Aspects regarding the methodology for determining the profit tax and their [631428]

Aspects regarding the methodology for determining the profit tax and their
implications on the role of accountancy and accounting profession in terms
of meeting the public interest and assuming the social responsibility

Abstract: A major objective of the accountancy and the professionals from the field consists
in supporting the durable economic development by meeting the public interest, under the conditions of observing the ethical principles imposed to the profession. By this study we intend to illustrate and to analyze certain factors which can perturb the fulfillment of the role of accountancy and accounting profession, seen in terms of meeting the public interest and assuming the social responsibility. In order to me et the proposed objective regarding the
research undertaken, we shall support our reasoning and the ideas expressed starting from the specific problematic of the profit tax, which we consider significant for the given context. In order to intercept some re levant images on the approached topic, we'll realize an analysis
oriented in double sense, aiming the national rules on one hand and the international rules regarding the determination and the accounting of profit tax on the other hand. Keywords : account ancy, accounting profession, profit tax, public interest, social
responsibility

JEL classification : M41

Aspects regarding the methodology for determining the profit tax and their
implications on the role of accountancy and accounting profession in terms
of meeting the public interest and assuming the social responsibility

1. Introduction
The public interest and the social responsibility are two concepts enjoying an
increasing wide circulation in business environment, in general, and also in the more limited
context of the financial -accounting management.
Although, at first sight, it would seem that there is no significant connection between
the two concepts previously mentioned and the financial -accounting management, one can
say th at, analyzed in the wider context of sustainable development context, in fact, there can
be identified important correlations which point out the real possibility that the way in which
are managed specific issues of financial -accounting field influences the idea of public interest
and social responsibility.
Among others, it is said about accountancy that it is a social science because it
significantly contributes to the management and the distribution way of resources within the economy. That’s precisely wh y between the accountancy and the public interest concepts,
respectively, social responsibility is, besides the questions, a direct connection.
Compared with other professions, the accounting profession is associated with a
definitive feature namely that o f accepting the responsibility in regard of the public interest
defined, in our opinion, in terms of the general good, like a desideratum aiming the fulfilment of specific necessities of all parties concerned by the activities developed by economic entities (shareholders, potential investors, creditors, clients, suppliers, state, employees etc.). This acceptance is a representative feature for the accounting profession because, as opposed to other fields where the professional provides a service in the inte rest of a well -shaped client, in
case of specialists activating in the accounting or in the audit field, although the direct beneficiary of his services is the entity which employed him and paid him, in fact, indirectly, the real beneficiaries of the actio ns undertaken by them are multiple and they form the public
whose interests shall be deserved.
Herewith, a social responsibility is assigned to the accountancy and to the accounting
professionals, because through the activity developed, they shall contribute to the human progress by ensuring the premises necessary to a healthy development of the entities deserved.
Therefore, we find that a major objective of the accountancy and the professionals in
the field consists in supporting the sustainable economic development by meeting the public interest, under the conditions of observing the ethic precepts imposed to the profession.
In the context of those previously mentioned, this study wants to illustrate the
existence of some factors which can perturb the fulf ilment of the objective listed above,
among which will be brought in discussion aspects concerning the accounting normalization process and the existence of some standards in the field, showing the globalization phenomenon that imposes the passage from an accounting referential to another, the reports between accountancy and taxability, the infringement of doctrine and professional deontology rules etc.
In order to meet the proposed objective regarding the research undertaken, we will
support our judgments and ideas expresses by starting from the specific problematics of the
profit tax, which we consider representative. Moreover, in order to intercept a more relevant
image on the approached problematics, we’ll realize an analysis oriented in double sense, aiming the national rules on one hand and the international rules regarding the determination
and the accountancy of the profit tax, in the other hand.

2. Methodological aspects regarding the determination and the accounting of
the profit tax
For the accounting registration of tax consequences regarding the entity’s result, the
accounting practice retains two methods: current tax method (due) and deferred tax method
(tax report).
Current tax method is based on the conception according to which the profit tax
expense shall correspond to the due tax (the tax due to the state), which makes that this expense be calculated starting from the fiscal result, without taking into account possible temporary differences. Therefore, the ignorance of temporary differenc es in the calculation of
the profit tax expenses makes that the fiscal charge don’t be proportional anymore with the
accounting result existing before the determination of the fiscal result and, as a consequence, don’t be realized a corresponding connection of income expenses.
Deferred tax method begins from the prerequisite that on the determination of profit
tax expenses shall be taken into account both the due tax related to the reciprocal exercise and the deferred taxes related to temporary differences. Through the accounting of deferred taxes,
the fiscal effects of an operation are taken into calculation in the exercise when these occurred, even if these will be effectively borne in the following exercises.

