Substance and Form in Romanian Accounting Regulation

Abstract

Switching from an accounting system based on compliance and enforcement of strict rules, to a system where the professional judgement plays a key role in the accounting recognition of assets and their disclosure can be a difficult exercise. Throughout history, Romania has moved through a winding path, from the standpoint of accounting judgement. Although there have been attempts of early normalization at the beginning of the twentieth century, that led to the literature addressing some aspects of assets recognition and classification, both form a legal and economic perspective, they have never been implemented (Calu, 2005). By the middle of the twentieth century, the accounting system was a Soviet-inspired one, where practitioners were required to apply “recipes” for asset recognition and disclosure, enforced on a national scale, thus rendering the professional judgement useless. Beginning with 1989, most accounting treatments were still predefined, but certain transactions and events required professional judgement. The regulators have expanded the field of professional judgement through the Romanian Accounting Development Programme, by adopting an economic view for assets recognition and disclosure. The objective of this paper is to show that conceptual contradictions or alternative classification criteria, can preclude the exercise of professional judgement regarding the recognition and disclosure of assets.

Keywords: Accounting Normalization, Recognition of Assets, Classification of Assets, Economic Approach, Legal Approach

JEL Classification: M41, M48