The normative reference for accounting is, in Europe, the 4th Directive on the annual accounts of certain type of companies (78/660/EEC), issued in 1978 and revised in 2003 and 2006 (2006/46/EC). For Romania, integration to the European Union implies the4th Directive (78/660/EEC), Romanian accounting standards, harmonization, European Union

BOTEZ DANIEL

PRAVAT CRISTINA IONELA

English

Research Papers in Economics

791 
 
STUDY CONCERNING THE DIFFERENCES BETWEEN THE FOURTH DIRECTIVE 
AND ACCOUNTING STANDARDS FROM ROMANIA 
 
Botez Daniel  
University  of  Bacau  Faculty  of  Economic  Sciences  Bicaz,  Neamt,  2    Cozmitei  St.  E-mail  : 
daniel63331@yahoo.com Mobile : +40 744 826004 
Pravat Cristina Ionela  
University  of  Bacau  Faculty  of  Economic  Sciences  Bacau,  8    Spiru  Haret  St.    E-mail  : 
daniel63331@yahoo.com Mobile : +40 745 260430 
 
The normative reference for accounting is, in Europe, the 4th Directive on the annual accounts of certain 
type  of  companies  (78/660/EEC),  issued  in  1978  and  revised  in  2003  and  2006  (2006/46/EC).  For 
Romania, integration to the European Union implies the assimilation and the consent of the European 
lines with respect to different areas. Therefore, the Romanian accounting standards that have been applied 
since 2006 can be considered to be very close to the spirit of the directive. Yet, we find some differences.  
The purpose of our study is to find the differences between the Romanian accounting standards and the 4th 
Directive, in other words, to investigate if the Romanian accounting standards have entirely assimilated 
the latter or not. 
 
Keywords : the 4th Directive (78/660/EEC), Romanian accounting standards, harmonization, European 
Union  
 
Cod JEL : M41 
 
INTRODUCTION 
In the four decades of existence, European Union undertook considerable steps in realizing the 
Treaty from Rome stipulations, that set the basis of the partnership, and inscribed as essential 
aims states‘ economic policies‘ harmonization, realization of common commercial policies, of 
agrarian policies and the creation of economic and monetary unity. During its operation, the 
common  market  conceived  at  Rome  in  1957  supported  cooperation  between  member  states, 
contributed to a certain work market‘s stability and to realization of some notable progress in 
agrarian, social and security domains.  
A special moment in European Union‘s development is constituted by creation, at the 1
st of 
January 1993, of The Unique Market, foreseen in The Unique European Act from 1987. After 
this act‘s putting into practice, European Union becomes the most unified market in the world, 
with favourable effects upon integrated markets‘ performances and upon the decision making 
system.  
Once with the settling of The Treaty from Maastricht (November 1993), European Community 
becomes European Union, the new name being motivated by its orientation towards public and 
social domains‘ integration.  
The Treaty has on its view the creation of one space without interior frontiers, by highlighting the 
economical and social cohesion and the creation of a strong economic and monetary union that 
should use a unique currency.  
On realization chapters the actions promoted on the line of Economic and Monetary Union by 
settling the Central European Bank and the states‘ engagement of answering to adhesion criteria 
to unique currency may be inscribed.  
Fourth Directive of Europe Council coordinates the assembly of member states and in course of 
adhesion  imposed  requirements  concerning  the  presentation  and  content  of  yearly  financial 
situations  and  of  their  rapports,  the  general  principles  concerning  position  and  financial 
performances of an entity, specific evaluation rules of actives and passives and of publication of 
financial situations.  792 
 
Therewith,  the  directive  foresees  the  requirements  concerning  the  statuary  audit  of  yearly 
financial  situations  by  persons  authorised  to  audit  with  this  purpose,  according  to  European 
requirements.  
 
