Within the article we tackle aspects concerning the forestry activity undertaken bycertain entities in Romania. We present some practical applications concerning the sale offirewood, standing timber and logs, because every sale category has certain accountingcharacteristics.accounting, forestry, incomes, firewood, standing timber, log

Liliana Marcela Cioara (Durgheu)

Nicolae Todea

Sorin-Constantin Deaconu

English

Research Papers in Economics

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  241
ACCOUNTING FACTS IN THE FIELD OF ROMANIAN FORESTRY  
 
 
Sorin-Constantin Deaconu
 1  
Nicolae Todea
2 
Liliana Marcela Cioara (Durgheu)
3 
 
 
ABSTRACT: Within the article we tackle aspects concerning the forestry activity undertaken by 
certain  entities  in  Romania.  We  present  some  practical  applications  concerning  the  sale  of 
firewood,  standing  timber  and  logs,  because  every  sale  category  has  certain  accounting 
characteristics. 
 
Key words: accounting, forestry, incomes, firewood, standing timber, log 
 
JEL codes: M 41, O 10 
 
 
Introduction 
In the older legal practice, decisions were taken by which it was argued that the concept of 
agriculture  had  a  broader  understanding,  including  floriculture,  horticulture,  forestry  and  cattle 
breeding  (the  Court  of Cassation,  section  I,  decision  121/1921).  This  decision  of  the  Court  of 
Cassation, as well as other views of the specialized literature represent the reason for which in this 
paper, we will also tackle some aspects concerning forestry. 
 
Literature review 
The  famous  classic  economist  William  Petty  has  made  in  his  studies  the  following 
observation: Labour is the Father and active principle of wealth, as Lands are the Mother. This 
statement points out that the land represents a resource able to bring substantial economic benefits if 
it is rationally used in the working (exploitation) process. 
At world level, in the present, it is clearly shown a trend for an international harmonization 
of  all  countries’  accountings.  This  trend  is  supported  by  IASB  through  its  recommendations. 
Through its elaborated Standards, IASB contributes to generate at international level of financial 
information,  more  easy  to  be  compared,  even  on  forestry  field.    This  thing  can  only  be 
accomplished by using of a unique accounting language. 
  We  have  used  as  reference  material,  studies  and  articles  quoted  in  the  following 
international  databases:  Emerald,  Research  Papers  in  Economics,  Directory  of  Open  Access 
Journals etc. A part of these studies are: 
￿  Gamini Herath, Sustainable development and environmental accounting: the challenge 
to the economics and accounting profession, International Journal of Social Economics, 
2005, p. 1035 1050. The paper in question is quoted in Emerald international database 
and  may  be  consulted  at  the  following  web  address: 
http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=598E74701BAF
2D7EF6056FC5A594A257?contentType=Article&contentId=1528597.  The  purpose  of 
                                                       
1  „1  Decembrie  1918”  University  of  Alba  Iulia,  The  Faculty  of  Sciences,  5  Gabriel  Bethlen  Street,  Alba  Iulia, 
deaconu_sorin@uab.ro 
2  „1  Decembrie  1918”  University  of  Alba  Iulia,  The  Faculty  of  Sciences,  5  Gabriel  Bethlen  Street,  Alba  Iulia, 
ntodea@uab.ro  
3 „Babe  Bolyai” University of Cluj Napoca, The Faculty of Economics and Business Administration, 58 60 Teodor 
Mihali Street, ldurgheu@yahoo.com Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  242
this paper is to examine the role of the natural resources accounting for development’s 
support. The natural resources accounting plays an important role because every nation 
assesses macroeconomic indicators, one of them, with great meaning being the Gross 
Domestic Product; 
￿  Paul  Pacter,  What  exactly  is  convergence?,  International  Journal  of  Accounting, 
Auditing and Performance Evaluation, 2005, vol. 2, p. 67 83. The article is quoted in 
Research  Papers  in  Economics  international  database  and  may  be  consulted  at  the 
following web address: http://econpapers.repec.org/scripts/search.asp?ft=What +exactly 
+is+  convergence.  The paper  studies  the  history  of  “convergence”  in  the  context of 
International Accounting Standards elaboration. The article mentions the fact that the 
International Accounting Standards demand that the data offered by the entities to have a 
better quality, to be transparent and comparable; 
￿  Juan Carlos Cordoba, Marla Ripoll, Development Accounting, article quoted in Research 
Papers in Economics international database and may be consulted at the following web 
address:  http://ideas.repec.org/p/red/sed004/325.html#related.  This  paper  wants  to 
estimate an accounting framework in order to perform comparisons at international level 
considering the characteristics met in the poor countries. 
 
