coming from external credits contracted or guaranteed 

by the state, and whose reimbursement, interests and other costs are assured through public 

funds; 

� the budget of the external non reimbursable funds; 

� the budgets of the public institutions totally or partially financed from the local 

budget as it is the case; 

� the budget of internal and external loans for which the reimbursement, the 

payment of interests, commissions and expenses and of other costs is assured from the local 

budgets and which come from: external loans contracted by the state and sub-loaned to the 

authorities to the local public administration and/or to the economic agents and public 

services under their supervision; external loans contracted by the authorities of the local 

public administration and guaranteed by the state; external and/or internal loans contracted 

and guaranteed by the authorities of the local public administration. 

The procedure of recuperation of the budget debts resulted from informalities and 

frauds contains two steps: 

1. the observation: represents the control activity through which it is established 

and individualized the payment obligation as a debt title ; 

2. the recuperation: through the volunteered payment, the deduction from the 

ulterior expenses statements, through the forced execution or through other modalities 

stipulated by law. 

Are authorised to make the control and administrate the recuperation of budget debts 

resulted from informalities and/or fraud, the authorities of the central or local administration, 

and their territorial units, as it is the case, and also by other public institutions certified by 

law. 

The competence to make the control is held by: 

• the inspection and/or control organs or other specialty structures within the 

Ministry of Public Finances, according to the legal context specific to them; 

• the specialized structures from the authorities of the central or local public 

administration, including their territorial units, which administrate funds coming from 

external financial assistance, and assured the national co-financing, through special 

compartments; 

• the institutions authorised by law. 

The Ministry of Public Finances and the other budgeters which administrate the 

budget debts of the co-financing budgets, through authorised organs, are certified by law to 

make the control, submit and accomplish the assuring measures and make the procedure of 

forced execution, within the conditions stipulated by law. 

Bibliography 

1 Anghel T., Brăgaru M., ,,Codul de procedură fiscală adnotat’’ (The annotated fiscal 

procedure code), Publishing House Rosetti, Bucharest, 2006; 

2 Bostan I. ,,Control fiscal’’ (“Fiscal Control”), Publishing House Polirom, Bucureşti, 2003; 

3 Colecţia revistelor de specialitate: Tribuna Economică, Control economico-financiar, 

2004-2007 (Collection of the specialty magazines. The Economical Tribune. Economicalfinancial 

control 2004-2007); 

4 Grigorie N. – Lăcriţa, ,,Codul fiscal’’ (“The Fiscal Code”), Publishing House Sitech, 

Craiova, 2006. 

5 Grigorie N. – Lăcriţa, ,,Fiscalitate. Realităţi. Inechităţi. Paradoxuri. Necesităţi. Soluţii 

practice’’ (“Fiscality. Realities. Inequities. Paradoxes. Necessities. Practical solutions”), 

Publishing House Sitech, Craiova, 2005


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THE IMPACT OF THE BASEL II AGREEMENT 

IMPLEMENTATION ON THE BANKING SYSTEM IN ROMANIA 

Ciurlău Loredana, assistant professor candidate for a doctor's degree 

"Constantin Brancusi" University from Targu Jiu 

ABSTRACT: Thanks to its high sophistication degree and to the great implementation costs, Basel II 

has initially been conceived to be applied only by the great international banks, generally situated in the 

countries with developed banking systems. In practice, the containing degree ended by being extended, thanks to 

the phenomenon of the globalisation itself. Thus, the fact that in the countries of the „New Europe” there are 

many subsidiaries of the banks from Europe, which normally had to apply the system of adequation of the capital 

used by the mother-banks made that out of maintaining a competitive non discriminatory climate the European 

Union apply Basel II in all the banks, not only in the great ones. 

The banks will be both in the situation to align themselves to performance standards but also to identify 

to new development trends. The Romanian banks will adapt to the requirements of the New Capital Agreement - 

Basel II, will respect new European rules regarding the identified (financial, operational, business or 

conjuncture) risks, paying still the major deserved attention to the crediting risk. 

The gradual maturing of the banking system led to the increase of the 

complexity of the banking activity. The passage from the risk based surveillance was 

the natural resultant of the consolidation of the monitoring process of the banking 

system, focusing on the identification and the commensuration of the credit, market, 

operational and reputational risk, risks that no longer had a major impact on the patrimonial 

situation and on the image of the credit institutions, once he banking sector was restructured 

and the banking activity and the economy in general evolved. 

In this context, according to the Financial Stability Report made by the National Bank 

of Romania, the Basel II implementation supposes a series of important challenges both for the 

credit institutions – the adjustment of the risk management and of the data-processing system, 

the personnel training, the obtaining of data bases etc. – and also for the National Bank of 

Romania – the adaptation of the surveillance process, the elaboration of the new regulation 

frame, the preparation of the personnel etc. 