2.1. Profit tax in the context of regulations from Romania
Considering the law regulating this problematics in Romania, for the beginning we’ll
mention that, in order to determine the taxable profit, it is used the current tax model (due) which takes into account the difference between the revenues and the expenses registered according to applicable accounting regulations, from which are reduced the non- taxable
revenues and the fiscal deductions to which are added the non- deductible expenses.
In order to support the ideas to be subsequently expressed and in order to avoid the
presentation of some normative aspects which can be found in specific legislation and also for a better perception of the methodology for determining the profit tax according to the national
regulations, we refer to a case study, but without considering it as being exhaustive.
Working hypotheses on which our example is based are presented below:
Expenses Amounts
(thousand )
Costs of raw materials – consumptions
Costs of raw materials – non-imputable gaps
Costs of consumables
Costs of energy and water
Costs of goods
Costs of insurance premiums – insurance of building, company
Costs of insurance premiums – life insurance for associate
Costs of protocol, advertising and commercial – contracted advertising
Costs of protocol, advertising and commercial – protocol
Costs of transport of goods and persons
Costs of travelling, detachments and transfers
Postal costs and telecommunications taxes
Tax duties and exercises – non- deductible
Tax duties and exercises – deductible
Salaries
Costs of insurances and social protection
Compensations, fines, penalties – paid to authorities
Other operational expenses – with supporting documents
Other operational expenses – sponsorships 1.400
120 600 150 800
30 90
210
80
174
7
28
23,8
80
310
108,4
46 36
50

Losses from receivables related to participations
Costs of exchange dif ferences
Costs of interests
Operational costs regarding the amortization of tangible assets
Operational costs regarding the allowances
Operational costs regarding the allowances – other non- deductible
Operational costs regarding the adjustments for the amo rtization of tangible
assets
Operational costs regarding the adjustments for the amortization of circulating
assets
Financial costs regarding the adjustments for the losing of value of financial
assets
Financial costs regarding the amortization of obligati ons reimbursement
premiums
Income tax expense 360
36
1.200
140
90
36
360

80

36

42

30
Total costs 6.753,2
Revenues Amounts
(thousand )
Revenues from the sale of finished products
Revenues from provided services
Revenues from the sale of goods
Revenues from various activities
Revenues from compensations, fines and penalties – commercial
Revenues from financial assets
Revenues from interests
Other financial revenues
Revenues from pr ovisions
Revenues from adjustments for the depreciation of circulating assets
Revenues from adjustments for the losing of value of financial assets 4.600
600
1.200
300
90
2.540
80 30 54 68
50
Total revenues 9.612
From the accountancy of the company we also know the following information:
– registered capital: 960.000 lei;
– registered legal reserve: 20.000 lei;
– indebtedness degree 3,67;
– exchange rate interests and differences are related to bank credits;
A. Accounting result = Total revenues – Total costs = 9.612.000 – 6.753.200 =
2.858.800 lei.
B. Fiscal result = Accounting result – (Non -taxable revenues + Fiscal discounts)
+ Non -deductible expenses.
Determination of non -taxable revenues:
a. Dividend income – according to the art. 23, letter a, Fiscal cod e, are non -taxable
revenues ”the dividends received from a Romanian legal person”: 2.400.000 lei;
b. Revenues from adjustments – according to the art. 23, letter d, Fiscal Code, are
non-taxable revenues ”the revenues from the reduction or the cancelation of provisions for
which no discount was granted”: 172.000 lei.
Determination of non -deductible expenses:
a. Expenses with insurances which don’t aim the goods of the company –
according to the art. 25, paragraph 4, letter g, Fiscal Code ” expenses with insur ance premiums
which don’t concern the assets and the risks associated to the taxpayer’s activity, except those concerning the goods representing a bank guarantee for the credits used in the development