Research methodology 
Methodology is a complex word originated from two Greek words methodos   method and 
logos – science, meaning in a free translation “the science’s method”, the science to conceive, select 
and use the method in order to investigate the economic phenomenon.  
The  research  methodology  represents  both  the  theory  and  practice  of  the  methods, 
respectively an activity through which the essence, nature, status, definition, classification etc. is 
studied in order to create explicative patterns.  
The documentation work was performed by: 
•  Revising of the specialty literature. In this regard we have made the accent on the research 
work, on the speciality literature documentation related to the previous researches and also 
on documentation concerning the activity of different economy normalization organisms. 
Our research work based on the speciality literature, on the analyse of the financial reporting 
standards  has  as  aim  to  go  beyond  the  personalization  of  the  accounting  registration 
opinions, hypothesis and models in order to test the reflecting of the theoretical concepts 
over the practical work in the forestry.    
•  Studying  the  normative  and  other  documents.  This  method  involves  analysing  the 
documents  in  question  using  some  parameters  set  out  in  relation  to  the  scope  and  the 
objectives of the research. For the present paper were studied documents such as: law no. 
46/2008 on the Forestry Code, The Official Gazette of Romania, issue 238/2008, order no. 
1752/2005  for  approval  of  accounting  regulations  in  compliance  with  the  European 
directives, The Official Gazette of Romania, issue 1080/2005. 
•  The  scope  of  the  study  was  to  highlight  the  viewpoint  of  the  Romanian  lawmaker and 
eventually to bring some improvement proposals for the present legislation applicable to 
forestry.  
 
Results and discussion 
  According to Law no. 46/2008 on the Forestry Code, forestry represents all the objects and 
actions  with  respect  to  becoming  familiar  with  the  forest,  to  creating  and  taking  care  of  it, 
harvesting and rational capitalization of its products, first timber processing, as well as organizing 
and managing the entire process of forest administration. 
  The notion of “forest” includes: Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  243
•  The forests  included in  the  forestry  arrangements  on  January  1,  1990,  as  well  as those 
included afterwards, according to the provisions of the law; 
•  Forestry safety curtains; 
•  Savines; 
•  Wooded pastures  with a density higher or equal  to 0.4 ha, calculated only for the area 
actually covered with forest vegetation. 
The wooden products specific to the forestry fund are represented by: 
•  Main products, resulted from regeneration felling of the forests; 
•  Secondary products, resulted from care and growth felling of the trees; 
•  Accidental products, resulted from the action of destabilizing biotic and abiotic factors or of 
legally approved deforestations; 
•  Hygiene products, resulted from the normal process of natural disposal. 
For an analysis of the procedure of registration in accounting of the sale of timber we will 
present some practical applications and we will act on the issuance of comments and findings. 
 
 
The Geoagiu Forest District sells to individual buyers 10 m
3 of firewood, 
worth of 112 lei, VAT 19%. 
General information about the Geoagiu Forest District: The Geoagiu 
Forest District is a part of the Deva Forest Administration within the National 
Forest Administration – ROMSILVA. Administratively speaking, the forest 
district’s area is situated in the Hunedoara county, the forests being located 
near the villages of Beriu (7,345.90 ha), Romos (235.80 ha) and the city of 
Oră tie (79.10 ha). 
•  The registration of the sale of firewood in the district’s accounting: 
 
4111 “Clients”  =  % 
701  “Incomes  from  the  sale  of 
finished products” 
4427 “Collected VAT” 
133.28 
112.00 
 
21.28 
 
  Finding:  the  sale  of  firewood  is  registered  in  accounting  as  an  income,  respectively  an 
income from the sale of finished products. In this case, although the 701 account (Incomes from the 
sale of finished products) is used, the discharge from administration is not carried out, because the 
obtained income has also not been emphasized. We ask the following questions: is the 701 account 
(Incomes from the sale of finished products) properly used in the forest district’s accounting at the 
time of the sale of firewood? Is it not necessary to register the obtained income from its own 
production if we apply professional reasoning? In the case that the obtained income from its own 
production is not registered, we can infer that no efforts are made by the forest district to acquire the 
timber. 
 