The regulation frame will be substantially reconfigured. The laws regarding the 

banking activity, the cooperationist credit organizations, the institutions of economies in the 

locative field and the mortgage banks will be revised. In its turn, the secondary legislation 

will be modified and completed in order to cover the requirements formulated within the three 

pillars from Basel II. For the implementation of the stipulations from the European 

directive, at the Steering Committee level was adopted the manner of exercise of the national 

options. The options are circumscribed especially to the problematic of risks, to the own 

funds and the surveillance on consolidated and individual basis. In the formulation of the 

position in report to the national options, the adopted policy was the caution one. 

It is hard to estimate the impact of the regulation frame which transposes Basel 

II on the credit institutions and the financing of the economy. The difficulty signalled by


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the banks in restructuring their data bases on exposures categories stipulated in Basel II made 

impossible the effectuation of a quantitative impact study in 2005 in order to fundament 

the choosing of the national options. 

The validation of the internal models by the surveillance authority is the fundamental 

condition for a credit institution to be able to use another approach than the standard one in 

determining the capital demands. The National Bank of Romania proposes itself to elaborate 

validation guides for each risk type: credit, market or operational. The principles that will 

stand at the basis of the validation process are: 

• The primary responsibility in the validation process belongs to the credit 

institutions, the surveillance authority only evaluating the manner the bank itself made the 

validation; 

• The validation represents, in essence, the evaluation of the predictive capacity of 

the risk estimations of a bank; 

• The validation is an iterative process, based both upon quantitative and qualitative 

elements. 

The implementation of the validation for the Romanian banking system could be 

more difficult, both from the perspective of the rating process, and also of the one afferent to 

the rating system. There are three important aspects for the validation process. 

First of all, even though the model is built by the mother bank and validated by the 

surveillance authority from the country of origin, the autochthonous management must prove 

that it can catch appropriately the characteristics of the risks afferent to the Romanian banking 

market. The model can work at the group level, but it can attract some minor, but important to 

Romania, risks at the aggregate level. 

Secondly, we consider that the autochthonous management mustn’t be a simple 

operator which uses the internal models as if they were black boxes, it must have a satisfying 

knowledge of them. In fact the management must be done in full awareness of the risks the 

entity that leads it will expose it to. 

Not last of all, the alimentation of the models with data bases is another challenge. 

Nowadays there is a long statistic historic for the data bases necessary to be used in the 

quantification of the capital requirements. The importing of such bases must prove that they 

can catch the structure and the dynamics of the banking market risks from Romania. 

Normally, in the approval of an internal model of evaluation of the credit risk 

imposes the use of the rating system for at least three years. NBR exercised the option 

which allows the reduction of this period by at least one year if the credit institution wants 

to apply the internal basic models before December the 31 st , 2009, namely at least each two 

years in the case of the application of the advanced approach until December the 31 st , 2008. 

Thus, the consolidation of the Romanian banks in the spirit of the Basel II 

treaty represents a sine qua non condition of the integration in the European banking 

communion and of the participation to the globalisation of the banking activity, which 

can happen only in the conditions of a good management in such a vision, the National 

Bank of Romania, as architect of the banking activity management fixed the following 

objectives concerning the implementation of the new Agreement: 

• the transposition in the primary and secondary legislation of the new prudential 

requirements; 

• the development of the prudential surveillance media adequate to the new context; 

• the development of the systems of risk management at the credit institutions level. 

The elaborated strategy and the actions taken in order to achieve it, aiming, 

especially, qualitative aspects of the surveillance process, should be concretised, at least in 

the following: 

• the adaptation of the new realities of the norms regarding the banking authorisation in order 

to increase the certitude that the new operators on the market will be stable ones, that the


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stockholders and their managerial teams are qualified for their roles, that they have a good 

reputation and that the structure of the groups they will be integrated in will not affect the 

quality of the surveillance activity exercised by the central bank; the improvement of the of 

the corporatist governance of the banks, by perfecting the control over the stockholders, of the 

methods used by the surveillance authority and, not last of all, of the regulations regarding the 

fight against the money laundry phenomenon; 

• the harmonisation of the regulations regarding the insolvability risk with the Basel II 

stipulations. Consequently, the banks will have to be encouraged to develop the internal 

rating models. Also, the central bank will have to prepare the personnel to be able to test the 

aggregated measures; 

• the evaluation and the harmonisation with the communitarian exigencies of the 

regulations regarding the great exposures to the persons in special relations with the 

banks; 

• the improvement of the norms regarding the capital participations in order to assimilate 

the experience of the communitarian banks, of the more rigorous specification of the 

limits applicable to the capital participations and the creation of the juridical frame 

necessary to their application on solid basis; 