DIFFERENCES  BETWEEN  THE  FOURTH  DIRECTIVE  AND  ROMANIAN 
ACCOUNTING STANDARDS 
The 4
th Directive is based on the 53
rd article of The Treaty from Rome, being a compromise of 
this type of financial reporting legislation and the approach is based on the trusty image concept. 
This accounting document offers the possibility of choice between more accountant alternatives 
of  solving  different  problems  and  offers  options  to member  states  in  what  its  application is 
concerned.  
The Directive covers public and private companies in all EU countries. Its articles include those 
referring to valuation rules, format of published financial statements and disclosure requirements. 
The fourth Directive`s first draft was published in 1971, before the United Kingdom, Ireland and 
Denmark  had  entered  the  EU  in  1973.  This  initial  draft  was  heavily  influenced  by  German 
company law. Consequently, valuation rules were conservative, formats were prescribed in rigid 
detail, and disclosure by notes was very limited. 
The influence of the United Kingdom and the Ireland on the Commission, Parliament and Group 
d`Etudes was such that a much amended draft was issued in 1974. This introduced the concept of 
the ―true and fair view‖. Another change by 1974 was that some flexibility of presentation had 
been introduced. This process continued and, by the promulgation on the final Directive, the 
―true and fair view‖ was established as a predominant principle in the preparation of financial 
statements. In addition, the four principles of the UK`s SAAP 2 (accruals, prudence, consistency 
and going concern) were made clearer than they had been in the 1974 draft (Nobes, Parker, 
2006).  
The introduction in national legislations of the 4
th Directive content should have been realized by 
July 1980, but none of the member states succeeded. As example we can mention that Spain and 
Portugal scarcely had succeeded its adoption in 1989, Italy in 1991 and Sweden in 1995, while 
Austria and Finland still have to introduce few amendments in order to declare the adoption 
completed. It can be, even though, asserted that in present this document‘s content is included in 
all member states‘ legislations, as well as in other states‘ legislations, sates that are not members.  
European Union‘s relations enforcement in adhesion process imposed continuous development of 
accounting  Romanian  system,  pursuing  a  better  harmonization  with  European  directives 
settlements.  
The  adhesion  presumed,  from  an  accountant  point  of  view,  the  introduction  in  scene  of 
accountant  standards  formulated  and  approved  by  Public  Finances  Minister  Order‘s  no. 
1752/2005, that are considered as being the closest to 4
th Directive‘s spirit and letter. Although, a 
series of differences can be observed, some of it dictated only by different expressions of the 
same basis, others remained from anterior Romanian accounting standards, when the opening 
towards the international accountant standards left marks.  
In what follows, we shall highlight some differences that constitute the punt of the present study.  
1. One of the first differences consists in financial information set name that were published 
yearly by companies. The directive maintains the recognized term of ―annual accounts‖ (comptes 
annuelle), collocation that crosses the whole history. The English version of directive translates 
the collocation directly, annual accounts, and not financial statements as the term has been used 
in international accountancy language. This situation is an expression of conservatory attitude 
from  Continental  Europe  accounting  pole  facing  the  accelerated  Anglo-Saxon  accountancy 
vocabulary.  
Romania‘s  accounting  standards  maintained  the  old  expression  ―accounting  balance‖  in  the 
harmonization period to European directives of the 90‘s, and passed straight to that of ―financial 793 
 