The Geoagiu Forest District sells Losan România Ltd. standing timber, 
175 m
3 worth of 80,618.04 lei. 
 
 
 
•  The registration in the forest district’s accounting of the sale to Losan 
România Ltd. of standing timber: 
APPLICATION 
￿ No. 1 
￿  Example   
￿  Solved 
￿  Sale of firewood 
APPLICATION 
￿ No. 2 
￿  Example   
￿  Solved 
￿  Sale of standing 
timber Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  244
4111 “Clients”  =  701  “Incomes  from  the  sale  of 
finished products” 
80,618.04 
   
Finding: Also in the case of selling standing timber, the 701 account (Incomes from the sale 
of finished products) is used in case of selling, and the discharge from administration is not carried 
out in this case either. The only difference from the sale of firewood, is the reverse VAT charge. 
 
The  Geoagiu  Forest  District  sells  Carpatina  Ltd.  logs,  59.65  m
3  worth  of 
14,912.50 lei (sale price 250 lei/m
3). The logs are registered at the worth of 
63.44 lei/ m
3. 
 
 
 
 
 
•  The registration in accounting of the sale of logs  to Carpatina Ltd.: 
4111 “Clients”  =  701  “Incomes  from  the  sale  of 
finished products” 
14,912.50 
 
•  The discharge from administration (59.65 m
3 x 63.44 lei/ m
3): 
 
711 “Stock variation”   =  345 “Finished products”  3,784.20 
 
  Finding: Although the sale is also done using the 701 account (Incomes from the sale of 
finished products), in the logs’ case, the discharge is carried out. 
  We notice a different accounting handling in the following cases: 
•  In the case of firewood, the sale is done using the 701 account, without registering the 
discharge from administration; 
•  In the case of the standing timber, the sale is also done using the incomes from the sale of 
finished products account, but without the discharge from administration with the mention 
that in this case the reverse VAT charge applies. We believe that the reverse VAT charge 
should not have been introduced in the case of timber, because both the forest districts and 
the business enterprises are “on the safe side”, legally speaking, in what concerns VAT 
reimbursement with the state budget; there is a possibility that massive forest felling could 
have a negative impact on the environment. This is why we infer that a tax measure can 
have major influences over the social and economic environments; 
•  The sale of logs is subjected to reverse VAT charge, but in this case, the discharge from 
administration is carried out. We find that the tax laws in the field of forestry are to the 
forests’ detriment, encouraging massive forest felling through very large incomes, without 
any significant effort. 
 
APPLICATION 
￿ No. 3 
￿  Example   
￿  Solved 
￿  Sale of logs Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  245
Stasfor  Ltd.  buys  standing  timber  worth  of  906.80  lei  with  invoice  no. 
08013161/10.06.N issued by the Sebe  forest district. The purchased timber is 
sold to Gardian Ltd. for 3,896.90 lei. 
General information about Stasfor Ltd.: The company’s main social scope 
is forestry and other forestry related activities. The company was set up as a 
microenterprise and paid income tax. On January 1, 2008 the company started 
paying an income tax. 
 
 
•  The purchase of standing timber: 
 
301 “Raw materials”  =  401 “Suppliers”  906.80 
   
•  The sale of timber: 
 
4111 “Clients”  =  701  “Incomes  from  the  sale  of 
finished products” 
3,896.90 
   
•  Discharge from administration: 
 
601 “Expenses with raw materials”  =  301 “Raw materials”  906.80 
     
  Finding: The presented practical example shows that the company which buys and sells the 
timber is registered as raw material on purchase and as income from the sale of finished products on 
sale. We think the registration as raw material on purchase is practically an anomaly, because the 
goods will be sold as they are and in this case they should be considered merchandise. Also, the 
income  should  be  emphasized  using  the  707 account  (Incomes  from the  sale  of  merchandise). 
Following debates with the company’s management, the use of the 701 account (Incomes from the 
sale of finished products) is justified as follows: the need to contract bank loans causes the banking 
company to force the trading company to use an account for incomes from the sale of finished 
products to prove in  writing  that Stasfor Ltd.’s social  scope is  production. Thus, the reality is 
distorted,  because  the  company’s  social  scope  is  not  production,  but  the  marketing  of  timber 
purchased from the forest district. 
 