• the generalisation of the surveillance on a solid basis, so that the premises for a group’s 

banking evaluation be created. In this regard, we consider necessary the inclusion in the 

consolidation sphere not only of the banking groups, but also of the groups formed by other 

entities, such as the financial and the mixed companies; 

• The increase of the independence of the surveillance authority, namely of the central 

bank, in order to get closer the levels registered among the communitarian banks; 

• the perfecting of the banking rating system and early warning - CAAMPL – by 

introducing new criteria, capable of assuring a greater accurateness of the evaluations; the 

remodelling of the surveillance system “on site” by adopting the methodology of the 

CAMELS methodology and the moving of the weight centre on the risk administration; 

• a better monitoring of the banking market by enforcing the discipline. We must not 

neglect one of the essential truths of the competitive economy and that is the market 

includes the mechanisms that can reward the performances and sanction the incautious 

behaviour of the banks. That is why, the authorities must enforce the market discipline 

through measures which should increase the number of persons who monitor the banks, 

and also through stimulants necessary to encourage an adequate behaviour. At the same 

time, they must promote the market discipline not as a surveillance alternative, but as its 

complement. 

In this context, the expected changes will no doubt generate profound mutations in the 

architecture of the Romanian banking market and, naturally, the accountability of the national 

banking system with the systems specific to the other state members of the European Union. In 

fact, some of them have already started to form. 

Table no.1 

Structural indicators of the Romanian banking system 

2001 2002 2003 2004 2005 2006 

Commercial banks, of which: 33 31 30 32 33 31 

Banks with majority state capital, of which: 3 3 3 2 2 2 

- held directly by the Public Finances Ministry 1 1 1 1 1 1 

- held directly by the AVAS 2 2 2 1 1 1 

Banks with majority private capital, of which: 30 28 27 30 31 29 

- with majority autochthonous capital 6 4 6 7 7 3 

- with majority foreign capital 24 24 21 23 24 26


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Branches of the foreign banks 8 8 8 7 6 7 

The banking system on the whole 41 39 38 39 39 38 

CREDITCOOP - - 1 1 1 1 

The source: BNR, Romanian Banking System, 2006 

Thus, through the promoted policy, BNR created a sector formed of more and more 

powerful banks, capable of assuring a financial intermediation on efficiency criteria, where 

the private banking system becomes preponderant. 

The increase of the weight of the banks with majority foreign capital is beneficial, 

consisting of the increase of the competition in the banking system, with a possible 

favourable impact on the interest rates on credits, but negative effects can occur also, since, 

by accessing the external financing or by granting foreign currency credits, the monetary 

policy promoted by BNR could be less efficient on these segments. 

At the same time, the risk exposure of the banking system can also be pointed out 

through the evolution of the main financial and banking prudence presented indicators sets 

the following aspects: 

• the substantial improvement of the two profitability indicators ROA and ROE DURING 

2001-2006, the maximum being reached in 2001. In 2004 and 2005 the profitability of the 

assets was much lower than it was last year, the profit being generated by the existence of an 

exogenous factor, the intervention interest rate of BNR. Also, the increase of the profitability 

of the banks was stimulated by an aggressive capitalisation process which allowed the 

expansion of the business segments, (including the extrabalance ones) and of the treasury 

products and the supply of modern solution of risk management for the clients; 

Table no.2 

The evolution of the indicator of adequacy of the capital 

INDICATORS 12/31/ 12/31/ 12/31/ 12/31/ 12/31/ 12/31/ 

2001 2002 2003 21104 2005 2006 

1 Solvability report 1 

28.80 25.04 21.09 20.55 20.97 17.25 

(>12%) 

2 Solvability report 2 

(>8%) 

26.21 22.93 18.11 - - - 

3 Self capital rate 12.11 11.60 10.89 8.88 9.13 8.26 

4 General risk rate 39.73 42.90 50.57 46.83 47.48 52.73 

5 Remaining and doubtful credits / 

Total credits (Net value) 


Total assets (Net value) 


Own capitals 

0.72 0.43 0.31 0.29 0.20 0.18 

0.32 0.23 0.22 0.18 0.12 0.14 

2.66 1.97 2.04 2.05 1.35 1.64 

8 The credit risk rate 2.54 1.10 3.37 2.87 2.62 2.82 

9 ROA (Net profit / Total assets) 3.10 2.64 2.21 2.04 1.65 1.35 

10 ROE (Net profit / own capitals) 21.79 18.27 15.64 15.58 12.64 10.83 

Source: the National Bank of Romania


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• the solvability experienced a slight decrease starting with 2002, which does not raise the 

question of braking the crediting, but, the reduced oscillation around the 20% value could 

be due to the influence of the BNR norms that determine the banks to be more careful in 

the crediting process of the population; 

• during 2001-2006, the uncompetitive credits reported to the total of assets, are within 

normal, subunit levels, specific to any banking system; 

• according to the BNR governor, the banking liquidity in Romania is high, much above 

the minimum obligatory levels. “The sector of the non-banking financial institutions IFN is 

underdeveloped, it holds however a considerable increase potential. The systemic risks are 

small, considering the reduced dimensions of the sector”. 