of the activity for which the taxpayer is authorized or used within some rent or leasing
agreements, according to contractual clauses ”: 90.000 lei ;
b. Entertainment expenses – according to the art. 25, paragraph 3, letter a, Fiscal
Code, the entertainment expenses are deductible ”within the limit of a share o f 2% applied on
the accounting profit to which are added the profit tax expenses and the entertainment
expenses ”.
Calculation basis = Total revenues – Total expenses + Expenses on profit +
Entertainment expenses = 9.612.000 – 6.753.200 + 30.000 + 80.000 = 2.968.800 lei.
Deductible entertainment expenses = 2.968.800 x 2% = 59.376 lei.
Non-deductible entertainment expenses = 80.000 – 59.376 = 20.624 lei;
c. Other taxes, duties and similar levies – according to the art. 25, paragraph 4,
letter k, Fiscal Code, are non- deductible ” the expenses with taxes, contributions and levies to
non-governmental organizations or professional associations which are connected with the
activity developed by taxpayers and which exceed the equivalent in lei of 4. 000 Euro per year, others than those provided by the law and at the paragraph (1) ”: 23.800 lei;
d. Expenses with fines and penalties – according to the art. 25, paragraph 4, letter
b, Fiscal Code, are non- deductible ” the interests/ the accruals for delay, the fines, the
confiscations and the penalties, due by Romanian/ foreign authorities, according to legal
provisions, except those related to the agreements concluded with these authorities”: 46.000
lei;
e. Expenses without legal documents – according to the art. 25, paragra ph 1, Fiscal
Code, ” for the determination of the fiscal result are considered the deductible expenses, the
expenses made for the development of the economic activity”.
Under the conditions where, for realized expenses, there are no supporting
documents, we can conclude the fact that there isn’t possible to demonstrate the previously
request, fact for which these expenses will be considered non -deductible from the fiscal point
of view: 36.000 lei;
f. Sponsorship expenses – according to the art. 25, paragraph 4, letter i, Fiscal Code,
are non -deductible ”sponsorship and/ or patronage expenses and expenses regarding private
bourses granted according to the law”. Herewith, we shall keep in mind the fact that those
taxpayers performing sponsorships and/ or patronage acts deduct the related amounts from the profit tax due on the level of minimum value among the following:
1. the value calculated by applying 0,5% to the turnover; 2. the value representing 20% from the due profit tax.
Sponsorship expenses registered in the accounting evidence: 50.000 lei.
Are determined the sponsorship expenses which can be decreased from the due profit
tax :
Total revenues – Total expenses + Sponsorship expenses = 9.612.000 – 6.753.200 +
50.000 = 2.908.800 lei.
Profit tax before the deduction of sponsorship expenses: 2.908.800 x 16% = 465.408
lei.
Turnover = 4.600.000 + 600.000 + 1.200.000 + 300.000 = 6.700.000 lei.
Turnover x 0,5% = 6.700.000 x 0,5% = 33.500 lei.
Profit tax before the deduction of sponsorship expenses x 20% = 465.408 x 20% =
93.082 lei.
Sponsorship expenses which can be deducted from the due profit tax: 33.500 lei .
Remark: the amount which wasn’t deducted from the profit tax, respectively the
amount of 16.500 lei is reported in the following 7 consecutive years and i ts recovery will be
realized in the same conditions, at each deadline of the profit tax.

g. Expenses with non -imputable gaps – according to the art. 25, paragraph 4, letter
c, Fiscal Code, are non -deductible ” the expenses regarding the goods and the king of
inventory or fixed depreciable assets found absent from the housekeeping or damaged, non –
imputable and also the related value added tax”: 120.000 lei;
Remark: These expenses are deductible if fixed depreciable inventory/ assets go into
any of the followi ng situations/ conditions:
1. damages existed as a result of some natural disasters or other Force Majeure
causes;
2. insurance contracts were concluded;
3. they were qualitatively damaged and the destruction is proved;
4. they have an expired validity date, according to the law;
h. non -deductible VAT related to the non- deductible minuses to the inventory:
20% x 120.000 = 24.000 lei;
i. Expenses with interests and losses in the exchange rate – according to the art.
27, paragraph 1, Fiscal Code ” expenses with interests are entirely deductible if the
indebtedness degree of the capital is lower or equal to 3.” Paragraph 4 of the same article
stipulates that “if expenses from differences in the exchange rate exceed the revenues from
differences in the exchang e rate, the net loss will be treated as an expense with interests,
deductible according to the paragraph (1). Expenses/ revenues from differences in the
exchange rate, which enter within the provisions of this paragraph are those related to the loans taken into account for the determination of the indebtedness degree of the capital.”
Analyzing the paragraph 5 of the art. 27, we find that it is mentioned the fact that “if the indebtedness degree of the capital is over 3 or the own capital has a negative value, the expenses with interests and with net loss from differences in the exchange rate are non-deductible”.
Indebtedness degree = 3,67 > 3. It results that are non -deductible the expenses with interests and with differences in
the exchange rate: 1.200.000 + 36.000 = 1.236.000 lei;
j. Expenses with provisions and adjustments for depreciation/ value loss: 36.000
+ 360.000 + 80.000 + 36.000 = 512.000 lei;
k. Profit tax expenses – according to the art. 25, paragraph 4, letter a, Fiscal Code
are non -deductible ”own expenses of taxpayer with due profit tax, including those
representing differences from the previous or from the current year and also profit or income tax paid abroad”: 30.000 lei.
Fiscal result = 9.612.000 – (2.400.000 + 172.000) – 6.753.200 + (90.000 + 20.624 +
23.800 + + 46.000 + 36.000 + 50.000 + 120.000 + 24.000 + 1.236.000 + 512.000 + 30.000) = 2.858.800 – 2.572.000 + 2.188.424 = 2.475.224 lei
Taxable result = Fiscal result – Legal reserve
Legal reserve calculation basis (according to the ar t. 26, paragraph 1, letter a, Fiscal
Code ” the legal reserve is deductible within the limit of a share of 5% applied on the
accounting profit, to which are added the expenses with profit tax, until it will arrive to the
fifth part of the subscribed and pai d-in share capital or of the patrimony, as applicable) =
Total revenues – Total expenses + Expenses with profit tax = 9.612.000 – 6.753.200 + 30.000
= 2.888.800 lei.
Total deductible legal reserve = 2.888.800 x 5% = 144.440 lei. Maximum reserve to be established: 960.000 x 20% = 192.000 lei.
Legal deductible reserve to be established = 144.440 – 20.000 = 124.440 lei. Taxable result = 2.475.224 – 124.440 = 2.350.784 lei .
Due profit tax = 2.350.784 x 16% = 376.125 lei