Conclusions 
  The following questions can be asked: were the actions of the company Stasfor Ltd. correct, 
using professional reasoning? Can the company “cosmeticize” the financial situation depending on 
all of the users’ “options” of accounting information? Is any legal regulation being violated in the 
above presented situation? 
  Thus, in reality, it may occur that in order to receive a bank loan, the trading companies find 
themselves compelled to turn to these “cosmeticized accounting information”. Thus, an exact report 
is no longer available and there is a risk that the companies that really are going bankrupt could 
receive  bank  loans.  Hence,  at  an  accounting  information  user’s  “command”,  the  company 
“improves” its profit and loss account in order to gain certain benefits, respectively the possibility 
of contracting bank loans.  
  From the point of view of the International Accounting Standards/International Financial 
Reporting  Standards,  we  notice  that  there  is  no  regulation  applying  in  forestry.  Therefore,  we 
recommend a set of evaluation rules to be drawn up, a set of definitions that can lead to information 
useful to the financial statements addressees. 
 
APPLICATION 
￿ No. 4 
￿  Example   
￿  Solved 
￿  Purchase of standing 
timber Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009 
 
  246
Acknowledgements 
  We would like to specify that both a theoretical and an applied research were carried out 
before the paper was finalized. For the theoretical part, we made reference to a series of laws in 
force, but we also turned to the specialized literature, including the international rules set by the 
IASB. The applied part of the research took place at a series of companies and public institutions, 
including: The Geoagiu Forest District which is part of the Deva Forest Administration within the 
National Forest Administration, the company Stasfor Ltd. etc., which we would like to thank for 
their availability to grant us a series of necessary data in our scientific endeavour. 
 
References 
1.  Law no. 46/2008 on the Forestry Code, The Official Gazette of Romania, issue 238/2008. 
2.  Order  3512/2008  regarding  financial-accounting  documents,  The  Official  Gazette  of 
Romania, issue 870bis/2008. 
3.  Law  no.  38/2006  regarding  the  approval  of  the  Emergency  Ordinance  no.  139/2005 
regarding the forest administration in Romania, The Official Gazette of Romania, issue 
206/2006. 
4.  Order  no.  1752/2005  for  approval  of  accounting  regulations  in  compliance  with  the 
European directives, The Official Gazette of Romania, issue 1080/2005. 
5.  Government Decision no. 85/2004, for approval of the Regulation for sale of wood mass by 
the owners of public property forest fund, to the traders, The Official Gazette of Romania, 
issue 121/2004. 
6.  Law  no.  571/2003  regarding  the  Romanian  Fiscal  Code  with  the  later  changes  and 
additions, The Official Gazette of Romania, issue 927/2003. 
7.  http://www.insse.ro/cms/files/pdf/ro/cap14.pdf, accessed on 24 August 2009. 
8.  Court of Cassation (1923), section I, decision 121/1921, “Panadectele române”: 45. 
9.  *** International Financial Reporting Standards including the International  Accounting 
Standards and their interpretations on 1 January 2006 (2006), CECCAR Publishing house, 
Bucharest. 
10. ***  The  Body  of  Expert  and  Licensed  Accountants  of  Romania  (2004),  Guide  for 
understanding and applying the International Accounting Standard no. 41 “Agriculture”, 
CECCAR Publishing house, Bucharest. 
 
 
 
 
 
 

1752/2005 for approval of accounting regulations in compliance with the European directives, The Official Gazette of Romania,

38/2006 regarding the approval of the Emergency Ordinance no. 139/2005 regarding the forest administration in Romania, The Official Gazette of Romania,

46/2008 on the Forestry Code, The Official Gazette of Romania,

571/2003 regarding the Romanian Fiscal Code with the later changes and additions, The Official Gazette of Romania,

85/2004, for approval of the Regulation for sale of wood mass by the owners of public property forest fund, to the traders, The Official Gazette of Romania,

Financial Reporting Standards including the International Accounting Standards and their interpretations

Order 3512/2008 regarding financial-accounting documents, The Official Gazette of Romania, issue 870bis/2008.

section I, decision 121/1921, “Panadectele române”:

The Body of Expert and Licensed Accountants of Romania (2004), Guide for understanding and applying the International Accounting Standard no. 41 “Agriculture”,

ACCOUNTING FACTS IN THE FIELD OF ROMANIAN FORESTRY

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ACCOUNTING FACTS IN THE FIELD OF ROMANIAN FORESTRY

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