Considering that appreciatively 30% of the net banking income is generated by the 

investments to BNR, it is obvious that the profitability on the whole of the banking 

system and of the banks will be threatened by the radical changes in the structure of the 

incomes. Thus, the banks will have to increase the productivity not only by increasing 

the loans, but also by decreasing the expenses. 

The dynamics of the crediting activity and the quality of the credits, prudentiality 

indicators – the high solvability rate, the administrable level of the uncompetitive credits 

(under 1% of the credit portfolio of the banks) – indicate a low credit risk at the level of the 

banking system and a its considerable resistance to shocks. 

Thus, although the banking system has registered notable progresses and is exposed to 

a moderate credit risk, there remain some blind spots such as: 

- the low intermediation level. The factors which have favoured the obtaining of such a 

low level of the intermediation can be: 

► The gradual liberalization of the foreign currency market; 

► The delay of the liberalization of the capital account; 

► The bankruptcy of some banking institutions which amplified the mistrust of 

the population in the banking system; 

► the gradual reform of the monetary policy which had however notable results, in 

the sense that the national economy and the financial Romanian market were free of shocks. 

The financial intermediation degree of the Romanian economy was of about 

25% of the gross internal product (GIP) at the end of 2006 and it represents less than a 

quarter of the financial intermediation degree in the EU, which was of 103,9% of the GIP 

in 2005; 

-the reduced access of the commercial banks in the rural environment although half of the 

population of the country lives in villages and the non-fructification of at least two potential 

resources: the financial transfers of the Romanian season workers and the non reimbursable 

funds disposed by the EU; 

-the reduced value of the deposits of clients at the banks whose value reported to the 

GIP reaches only 26% /GIP, much below the value of this indicator from the other countries 

in the EU (90%), Central and Eastern Europe (45%) or even Bulgaria 

(40%) and Albania (5%). Thus, the corporate rating deposits in Romania 15% of the GIP, in 

report to the countries form the EU where this indicator registers an average of 30%. 

According to some UniCredit estimations, the deposits of the economical agents increased in 

2005 by 25%, their weight in GIP is to reach 19% in 2008 in report to 15% 

in 2005. This situation is the consequence of the preference for consumption which was 

stimulated by the inflationist phenomenon which strongly eroded the economies of the 

population, and also the poverty degree of the population. 

The operational risk becomes more and more present in the banking activity, being 

generated especially by the deficiencies of the informational system, the defective 

monitoring of the customers, the great personnel fluctuations or the non reporting in totality


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of the information regarding the suspicious transactions, with possible repercussions on the 

image of the bank in question. 

The interest rate risk is relatively minor in the conditions where the short term credits 

are preponderant, and the average and long term ones are granted with variable interest. At 

the same time, the interest rates practiced by the banks represent sources of financing the 

interest rate risk, in case it occurs. The modification of the credits granted in favour of 

medium and long term ones, and also the reduction of the interest spread will determine 

another dimension to this type of risk. According to the specialists’ prognoses the strongest 

narrowing of the spread between the interests will occur in 2007 and this indicator will be 

reduced by 4,5 percents because of the tempering of crediting activity. 

The contamination risk on the interbanking market is not significant since the 

investments on the interbanking market have been oriented towards the central bank and the 

adjacent risks (foreign currency risk, interest rate risk and credit risk) register a low level. 

The gradual improvement of the banking prudence is the result of the focusing of the 

central bank on qualitative side of the surveillance and of the economic growth supported by 

2000. Their positive trends have been supported by the increase of the capitalisation level of 

the banking system (the capitalisation degree of the banking system increased in real terms 

by 12,5% in 2004 in report to 2003) and by the consolidation of the position of the foreign 

capital banks in the structure of the banking sector, although the profitability of the assets was 

in 2004, 2005 and 2006 much lower than the previous year, the profit being generated by 

the existence of an exogenous factor – the interest rate of intervention of 

We can conclude that, after the restructuring de fond of the banking surveillance 

activity, BNR pursued particularly the increase of its efficiency which led to the gradual 

exposure to the risk of the banking institutions, the creation of a healthy banking system 

and the increase of the population’s faith in it. 

The dynamic field of the banking risks determines the rapid modification of the 

procedures, the techniques and the models currently used in their efficient administration, 

underlining at the same time that they cannot eliminate the risk, but they can only predict it 

and attenuate it. From this perspective, indifferently of the models used in the surveillance 

process, the monetary authority cannot prevent the banking bankruptcies or escape an 

aggressive banking crisis. Its role is to assure the legal context where the risk is monitored 

and administrated. 

