(The Order of the Minister of Public Finances no. 2239/30 June 2011 for the approval of the simplified accounting system - published in the Official Gazette no. 522/25 July 2011)

According to the provisions of the Accountancy Law no. 82/1991, the entities that have recorded in the previous financial year a net turnover as well as total assets below the RON equivalent of EUR 35,000 calculated at the exchange rate published by the National Bank of Romania valid at the end of the prior financial year, may opt for the simplified accounting system.

The Order of the minister of public finances no. 2239/2011 provides the content of the simplified accounting regulations as well as the rules regarding the approval, the signing and the publishing of simplified financial statements.

The provisions of the order are applicable starting with the financial statements for the financial year 2011.

The applicability of the simplified accounting system

The newly established entities may opt in the first financial year to apply either the simplified accounting system or the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009.

Certain types of entities are not allowed to opt for the application of the simplified accounting system:

- the legal entities listed on a regulated securities market;

- the legal entities, part of a group of companies, that are included in the consolidation perimeter of a parent company registered in Romania that has the obligation to prepare consolidated financial statements;

- the national enterprises/companies, the companies that are owned entirely of partially by the state, the independent utilities, the national research and development institutes, the cooperative companies;

the legal entities regulated and supervised by the National Bank of Romania, the National Commission of Securities, the Insurance Supervision Commission or by the Supervision Commission of the Private Pensions System, as well as the subunits devoid of legal personality from Romania that belong to legal entities domiciled abroad or the subunits domiciled abroad, that belong to Romanian legal entities with the activity regulated and supervised by the above mentioned institutions.

Simplified accounting regulations

The simplified accounting regulations include the accounting principles and rules for the recognitions, evaluation and presentation of the elements in the simplified annual financial statements, the rules for preparation of the simplified annual financial statements, the layout and the content of the simplified annual financial statements, the simplified chart of accounts as well as the content and the functions of the accounts.

Out of the differences between the simplified accounting system and the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009, we note the following:

- the general accounting principles on which the simplified accounting system is based do not include the substance over form principle, nor the materiality principle;

- the correction of errors related to the previous financial years is performed, as per the simplified accounting system, through the profit and loss account (according with the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009, the correction of errors related to previous financial years is performed through the retained earnings, as exception the correction of immaterial errors being allowed through the profit and loss account);

- the simplified accounting system provides that the valuation of cash and cash equivalents in foreign currency, as well as of receivables and liabilities in foreign currency, should be performed at the end of each period for which the profit/revenues tax return is prepared (the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009, provide that such valuation should be done at the end of each month).

The simplified chart of accounts, according with the simplified accounting system, includes a smaller number of accounts, each having the functions of several accounts from the general chart of accounts provided by the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009. As an example, the account 400 “Suppliers and assimilated accounts” from the simplified chart of accounts cumulates the functions of the accounts 401 “Suppliers”, 403 “Trade notes payable”, 404 “Suppliers of fixed assets”, 405 “Trade notes payable for suppliers of fixed assets” and 408 “Suppliers – invoices not received” from the general chart of accounts. In addition, some of the accounts in the general chart of accounts provided by the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009, were not taken over by the simplified chart of accounts, according with the simplified accounting system (e.g. the accounts 104 “Premium related to capital”, 105 “Revaluation reserve”, 451 “Inter-company balances”).

Depending on the information needs and the complexity of the economical-financial transactions, the entities may also use accounts from the general chart of accounts, as well as accounting treatments included in the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009.

As an example, the account 400 “Suppliers and assimilated accounts” from the simplified chart of accounts cumulates the functions of the accounts 401 “Suppliers”, 403 “Trade notes payable”, 404 “Suppliers of fixed assets”, 405 “Trade notes payable for suppliers of fixed assets” and 408 “Suppliers – invoices not received” from the general chart of accounts. In addition, some of the accounts in the general chart of accounts provided by the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009, were not taken over by the simplified chart of accounts, according with the simplified accounting system (e.g. the accounts 104 “Premium related to capital”, 105 “Revaluation reserve”, 451 “Inter-company balances”).

Depending on the information needs and the complexity of the economical-financial transactions, the entities may also use accounts from the general chart of accounts, as well as accounting treatments included in the Accounting regulations conformant with the European Directives, approved by the Order of the minister of public finances no. 3055/2009.

By Venkatesh Srinivasan, Partner – Head of Tax and Legal, Ernst & Young Romania

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