statements‖. This new expression used was the expression of accounting standards harmonized to 
International Standards of Accounting, published in 1999.  
2.  Another  difference  refers  to  settlements  concerning  the  annual  financial  statements  set 
constitution. The directive foresees as compulsory elements the balance sheet, profit and loss 
account and explanatory notes, with the mention that the member states may allow or require 
other  components.  Romanian  accounting  standards  oblige  certain  categories  of  entities  to 
introduce  the  financial  situations  set also  the  changes  in equity  statement  and  the  cash-flow 
statement. It is a consequence of IAS/IFRS application, with the mention that only the entities 
considered  big,  that  fulfil  the  conditions  of  two  of  the  three  criteria  foreseen  by  accounting 
standards  have  the  obligation  to  prepare  it.  However,  the  other  categories  of  entities  are 
encouraged to introduce, them too, these components.  
3.  A  difference  may  be  identified  in  defining  and  using  the  basis  concepts  of  accountant 
vocabulary. Thus, the directive uses concepts of assets, liabilities, financial position, but it does 
not  define  it.   Romanian standards  use the  concepts  of  assets, liabilities  and  owners`  equity 
according to IASB preparing and presenting financial statements‘ general framework. It may 
seem as a simple difference, but the appeal of Romanian accountancy to definitions from the 
General Framework, by reason of the fact that it took part of the accounting standards starting 
with  1999,  produced  for  some  of  them,  a  real  professional  opening,  an  open  door  towards 
international conceptual framework‘s valences.  
4. A form difference, but one that contains background aspects, is the one referring to the manner 
of presenting the elements in balance sheet. Both forms of balance, foreseen by the directive, on 
the  9
th  and  10
th  articles,  present  the  claims  concerning  unpaired  subscribed  capital  as  main 
element,  and  its  inclusion  in  claims‘  structure,  as  exception,  as  alternative  presenting  form. 
Romanian  accounting  standards  retained  the  exception  as  presenting  rule,  respectively  the 
presenting of the claims connected to capital at ―claim‖ position.  
5.  A  direct  expression  of  the  accepted  degree  of  compromise  in  the  ―battle‖  between 
conservatism  (prudence)  and  accrual  accounting  (Nobes,  Parker,  2006)  is  the  accountant 
treatment of developing expenses. The directive frames in the balance pattern the research and 
developing  expenses  in  the  structure  of  intangible  fixed  assets,  under  the  reserve  of  their 
recognition as actives by national legislation, without defining it. Romanian standards are stricter 
and use the vocabulary used by IAS 38. Thus, in the structure of intangible fixed assets only the 
developing expenses can be capitalized, these being generated by research‘s results applications 
or other knowledge, in order to realize new products. Without defining it, it is understand that 
those research expenses named by research, meaning those that come out, according to IAS 38, 
from original and planned investigation undertaken with the purpose of knowledge or scientific 
meanings and new techniques, are deducted on the period cost.  
6.  Commercial,  industrial  and  intellectual  property  rights‘  treatment  are  the  basis  of  a  new 
difference. The directive foresees the possibility of registration it as intangible fixed assets, as 
well as the commercial, industrial and intellectual property rights purchased with onerous title as 
well as those created by the entity, under the conditions that national legislation allows their 
presenting  as  assets.  Romanian  standards  foresee  that  may  be  registered  in  intangible  fixed 
assets‘ structure the leasing, patent acts, licences, commercial labels, rights and similar assets that 
represent  contribution,  acquisition  purchased  on  other  ways,  excluding  the  possibility  of 
registering those created by the entity.   
7. Each country‘s companies legislation may allow the purchase of own titles, under certain 
conditions. This situation leads to the need of establishing a corresponding accounting treatment. 
The directive foresees that if the legislation of a member state allows a society to purchase its 
own actions, either directly, by means of a person that takes action for herself, but under the 
society account, the holding of those actions is submitted in any moment to at least the following 
conditions: a) among the rights associated to the respective actions, the vote right conferred by 794 
 