Bibliography: 

1 Costică I., Lăzărescu S. ,,Politici şi tehnici bancare’ (Banking policies and techniques)’, 

Publishing House ASE, Bucharest, 2004; 

2 Dardac N., Barbu T- ,,Monedă, bănci şi politici monetare” (Currency, banks and 

monetary policies), Publishing House Didactică şi Pedagogică, Bucharest, 2005; 

3 Lăzărescu, S.; Moinescu, B.; Pocan, I.; Turacanu, M. ,,Managementul riscului şi 

măsurarea performanţelor bancare” (Risk management and the measuring of the banking 

performances), Bucharest, Ed. ASE, 2004; 

4 Rajan, R., Zingales, L., 2002, “Banks and Markets: The Changing Character of European 

Finance”, Second ECB Central Banking Conference „The transformation of the European 

financial system”; 

5 Hwww.bnro.roH, ,,Raport asupra stabilităţii financiare” (report on the financial stability).


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THEORETICAL ASPECTS REGARDING THE METHODS OF COSTS 

CALCULATION USED IN THE COAL MINING INDUSTRY 

DINA IONELA CLAUDIA, junior assistant, ”C. Brâncuşi “University 

ABSTRACT 

In any domains where the production activity takes place, where services are performed and works are 

done, exists either costs. The framing of the production cost among the most considerable indicators with its help 

the activity of an industrial firm is appreciated makes from its calculus an instrument for the diagnosis, coming 

to decisions or for the control of the efficient accomplishments. 

Both to economic unit level and the level of sector, production economic branch, the 

decisional process is based on the informations gathered from inside and outside of entity, 

these informations must beeing supplied, processed, analysed and rigorous checked. 

The mining industry, generally, and coal brown mining industry, especially, request an 

attentive pursuit of production costs in order to have in any moment their control, thus the 

strategical decisions beeing grounded and adopted in time. 

The successfully use of strategy through costs, impose the activity organization and 

focusing the financial accounting informations on cost centers. In this situation are taking 

proceedings against: 

� Establishment of activities and areas which engender/generate costs, 

respectively the areas where takes place the resources consumption; 

� Establishment of responsibilities for each activity type; 

� Organization and efficient management of entirely firm's activity ; 

� Fundamentation of internal decisional process ; 

The calculation methods of costs inside these unit types are, basically, the traditional 

cost's methods, bassed on effective output expenses, such as: the method on phases and 

aggregate method. 

The most used cost calculation method are the method on phases who is used, mainly, 

inside the enterprises with global production, where in order to obtain the final product must 

to traverse a lot of phases inside production's process. 

Due to intricate of works to be done in order to exploit the brown coal through 

quarries, these works can be divided in two large categories representing, in fact, also the 

phases of production process, thus: 

� Works performed in order to uncover the coal stratum, thus beeing the 

preparation works, consisting in hollow the barren gangue, the transportation 

and putting the unuseful rocks in the waste dump. 

� Works performed in order to hollow/extract and capitalization the coal, 

consisting in excavate/hollow, transport and delivery the product to customer . 

The costs for these works are increase by spreading on them other auxiliary activities 

such as collect, direct and evacuate the waters, the revisions, the period repairs performed to 

keep in working the equipments, the suppling with materials, exchange pieces for work 

places etc. 

Due to characteristic of technological process, a part of terrace equipments are used 

both to extract, transport the barren gangue and to extract, transport the coal.


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As result of this specific feature is necessary to settle some methods to split the 

common expenses on these two activities, taking into account the expenses with 

unfolding/uncover the coal who follow the regime of forecast expenses, which are not 

included directly in cost price. 

Acordingly to specific features of brown coal extract activity, the exploiting units use 

for book keeping production costs the method on phases which follow to establish the cost 

for each phase of technological proces, afterward on final product. 

The development on phases for a certain production process must have as goal to 

create the necessary conditions in order to perform in practice some analysis regarding the 

production costs evolution, also to mobilise some categories of reserve which appear during 

productive activity . 

The organizational manner of book keeping production expenses, establishment of 

effective computations are made accordingly to organizational structure of the plant. Thus, the 

works and services who are reciprocally made by auxiliary sections are included in effective 

cost for consumption sections. 

The exploiting units for brown coal achieve the effective computations for final 

product (the brown coal), corelate with plann calculations. 

These are achieved every month, for each independent base sector, or for each single 

exploiting unit . 

The dates cumulate from computations/calculations of independent base sector and 

those from exploiting are adding, thus beeing made a calculation pattern for ”coal” product on 

enterprise level. The production expenses illustrate, in money enunciation, the material and 

labour expenses(including those for marketing), necessary to achieve in optimum/best 

conditions the foreseen plann production for a settled period. 