Final due profit tax = Due profit tax – Sponsorship expenses according to the law =
376.125 – 33.500 = 342.625 lei .
Profit tax already registered in accountancy: 30.000 lei.
Are also registered in accountancy:
691
“Income tax expense” = 4411
“Profit tax” 312.625 lei

2.2. Profit tax in the vie w of international accounting rules
The existence of some differences between the accounting and the fiscal rules, in
respect to the determination of the fiscal result, imposes that the accounting result be
submitted to some adjustments.
According to natio nal regulations, the fiscal result is determined through the
correction of the accounting result with certain permanent difference in the form of non-
deductible expenses and, respectively, of non -taxable revenues.
In the view of international rules, in the present instance IAS 12 “Income taxes”, the
fiscal result is obtained as a result of the adjustment of the accounting result with a series of
permanent and temporary differences. Permanent differences are represented by non –
deductible expenses and by fisc al deductions, as these were previously presented, while
temporary differences are those appearing as a result of the time delay existing between the
accounting of an element and its inclusion in the fiscal result.
Therefore, according to the national rule s, the fiscal result is calculated according to
the relation:
Fiscal result = Accounting result – Non-taxable revenues + Non -deductible
expenses (where the accounting result represents the difference between the total of revenues and the total of expenses) .
On the other hand, according to IAS 12, the fiscal result is obtained starting from the
following calculation relationship:
Fiscal result = Accounting result ± Permanent differences ± Temporary
differences.
According to those previously mentioned, we find significant differences in respect
to the way of approaching the analyzed problematics, represented, in the case of international referential, by the taking into account, in addition, of some temporary differences.
These temporary differences which, as a matter of fact, delimit the two accounting
referentials from the conceptual and the methodological points of view, in matters of taxation of results, are defined by IAS 12 as being the differences between the accounting value of
an asset or of a balance d ebt and their fiscal basis.
It results that they can have the form of (Morariu, 2005):
a. taxable temporary differences , which have as a result taxable revenues in the
determination of taxable profit (or of fiscal loss) of future periods, when the
accounting value of the asset or of the debt is recovered or discounted;
b. deductible temporary differences , which have as a result values that are
deductible for the determination of the taxable profit (or of fiscal loss) of future
periods, when the accounting value of the asset or of the debt is recovered or
discounted.
As a result, if the net accounting value (from the balance) of an asset is above its
fiscal basis or the accounting value of a debt is below its fiscal base, it results taxable
temporary differences, w hile inverse situations show the existence of some deductible
temporary differences.
For the determination of temporary differences, it’s necessary to know the fiscal
basis of assets and debts, meaning the value assigned to them in fiscal purposes.

In case of assets, the fiscal basis is obtained through the deduction, from their
accounting value, of the taxable amounts resulting from the recovery of the asset and the
cumulative value obtained in this way with the deductible amounts resulting from the use of
the asset.
The determination of the fiscal basis for debts needs the diminution of their
accounting value with the deductible amounts resulting from the debt reimbursement, the
value thus calculated being increased with the taxable amounts resulting from the debts
reimbursement.
It’s possible that, in certain situations, the fiscal basis of an element not be obvious
immediately. In this case, IAS 12 recommends that the entity recognize a debt or a receivable
regarding the deferred tax every time the recov ery or the reimbursement of the accounting
value of the respective element determines future payments regarding higher taxes (or lower)
than it would be their value if such recovery or reimbursement won’t have fiscal
consequences.
Under these conditions, t he emphasis of fiscal consequences of temporary
differences in accountancy presupposes the registration of a debt regarding the deferred tax, in
case of those taxable, respectively of a receivable regarding the deferred tax, in case of
deductible ones. Thi s means that Romanian entities applying IFRS shall use additional
accounts by whose help they illustrate deferred taxes, because national accounting regulations
in force don’t provide such accounts, namely: 1034 “Current profit tax and deferred profit tax
recognized at own capitals”, 4412 “Deferred profit tax”, 692 “Deferred tax expense”, 792
“Revenues from deferred tax income”.
Debts regarding deferred taxes impose the emphasis of an expense, while the
receivables regarding deferred taxes show an income, as presented below:

692
“Deferred tax expense” = 4412
“Deferred profit tax” Deferred tax debt x 16%

4412
“Deferred profit tax” = 792
“Revenues from
deferred tax income” Deferred tax receivable x 16%
At the recognizance of an asset, its accounting value will be recovered in the form of
economic benefits which the entity will get during the future periods. When the accounting value of the asset exceeds its fiscal basis, the amount of taxable economic benefits will exceed
the value to be allowed under the form of deductions in fiscal purposes. This difference
represents a taxable temporary difference and the obligation to pay taxes on the profit resulting during the future periods represents a debts regarding the deferred tax. As the entity recovers the accounting value of the asset, the taxable temporary difference will be retaken and the entity will have a taxable profit.
The recommencement of debts regarding deferred taxes imposes the emphasis of a
revenue:
4412
“Deferred profit tax” = 792
“Revenues from
deferred tax income” Deferred debt tax
On the other hand, at the recognizance of a debt, its accounting value will be
reimbursed during the future periods through an output of resources from the entity incorporating economic benefits. When resources get out the entity, a part of or their entire value is deductible at the determination of the taxable profit of a subsequent period of that

when the debt is recognized. In such cases, there is a temporary difference between the
accounting value of the debt and its fiscal basis. As a consequence, it appears a receivable
regarding the deferred tax in relation to the profit taxes to be recoverable during the future
periods, when the respective part of the debt is allowed as reimbursement for the determination of t he taxable profit. In a similar way, if the accounting value of an asset is
lower than its fiscal basis, the differences leads to the apparition of a receivable regarding the
deferred tax in relation to the profit taxes to be recoverable during the future periods.
The recommencement of temporary deductible differences generates reimbursements
to the determination of taxable profits of future periods. Although, economic benefits under
the form of the reimbursement of taxes payment will enter in the accounts of the entity only if this gets enough taxable profit in respect to which the reimbursements can be compensates.
Therefore, the receivables regarding the deferred tax are recognized only when there is the
possibility that will exist taxable profits in resp ect to which temporary deductible differences
can be used.
The accounting value of a receivable regarding the deferred tax shall be reviewed on
each date of the balance and reduced if it isn’t probable to be available enough taxable profit
in order to allow the use of the benefit of a part of the respective receivable or of the
receivable in its entirety.
The recommencement of receivables regarding deferred taxes impose the emphasis
of an expense:
692
“Deferred tax expense” = 4412
“Deferred profit tax” Deferred tax receivable

Example: In December 2011 an enterprise purchased and put in action a
technological equipment whose accounting value (Vc) is 200.000 lei. From the accounting
point of view, the equipment is depreciated on a useful life duration of 4 years and from the
fiscal point of view it taken in view the normal life duration of 5 years. The linear depreciation is used both in accounting purposes and in fiscal purposes. The gross accounting result in the year 2012 is 70.000 lei and 50.000 lei in the year 2016 and the profit tax rate is
16%.

Year Accounting
depreciation Fiscal
depreciation Net
accounting
value Fiscal
basis Temporary
differences
0 1= Vc/4 ani 2= Vc/5 ani 3= Vc – 1 4 = Vc – 2 5 = 3 -4
2012 50.000 40.000 150.000 160.000 10.000
2013 50.000 40.000 100.000 120.000 20.000
2014 50.000 40.000 50.000 80.000 30.000
2015 50.000 40.000 – 40.000 40.000
2016 – 40.000 – – –

In the year 2012:
Taxable result = Accounting result + Temporary difference = 70.000 + 10.000 =
80.000 lei.
Current pr ofit tax = 80.000 x 16% = 12.800 lei.
691
“Expenses with current
profit tax” = 4411
“Current profit tax” 12.800 lei

