Amendments to the accounting provisions – MF – draft

On 23 November 2022, the Ministry of Finance published draft legislation making some changes to the accounting regulations (Order 1802/2014).

According to the draft’s approval document, the following aspects will be regulated:

  • on the accounting by entities of amounts received as a result of the partial distribution of dividends during the financial year

In accordance with the method of accounting by entities which have opted by law to distribute dividends during the financial year, i.e. on account of receivables (account 463 “Receivables representing dividends distributed during the financial year”), it is proposed that entities receiving such amounts should recognise them as a liability (account 467 “Liabilities relating to interim dividend distributions”).

  • on the discontinuation of capitalisation of borrowing costs

The present draft proposes to supplement the Accounting Regulations approved by the Order of the Minister of Public Finance no.1802/2014, with subsequent amendments and additions, in order to mention the conditions under which the entity interrupts the capitalization of debt costs, i.e. when it does not actually work on the realization of the asset with a long production cycle.

  • on the accounting nature of amounts received in advance from customers

The draft order proposes to supplement the accounting regulations with provisions clarifying the situation in which these amounts represent payables (accounted for in account 419 “Customers – creditors”) or prepaid income (accounted for in account 472 “Prepaid income”).

If a customer pays an amount before the entity transfers a good or service to the customer, the entity records a liability in respect of the contract when the payment is made. A contract liability is an entity’s obligation to transfer to a customer the goods or services for which it has received consideration from the customer.

In accordance with paragraph 1, on receipt of a prepayment from a customer, the entity recognises a contract liability (account 419 ‘Customers – creditors’) at the amount of the prepayment for its obligation to transfer or be prepared to transfer goods or services in the future. The entity derecognises that liability and recognises revenue when it transfers those goods or services and thereby fulfils its contractual obligation.”

After paragraph 351 a new paragraph 351.1 is inserted with the following content:

“An entity may sometimes charge a non-refundable upfront fee to the customer at or near the inception of the contract (for example, activation fees in telecommunications contracts, set-up fees in some service contracts and upfront fees in some supply contracts). In this situation the entity shall determine whether the advance received relates to the rendering of a service.

If the advance received represents a prepayment for future services (amount recognised in account 472 ‘Revenue recognised in advance’), it will be recognised as revenue when those future services are rendered

  • on the accounting of intellectual property licensing agreements:

The draft order proposes to supplement the accounting regulations with explicit provisions on the accounting treatment applicable when an entity grants a customer the right to use its intellectual property. Thus, the manner in which it recognises the corresponding revenue is determined by the contractual provisions.

  • on the retention of salary statements

As a consequence of the provisions of the Law no.195/2022 for the completion of article 25 of the Accounting Law no.82/1991, it is proposed to modify the requirements contained in the accounting regulations in force, which provide for the duration of keeping the payroll statements, so that they comply with the provisions of the mentioned law.

The Order of the Minister of Finance no. 2634/2015 on financial-accounting documents, published in the Official Gazette of Romania, Part I, no. 910 bis of 9 December 2015, is amended and supplemented as follows:

Point 38 of Annex No 1 is amended to read as follows:

“38. The period of retention of the registers and other financial and accounting documents, with the exception of salary statements, shall be 10 years, starting from the end of the financial year in which they were drawn up, with the exception of those referred to in points 39 and 40.

The following financial-accounting document is added to Annex No 4: “Payrolls statement”, critical No 26, code 14-5-1.

  • other aspects – relate to certain correlations or clarifications of certain provisions contained in the accounting regulations in force (e.g. clarification of the conditions for capitalisation of expenses incurred in obtaining authorisations or examples of indicators indicating that an entity is acting in its own name), as well as the detailing of certain accounts contained in the chart of accounts applicable to economic operators, i.e. non-profit legal entities

We underline the fact that new accounting accounts are introduced, i.e. accounts corresponding to income tax revenues resulting from settlements between members of the tax group in the field of corporate income tax, respectively income tax expenses resulting from settlements between members of the tax group in the field of corporate income tax, defined according to the Tax Code.