In order to product cost classification, could be taken into account more criterions, 

such as: 

� Accordingly to activity features: base production activity expenses, auxilliary 

production expenses, market expenses; 

� Accordingly to work place: the exploiting expenses for sectors, sections and 

workshops; 

� Accordingly to allot manner in products cost of directly expenses and indirectly 

expenses; 

Due to the fact that mining exploiting units of brown coal have as a goal to obtain one 

single product ( the brown coal), are not taking into account the issue of alloting the indirect 

expenses on more products, but is necessary to allot some expenses on production phases, 

thus: 

� The repartition of expenses caused by mentenance and repair of equipments 

(excavators, transporting tapes) used both in exploiting activity of waste 

material/barren gangue and in exploiting barren gangue, on these two 

activities; 

� The spliting of expenses for use, mentenance, and repair of auxiliary 

equipments (drain pumps, canal delves) on these two phases: brown coal 

uncover and production ; 

� The repartition of general expenses made to plant level over coal brown 

production, obtained from exploiting of independent sectors from the unit. 

� Accordingly to the structure: elementary/simple expenses and complex expenses ; 

� Accordingly to economic content : material expenses and labour expenses; 

� Accordingly to dependence of output volume : fixed expenses and variable 

expenses; 

All production expenses, both simple and complex, of base, auxiliary, market 

activities are cumullate on basic expenses elements who characterize their's economic content.


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The criticism analysis of these method of calculation based on phases, illustrates it's 

limitations , thus beeing the fact that method allow only an after-operational control of 

reverve the settled level of costs. 

Also, the method on phases, don't allow the operative knowledge of turning 

off/deviations from normal conditions to develop the production, taken into account with 

budgeting or standardization occasion of expenses on a detailed manner, in sortiments, modes, 

causes, production places etc. As a consequence, the supplied informations don't allow to 

discover in useful time the uneconomical expenses, or some weights interfering in activity 

performance and don't take into account the optimization and minimization issues of costs. 

The main consumptions are pursuit in frame of this method through the consumption and 

labour norms/standards, having more statistic relevance then the information for taking 

decision process. The informations supplied by method on phases can be use in a long term 

management process, the production processes to whom this refer already had been close. 

By using the phase method is not settled yet an adequate system to pursuit the 

productive consumptions and to remade the dates regarding those consumptions by a 

functionally link who can satisfy the management's demands from all enteprise levels. 

An other method of cost calculation used in mining industry is the aggregate method 

who applies to base production of those enteprises with a perfect homogeneous production. 

To these enteprises, sections or workshops, don't exist production in progress ( 

account no.331 from chart of accounts), or in hypothesis that it exists, the production in 

progress remains constant and the production process don't divide, as a rule, on sections. So, 

all the production expenses identify on the product who is obtained from production process, 

having consequently the nature of direct expenses. 

The aggregate method of cost calculation is based on aggregate, total cost notion, and 

the calculation object or the cost bearer are the final product as material result of 

production/making process. 

The core of this method consists in fact that the delimitation and determination of 

expenses take place to a level of certain expenses center or to a level of entirely enteprise, and 

the cost for this product are determine in reference of those expenses to production volume 

obtained by entirely enteprise or production center. 

The production expenses, entirely, have a directly nature versus homogeneous 

obtained production, that means those expenses are identify on the product or product groups 

who engendered them. 

The indirect or common expenses of production center (section, workshop, 

construction site etc) and general-administrative expenses of enteprise are assimilated to 

properly indirect expenses and are registered in the account of collecting/procurement and 

alloting expenses, and to the end of administration period are transfer in the calculation cost 

of product based on conventionally criterions. The total amount of production expenses are 

obtained by adding the directly expenses with so-called indirectly expenses. 

The improvement of book keeping/accounting internal administration method in 

mining coal industry, implies to adopt some systems, methods and budgeting techniques, 

collect and allot of production and calculation expenses of costs, who allow promptness, 

simplicitate, economical, forecast, etc., all conducting at the end to the growth of obtained 

result's quality. It is about a conception change in application of certain systems, methods and 

work techniques, accordingly to efficent management needs of production and entirely 

enteprise, view as a whole. 

These systems, methods, new techniques of cost calculation must be the result of real 

present day situation and look ahead to the future demands related to objectives that must be 

achieved, thus, to improve the functionally position of book keeping in general and costs 

calculation and internal book keeping, specially, in frame of management activity for 

constructing machines enteprises.


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Based on some criticism analysis of extant situation, from who is necessary to keep 

the positive elements, must to promote new methods, who will offer useful informations to 

enteprise's management in order to adopt decisions.In this context, taking he decisions related 

to production expenses and it's costs, measures the information obtainance related to material 

and payroll expenses from production process, and those, to theirs turn, sway on the 

calculation method used, as informations supply. 