At the end of the year 2012, the net accounting value of the equipment, of 150.000
lei, is lower than its fiscal basis, of 160.000 lei, re sulting a temporary non- deductible
difference of 10.000 lei, fact for which it should be registered a deferred tax receivable in the
amount of 10.000 x 16% = 1.600 lei.
4412
“Deferred profit tax” = 792
“Revenues from deferred
tax income” 1.600 lei
As a r esult of previous registrations, is illustrated the following situation:
Expenses with current profit tax: 12.800 lei;
(-) Revenues from deferred taxes: 1.600 lei;
(=) Expenses with profit tax: 11.200 lei.
The bookkeeping of deferred tax allows a corresponding connection of expenses to
revenues, the fiscal charge being proportional to the gross accounting result.
In the years 2013- 2015:
The situation is similar, being performed the same registration:
4412
“Deferred profit tax” = 792
“Revenues from deferred
tax income” 1.600 lei

In the year 2016:
Taxable result = Accounting result – Temporary difference = 50.000 – 40.000 =
10.000 lei.
Current profit tax = 10.000 x 16% = 1.600 lei.
691
“Expenses with current
profit tax” = 4411
“Current income
tax” 1.600 lei

At the end of the year 2016, the difference between the net accounting value of the
equipment and its fiscal basis is recommenced, fact which generates the cancelation of deferred tax receivable registered during the previous exercises.
692
“Deferred tax expense” = 4412
“Deferred profit tax” 6.400 lei

As a result of previous registrations, it’s obvious the following situation:
Expenses with current profit tax: 1.600 lei;
(+) Expenses with deferred profit tax: 6.400 lei;
(=) Expenses with profit tax: 8.000 lei.

Example: A company contracted a credit about we know the following data : credit
value 200.000 lei, interest rate 20%, the credit was contracted on 01.01.2015, credit duration 20 years, from fiscal point of view, the interest expenses are deductible on the time of the payment. The accounting result of the company in the year 2015 is 200.000 lei and in the year 2016 the accounting result is 100.000 lei. There are no other temporary differences except those appearing as a result of the recognizance o f interest expenses on the time of the
payment. What happens if the accounting result in the year 2016 is 30.000 lei?
Interest expenses registered in the year 2015 = 200.000 x 20% = 40.000 lei. These expenses aren’t deductible from the fiscal point of view , because these will be
paid in the year 2016.
Fiscal result for the year 2015 = Accounting result for the year 2015 + Interest
expenses = 200.000 + 40.000 = 240.000 lei.

Current profit tax due for the year 2015 = Fiscal result for the year 2015 x 16% =
240.000 x 16% = 38.400 lei.
691
“Expenses with current
profit tax” = 4411
“Current profit tax” 38.400 lei

Since in the balance of the year 2015 are recognized interest debts in the amount of
40.000 lei, it results that the accounting value of this debts i s 40.000 lei. On the other hand,
the fiscal basis of this debt is null, since the interest expenses will be recognized on the
payment time, meaning in the year 2016. Accordingly, the accounting value of the debt is higher than its fiscal basis, resulting a temporary deductible difference of 40.000 lei, which
generates a deferred tax receivable of 40.000 x 16% = 6.400 lei.
4412
“Deferred profit tax” = 791
“Revenues from deferred
tax income” 6.400 lei

In the year 2016 the interest will be paid and the defer red tax receivable will be
retaken, while interest expenses which weren’t recognized in the year 2015 to the calculation of the fiscal result will become deductible reducing in this way the fiscal result of the year 2016. For this, the enterprise shall est imate, before the registration of deferred tax receivable,
that in the year 2016, it will have a fiscal profit at least equal to the value of temporary deductible differences which will be retaken, meaning 40.000 lei.
Fiscal result for the year 2016 = Fiscal result for the year 2016 – Interest expenses
(became deductible) = 100.000 – 40.000 = 60.000 lei.
Current profit tax due for the year 2016 = Fiscal result for the year 2016 x 16% =
60.000 x 16% = 9.600 lei.
691
“Expenses with current
profit tax” = 4411
“Current profit tax” 9.600 lei

The receivable regarding the deferred tax registered in the year 2015 has no object,
since both in its accounting value and it fiscal basis are null and it shall be retaken.
692
“Deferred tax expense” = 4412
“Deferred profi t tax” 6.400 lei

If the accounting result in the year 2016 would have been 30.000 lei, it would have
been insufficient for retaking the temporary deductible differences in the amount of 40.000 lei. In this case, the fiscal result is a loss of 10.000 lei and the enterprise cannot benefit of the advantage of retaking the temporary deductible differences. If the company would have estimated at the end of the year 2015 that it will get in the year 2016 a fiscal result of 30.000 lei, then it wouldn’t have been registered the deferred tax, because the retaking of temporary
deductible differences would have been higher than the estimated fiscal profit.

3. Fulfillment of public interest and social responsibility under the influence of
disturbing factors
Analyzed in the specific context of the profit tax, the general objective of the
accountancy and accounting profession, fulfillment of public interest, shows certain
difficulties in respect to its attainment, because, from this perspective, appear certain questions to which the accountancy hesitates to give a clear answer or it makes it in an
inconclusive way.

