“Romanian banks need to understand that the international methodology is continuously changing,” said Cezar Furtuna, Partner in KPMG in Romania’s Financial Services Department.
Furtuna said the International Accounting Standards Board is constantly developing new projects that directly impact banks and consider the potential accounting implications of regulatory requirements.
As of January 1 2012, Romanian banks will use International Financial Reporting Standards (IFRS) instead of local accounting standards (RAS). The banking sector will thus become the first sector in Romania to fully align to internationally accepted accounting and financial reporting principles, KPMG noted.
“Although we are fast approaching 1 January 2012, the differences between Romanian and international accounting laws still remain important and create volatility in the interpretation of results of Romanian banks,” Furtuna said.
One of the main differences between the two methodologies refers to impairment loss adjustments for loan portfolios under the two reporting frameworks, the survey showed.
KPMG said the difference in loan loss adjustments as a percentage of statutory equity increased from 19% in 2009 to 24% in 2010.
“Although starting 2012 this difference will be fully absorbed into the financial reports of banks, which will include the loan loss adjustment estimated according to IFRS rules, statutory loan loss adjustment will still influence the prudential and tax positions of credit institutions,” KPMG said.
The move aims to ensure stability and continuity in the banks’ prudential tax positions.
“One of the most challenging tasks of a bank’s management is to balance the capital position so as to meet the capital adequacy requirements as assessed both by shareholders and regulators, considering the implications of prudential and fiscal requirements both at a local level and in the country of origin,” said Serban Toader, Senior Partner at KPMG in Romania.