Therefore, it imposed improvement and introduction of new modern methods for costs 

calculation, who allow an adequate capitalization of informations in connection to production 

process, in order to support the rhythm of increasing needs to informations. Result that 

improvement of cost calculation methods, assumes the study and analysis of needs, 

conditions,of real advantages offered by various advanced methods and techniques, taking 

into account the efficiency criterion. 

BIBLIOGRAPHY 

1. Ionescu L. & collective - ”Methods of costs calculation”, Publishing House Foundation 

Romania from Tomorrow, Bucharest , 2002 

2. Oprea C., Cârstea G. - ”Internal book keeping and costs calculation”, PH. AtlasPress, 

2003 

3. Ristea, M. - ”Options and accounting methods for enteprises”, PH. Economic 

Tribune, Bucharest 2001


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THE REORIENTATION OF THE COAL INDUSTRY TOWARDS THE 

GROWTH OF ECONOMICAL EFFICIENCY 

DINA IONELA CLAUDIA, junior assistant., ”C. Brâncuşi”University 

ABSTRACT 

During the last 17 th years, Romania traversed the economical, social and political transformation 

phases, who had as result the evolution from a centralized economy, strictly manage by state to a market 

economy, of competition pattern , in which the state role, as player of economic unity , decreases from more to 

more. 

During the last 17 th years, Romania traversed the economical, social and political 

phases of transforming, who had as result the evolution from a centralized economy, strictly 

control by state towards a market economy, of competition pattern, in which the state role, as 

player of economic's unity, decreases from more to more. 

As a consequence of these transformings, must to mention the importance of one 

economic performance indicator- the profitability- inside the philosophy of those two 

economic systems.Thus, in economical thinking, precedent to 1990 year from Romania, the 

main indicator was the production volume, beeing strictly controlled/checked the achievement 

of production norms/standards imposed to every economic entity, as part of yearly national 

economical programme. In those conditions, the profitability was a secondary indicator, with 

the main purpose to indicate the efficiency threshold. 

In market economy this indicator plays an important role in taking the investment 

decisions, in evaluation of one activity� ��s 

efficiency. 

Profitability is one of the pillars which sustain the theory of market economy, the 

majority of rules which conduct the economy starting straightly or indirectly from concept of 

profit. 

The profit, in extense sense, can be define as the surplus create from an economic 

entity, ccalculate as difference between the obtained incomes and the expenses made in order 

to receive these incomes. 

The problem issues regarding the incomes and expenses, generated by an economic 

entity, inside the frame of certain economic entity is very various, taking into account the 

activity type, the volume of this activity, the economical, social and political frame of 

development etc. 

The drilling/extracting industry represents one of the most important branch of 

national economy, due to the fact that it is the main producer of raw materials. 

The drilling/extracting industry notion includes the achieved activities in order to 

introduce into economic process a bigger volume of mineral resources. 

The developmnet strategy of mining industry promoted before 1989 year, was based 

on concept of self-sustaining in assurance to economy the mineral resources, in order ot 

decrease the imports.The result was development of a mining sector bigger then the 

allowance of solid mineral resources economic exploiting capacity of the country, directly 

beeing occupied a number of over 350.000 persons, and indirectly a number of over 700.00 

persons. 

The situation created after 1989 imposed the sustaining of state sector, for that beeing 

necessary a great budgetary effort . 

In perioad of time between 1990-2005, the state made expenses for sustaining the 

mining sector, in sum of 5.950.7 millions USA dollars, as results from the table bellow:


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Value 

Signification 

(equivalent 

dollars) 

millions U.S.A 

Subventions 3966,4 

Social Transfers 308,9 

Capital allowances 1675,4 

Total amount 5950,7 

To this, it adds for the specified period an exploiting loss in total amount of 1.547,3 

millions U.S.A dollars.The state effort for mining sector, adding the budgetary expenses with 

the expoiting loss from period between 1990-2005, rises to the value of 6.519,7 millions 

U.S.A.dollars. 

The results of transformation actions from this period generated a lot of new problems 

, the main beeing : 

- the suddenly decreasing of mine regions economy affected by sector 

transformings; 

- the growth of social problems in these regions; 

- the growth of environmental problems; 

- the growth of poverty; 

In the industry drilling/extracting sector of mineral substances, it devellop the activity 

a number of 16 economic agents wih state capital and a number of 363 economical agents 

with private capital, which from: 

� coal: 2 national companies, respectively SNLO and CNH Petroşani, 3 energy 

power complexes, respectively CE Rovinari, CE Turceni, CE Craiova, 1 

national society, respectively SNC Ploieşti,1 commercial society, respectively 

S.C. Banat Anina; 

� metal ore : 2 national companies, respectively C.N. MINVEST S.A. Deva and 

C.N. REMIN S.A. Baia Mare, 4 commercial societies, respectively S.C. 