In our opinion, can be identified certain factors disturbing the idea of fulfillment of
public interest, as we perceived it in terms of accountancy and accoun ting profession, by
fulfillment of information needs specific to all parties concerned with the activities carried
forward by economic entities.
Below, we’ll analyze also some of the factors previously referred, the way of
presentation being synthetic, jus tified by the complexity of the approached problematics,
which needs a corresponding particularization in a work of higher dimension.
Accounting normalization process
In this context, two distinct elements are brought in discussion: the existence of
several categories of beneficiaries of the information provided by accountancy and, respectively, the accountancy standardization through rules transposed in legal rules.
We consider that the existence of some rules renders impossible the complacency,
from the financial communication point of view, of all categories of users of accounting information. The question if information provided by accountancy succeed to answer to the diversity of users expectations, sometimes contradictory, only through the simple appli cation
of rules, was and remains actual. Without doubt that the production of information in order to
fulfill the users’ needs represents a fundamental objective of accountancy, but it raises the
question in what measure it succeeds to keep an equidistance regarding their divergent
interests. Herewith, we shall not omit that the appreciation of the way in which the true and
fair view is rendered by accountancy represents a subjective process, influenced by the position on which is located each category of users. Thus, shareholders, for example, can have a certain view on the true and fair view image, while for the state and for the creditors, the same information can have another value or significance.
In terms of problematics related to the profit tax, the accounting normalization
process infringes the desideratum of fulfilment of public interest, because the methodology
for its determination, as it was previously presented, illustrates several technical aspects which lead to the fact of giving advantage, fr om the methodological and the informational
point of view, to certain categories of users of accounting information.
We support this idea because the results of economic entities can be brought to the
desired image through the actions of accounting profess ionals and with “the acceptance” of
accounting rules. The size of results depends, in many cases, on the accounting methods adopted. The accounting result, implicitly the fiscal result, is a subjective indicator, which depends on the concerned parties, on the economic and the political system, but also on the management and organization way of economic entities.
As a consequence, under the conditions where the existence of many accounting
referentials shows different categories, declared or undeclared, by p rivileged users of
accounting information, it inevitably raises the question in which measure we can really speak about the fulfillment of the public interest in the sense of ensuring an informational symmetry.
Passage from an accounting referential to another
The access to international markets of capitals involves the elaboration of several
sets of financial situations, among which we mention: corresponding to the national
referential; corresponding to the European rules, if the entity doesn’t belong to t he community
space; corresponding to the international referential etc.
Pregnant manifestation of globalization phenomenon and mobility of capitals impose
the adaptation of a common accounting language which facilitate the investment process, under the conditions of ensuring the comparability of information in time and space. The implementation of international accounting referential based on IFRS is the solution aimed for this problem, although, on global level, it is yet put in the matter the assurance of a
convergence in the field.

In this context, the problem of the passage from a national accounting referential to
that based on IFRS brings in discussion certain aspects raising question marks from the
perspective of the subject in discussion – fulfilment of public interest. We consider here the
discrepancy existing in respect to the results obtained under the conditions of the implementation of two different referentials.
In order to support the ideas expressed, it’s relevant the example of the company
Daimler -Benz, the first German company registered to Security Exchange of New York
which, in the year 1993, reported, according to the German accounting referential, a profit of 615 million DM and, according to US -GAAP, for the same financial exercise, as a result of
the reconciliation, the result was reflected under the form of a loss of 1.839 million DM (Popa I, 2008).
This example, relevant in respect to the influence of the passage from a referential to
another on the results of the entity, can bring just ified queries in respect to their real size.
Which of the two results corresponds to the requirement regarding the fulfillment of the public interest? Which of the two results is correct? In which of the two situations the public was correctly informed?
The relationship accounting -taxability and management of results
The discrepancy we notice in this case consists in the fact that, in the case of national
accounting referential, the accounting information has a privileged addressee represented by the Inland Revenue. But the role of the accountancy doesn’t consists in serving the state’s
interest, but in serving the public interest, by providing useful information for all concerned users equally. The state is only one of those users and the major purpose of t he accountancy is
not that to provide information in taxation purposes, even if the fiscal result is based on the accounting result.
The interposition of fiscal rules with the accounting rules, in our opinion, influences
in a negative way the meeting of th e general objective of the fulfillment of public interest,
because, on one hand, as we previously illustrated, they create a privileged user of information – the state, and on the other hand, they stimulate professional reasoning aiming
the management of t he results depending on the interests of different parties involved in the
management and administration process of entities.
The influence of users of accounting information by adjusting or manipulating the
results contravene totally to the idea of fulfillment of public interest. On the other hand, the cosmetic change of the results or the implementation of some professional arguments aiming the exploitation of legal rules in order to diminish the results with the purpose of reducing the fiscal charge con travenes to the idea of assumption of social responsibility, under the
conditions in which it is known the fact that a large part of the taxes collected by authorities are directed for the fulfillment of the public necessities.
In this context, we consider that a particular situation is represented by economic
entities from Romania which implement IFRS as basis of the accountancy, because the determination of the profit tax, in their cases, presupposes the use of the accounting result,
obtained through the application of the international accounting referential, as starting point in the application of fiscal rules. This condition of fact illustrates, in our opinion, two situations which can lead question marks in respect to the correctness of the financial communication process, in general, and of results, in special:
– the fact that the auditors of financial situations corresponding to IFRS give a
reasonable and not an absolute assurance on the correctness of the accounting result, under the conditions in which it is known the fact that international accounting rules stimulate the professional reasoning based on accounting processing and options;