the actions detained by society are suspended for all situations; b) if the actions are included in 
balance  actives,  in  passive  balance  a  reserve  with  equal  value  is  included,  that  cannot  be 
distributed. In Romania, Commercial society law allows entities to purchase their own actions in 
a maximum proportion of 10%, with the mention that if these are inscribed in the active, in the 
passive  should  be  inscribed  a  reserve  with  the  same  value.  From  this  point  of  view,  the 
commercial society‘s law is in agreement with the directive‘s settlements. Romanian accounting 
standards do not allow the presentation of own actions as balance assets. Thus, nor the owners` 
equity  elements  ―Reserves  for  own  actions‖  was  not  foreseen.  The  position  ―Own  actions‖ 
figures as subtractive element in owners` equity structure.  
8. A difference that supposes a conceptual approach refers to the explicit set of drafted principles, 
which should be taken into account when drafting financial statements. Thus, our discussion has 
on  its  view  two  principles  of  Anglo-Saxon  origin,  which  are  not  foreseen  by  the  directive: 
economic substance (substance over form) and the significance threshold principle (materiality). 
These two principles are explicit drafted in Romanian accounting standards and compulsory for 
some categories of entities (those who cross the value of two of three criteria foreseen). In this 
case the inherence of IAS application is also felt, the prevalence principle making itself felt 
significantly in accountant treatments applicable to leasing operations.  
9. The existence of an alternative evaluation treatment concerning the fixed assets value at the 
end  of  the  exercise  is  a  necessity  dictated  by  accrual  accounting  concept‘s  incidence.  The 
directive foresees that the reserve from the re-evaluation may be capitalized in any moment, 
integral or partial, with the mentioning of member states‘ possibilities of foreseeing rules that 
should settle the re-evaluation reserve use, under the condition that transfers from re-evaluation 
reserve to profit and loss account should be done only if the transferred amounts have been 
registered in profit and loss account as expenses or reflect realised value rises. In Romania there 
exist standards  referring  to  value  difference  observed  with the  re-evaluation,  in  the  societies 
commercial laws as well. Therefore, this difference is included in reserves, without increasing 
social capital. Romanian accounting standards foresee an accounting treatment closer to the one 
mentioned in IAS 16. The surplus from re-evaluation included in reserve may be capitalized  by 
direct transfer to reserves, when this surplus represents a realized gain. By exception, this surplus 
may be capitalized by the measure of using the respective active, but only at the level of the 
difference between the calculated amortization calculated on the basis of re-evaluated value and 
the one calculated on the basis of initial cost.  
10. A seemingly harmonization aspect, that is maintained for a long time in Romanian accounting 
standards, is the one referring to intangible opening balance principle. It is easy to observe that 
this  principle  is  one  of  those  explicitly  drafted  as  well  in  the  directive‘s  settlements  as  in 
Romanian  accounting  standards.  Even  though,  the  accounting  treatment  foreseen  for  errors 
correction supposes direct violation of this principle, because error correction is made according 
to reported result. In this case the remnant of international accountant standards applications is 
felt.  
 
CONCLUSIONS 
Without claiming that the subject is overwrought, we presented few of the form and background 
differences among the 4
th directives settlements and the Romanian accounting standards. We 
consider some of the differences having as cause the anterior application in Romania of some 
accountant standards harmonized with International Accountancy Standards, their remnant effect 
being found in present standards. On the other side, we notice the Romanian standards amplitude 
of using and impose a European accountant language, opened towards value axes of international 
accounting.  
 
   795 
 
REFERENCES 
1. Nobes, C., Parker, R., 2006, Comparative international accounting, Ninth Edition, Prentice 
Hall, London 
2. ***, Directive 2006/46/EC of the European Parliament and of the Council of 14 June 2006 
amending  Council  Directive  78/660/EC,  Official  Journal  of  the  European  Union,  L  224/1, 
16.8.2006 
3.  ***,  The  fourth  Directive  on  the  annual  accounts  of  the  certain  types  of  companies, 
(78/660/EEC), published in Official Monitor of Romania nr. 27 bis of 10th January 2005  
4. ***, Romanian accounting settlements harmonized with European Directives, approved on 
Orders of Minister of Public Finances nr. 1752/2005, 2001/2006, 2374/2007. 
   

accounting settlements harmonized with European Directives, approved on

Directive 2006/46/EC of the European Parliament and of the

The fourth Directive on the annual accounts of the certain types of companies,

STUDY CONCERNING THE DIFFERENCES BETWEEN THE FOURTH DIRECTIVE AND ACCOUNTING STANDARDS FROM ROMANIA

http://steconomice.uoradea.ro/anale/volume/2009/v3-finances-banks-and-accountancy/133.pdf

STUDY CONCERNING THE DIFFERENCES BETWEEN THE FOURTH DIRECTIVE AND ACCOUNTING STANDARDS FROM ROMANIA

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