MOLDOMIN S.A. Moldova Nouă, S.C. CUPRUMIN S.A. Abrud, S.C. Băiţa 

S.A. Stei and S.C. Bucovina Min Vatra Dornei, 5 mining operators – economic 

agents with private capital; 

� no metal substances, useful mine rocks: 330 mining operators – economic 

agents with private capital; 

� radioactive substances (uranium): 1 national company, respectively CNU 

Bucureşti; 

� salt: 1 national society, respectively S.N. Sării Bucureşti; 

� mineral water: 1 national society, respectively SNAM Bucureşti, 28 operators 

- economic agents with private capital . 

After Romania ��s 

adheration to European Union, was elaborated „The strategy of 

mining industry for period 2007-2020 ”, who followed to a strategy elaborated on period 

2004-2007. 

The Strategy makes an accurate analysis of mining sector from Romania, on period 

1990-2005. Accordingly to this study, the main factors who conducted the evolution on 

analysis period are : 

� The oscillation of demand for brown coal and pitcoal, ilustrate by decreasing, 

starting 1997 year of necessary coke coal, the internal market requiring a 

maximum amonut of 3,5 millions tone/year to a caloric power of maximum 

3.800 kcal/kilo, also the oscillation of thermoelectric power station 

consumption of brown coal ; 

� The graduate decreasing of state support for exploiting complex ores and 

copper ores ;


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� Stoping by National Bank, starting 2000 year, of gold aquisitions on internal 

market; 

� The decreasing of salt demand : on internal market . 

The evolution of mining industry from Romania followed the extant trend of European 

Union. 

Thus, accordingly to dates supplied by Eurostat, the evolution of coal output, in 

metric tones measure units, for states member of European Union for period between 2003- 

2005, are as the graphic underneath: 

The trend of energy power sector in Romania inscribes into an upward trend of 

worldwide power sector, as it is ilustrate in power strategy of Romania for 2007 – 2020 

period. 

The total power demand in 2030 year will be about 50% higher then on 2003 year, 

also for oil will be about 46% higher. The known oil reserves could support an consumption 

extant level only until 2040 year, those of natural gases until 2070 year , while the global 

pitcoal reserves supports a period over 200 years, even to a growth of exploiting level. The 

forecasts point to an economic growth , fact which will imply a higher consumption of energy 

power resources. 

It is valued that, rougly a quarter of basic energy power resources, to global level,will 

be support, in continuation, by coal . Same time with energy power consumption growth will 

grow also the coal consumption . The dates gathered by World Energy Council (WEC) 

illustrate a growth with almost 50% of coal extraction to global level in 2005 year versus 

1980 year . 

The power sector from South-West Oltenia region represents a basic strategical 

understructure of regional and national economy.The hydrological network, both with relief 

configuration, awards to region the main power energy role in Romania(71,57% from total 

hydroelectric output, with a total of 10.363,39 GWh in 2001), by exploiting the potentialities 

of flowing waters who cross the region : the Danube flood, rivers Jiu and Olt. On Oltenia 

teritory exists the hydroenergetic complexes Portile de Fier-Iron Gates (among the biggest in 

Europe) – Mehedinţi county and Lotru-Olt –in Vâlcea county (among the biggest in 

Romania).More, nearby the mining zones Motru –Valea Jiului, works two of the biggest 

thermo-electrical plants from Romania: Rovinari and Turceni.


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The demand ensurance for brown coal at level of period 2013-2020 and after, is 

conditioned by policy of Agency for Mineral Resources in order to put in value the 

enrichments , with goal to efficiency the exploiting to surface of coal brown. 

The reference script for forecast the power demand evolution in 2007-2020 period 

takes into account the forecast of main macroeconomy indicators evolution for 2007-2020 

period, evolved by National Prognosis Committe. 

From the issues presented above, might conclude that the mining coal industry will 

continue on Romania teritory also in future decades, only for those usefull mineral substances 

and exploiting perimeters which will ensure a certain economical efficiency. 

BIBLIOGRAPHY 

1. Lasdon, L. - „The optimisation theory for big system”, Technical Publishing 

House , Bucharest, 1975; 

2. Todoran, I. - „ Possible answers, connections and prognosis ”, Publishing 

House Dacia, Cluj-Napoca, 1989; 

3. Tietenberg, T.H. - „Environmental and Natural Resource Economics”, Harper 

4. Văduva, I., Stoica, 

M 

Odăgescu, I. 

Collins, Publishers, New York, 1992; 

- „The feigns of economical processes”,Technical Publishing 

House, Bucharest, 1983.

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