– in what measure the representatives of the Inland Revenue have the necessary
competence to check if the accounti ng result, according to which the fiscal result is based, is
correctly determined in the spirit of IFRS.
Therefore, we can conclude the fact that, in terms of determining the taxable profit,
both the interaction between the accounting and the fiscal rules, and the practice of a creative
accountancy can have negative repercussions in terms of fulfillment of public interest, under
the conditions in which we discuss about users of accounting information which can follow
different purposes from the point of vie w of the size of the results illustrated by the
accountancy.
Infringement of doctrine and professional deontology rules
The assumption of a responsibility in regard of the public interest represents a
distinct feature for the accounting profession. In our opinion, this responsibility can be
analyzed from three points of view, but which aren’t divergent, but on the contrary, it should
have as goal to ensure a convergence, the convergence point being represented exactly by the meeting of this fundamental des ideratum of the accountancy and the accounting profession,
thus:
– the supply of some qualitative information which serve, equally, to the specific
needs of all categories of users who form what we generically call the public;
– the supply of some qualitat ive professional services which justify the confidence of
the public, oriented in the direction of supporting the durable development of business and the economic environment in general, according to the principles of the social responsibilities assumed;
– the existence of a direct relationship between meeting the ethical principles and
ensuring the quality of services provided.
The observance of the principles promoted by the doctrine and the deontology of the
accounting profession shall be seen as a signi ficant part of the efforts oriented in the direction
of meeting the general objective of assuming the social responsibility and fulfilling the public interest.
We express this point of view because the infringement of ethical principles in the
profession c an bring serious damages to its image, especially because, in our opinion, this
disturbing factor can have amplifying effects on the other factors we previously analyzed.
Seen in terms of specific problematics of the profit tax, the infringement of doctrine
and professional deontology rules shows certain aspects bringing in discussion ethical principles referring to morality, independency and professional competence. In this context, we illustrate the fact that the entire activity carried out by accounting professionals shall
answer to some interdependent requirements, through whose cumulative fulfillment is ensured, in fact, the fulfillment of the desideratum to answer to the public exigencies, in the following way: professionalism = quality of provided ser vices = credibility in information
provided to the public = confidence in accounting profession.
Herewith, starting from the methodological elements we previously presented in
respect to the determination of the profit tax, we can identify certain deontological aspects
which, in our opinion, reflect on the desideratum aiming the fulfillment of the public interest and it affect, in equal measure, the credibility in accounting information and the confidence of the public in the accounting profession. From the aspects previously referred to, we list the
most representative aspects below:
– exploitation of legislative lacunas, without infringing the rules, by using creative
accountancy techniques, in order to “shape” the results in the favor of a concerned party and
in the disadvantage of other parties;
– commitment of frauds, by falsifying the results, as a result of the intended
infringement of legal provisions in force;

– infringement of fundamental principles of professional deontology: integrity,
objectivity , professional competence, confidentiality etc.

4. Conclusions
From the analysis realized, we can notice the fact that accounting professionals can
encounter difficulties in respect to the realization of the desideratum concerning the
fulfillment of public interest or, sometimes, even they are at the origin of some factors which
can disturb the fulfillment of this objective.
Without derogating from the undisputable importance of the accountancy within the
company, because of the major influence it can have on the development of an economy, it’s
our obligation to notify the fact that this is perfectible in respect to the production and
communication process of specific information, thus the defaults identified can be corrected.
It’s important that, through t he products put at disposal of the public, the
accountancy significantly contribute to the fulfillment of informational necessities of all
participant actors to the development of economic activities.
Even if our analysis was intentionally limited, being r ealized only on the example of
the profit tax, we consider that, because of the complexity of the subject, this can be extended
by adding other elements and also by including some other disturbing factors in the research process, this approach involving the realization of a major study.

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