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UNIVERSITATEA DE VEST „VASILE GOLDIŞ” din ARAD

STUDIA UNIVERSITATIS

„VASILE GOLDIŞ”ARAD

SERIA ŞTIINŢE ECONOMICE

ECONOMICS SERIES

VOLUME 22, ISSUE 1/2012

Arad 2012

Studia Universitatis “Vasile Goldiş” Arad Economics Series Vol 22 Issue 1/2012

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CONSILIUL ŞTIINŢIFICPreşedinte:Prof. Cristian HAIDUC PhD – vice rector, Faculty of Economics, „Vasile Goldis”Western University of AradMembers:Prof. doc. Ing. Maria URAMOVA, PhD – Faculty of Economics, Matej Bel University,Banska Bystrica, SlovakiaProf. Janos PUSKAS, PhD. – Dean, Szent Istvan University Godolo, HungaryAssoc. Prof. Ilona MATHE, - Szent Istvan University Godolo, Hungary Prof. FlorinDUMESCU, PhD. - Faculty of Economics, „Vasile Goldis” Western University of AradProf. Dorina ARDELEAN, PhD. - Faculty of Economics, „Vasile Goldis” WesternUniversity of AradProf. Marian Florin URSU, PhD. – GoldSmith College, London University, EnglandProf. Corneliu MAIOR – Deparment Manager, „Vasile Goldis” Western University ofAradProf. Dorel MATEŞ, PhD. - Faculty of Economics, Western University of TimişoaraProf. Ionel BOSTAN PhD. - Faculty of Economics and Public Administration, Stefan celMare University of SuceavaProf. Mariana MURESAN, PhD – Faculty of Economics and Business Administration,Babeş-Bolyai University of Cluj NapocaAssoc. Prof. Victoria BOGDAN, PhD. - Faculty of Economics, University of Oradea

EDITORIAL BOARDEditor:Lecturer: Andrei ANGHELINA, PhD. Faculty of Economics, „Vasile Goldis” WesternUniversity of AradAssociate Editors:Prof. Horaţiu ŞOIM, PhD. Faculty of Economics, „Vasile Goldis” Western University ofAradLecturer Eugen REMEŞ, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Delia DAVID, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Florin DUMITER, PhD. Faculty of Economics, „Vasile Goldis” WesternUniversity of AradLecturer Ştefana DIMA, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Cosmina REMEŞ, PhD. Faculty of Economics, „Vasile Goldis” WesternUniversity of AradSecretary:Daniela POPA, Faculty of Economics, „Vasile Goldis” Western University of Arad

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CUPRINSLuis-Raul Boroacă - FISCAL POLICY AND ECONOMIC GROWTH INFRANCE, GERMANY, AND GREECE …………….................................... 1Loredana Ciurlău - THE IMPACT OF MONETARY AND FISCALPOLICIES ON PUBLIC FINANCIAL MANAGEMENT ............................. 14Dorel Mateş, Ionel Bostan, Veronica Grosu, Virag Nicolae Paul -CONSIDERATIONS ON THE CRITERIA, PARAMETERS AND TAXIMPLICATIONS OF DEPRECIATION ........................................................ 20Dana Dănoiu, Florin Dumescu, Ladislau Klein - ENVIROMMENTALPROBLEMS IN TODAY ECONOMY OF ARAD COUNTY ...................... 31David Delia, Szabo Ioan Alexandru - ASPECTS REGARDING THEMECHANISM OF BANK LENDING FOR INDIVIDUALS ……………... 47Dana Codruta Duda-Dăianu, Denisa Abrudan - CROSS-BORDERSCOOPERATION INSIDE THE EUROREGIONS. CASE OF DKMTROMANIAN EUROREGION ………………………………………............ 55Partenie Dumbravă, Csősz Csongor - ACCOUNTING POLICIESAPPLIED BY ENTITIES AND THE VALUE OF FIXED ASSETS ............ 62Ana-Maria Mărculescu, Octavian Florin Dondera - FROM ACCOUNTINGCONVERGENCE TO ACCOUNTING HARMONIZATION UNDER THEAUSPICES OF ECONOMIC GLOBALIZATION ………………................ 77Breban Ludovica, Achim Monica Violeta, Borlea Sorin Nicolae - THEACCOUNTING TREATMENT APPLICABLE TO THE STRUCTURALFUNDS IN ACCORDANCE WITH THE INTERNATIONALFINANCIAL STANDARDS –IAS20 ………………………………………. 84Rodica Gabriela Blidişel - ELECTRONIC ACCOUNTINGINFORMATION IN LOCAL PUBLIC ADMINISTRATION ...................... 90Gheorghe Pribeanu - ECONOMIC REVIVAL OF THE RURAL AREATHROUGH TOURISM .................................................................................. 98Felicia Sabou - THE CONTROL AND EVALUATION OFPROMOTIONAL ACTIVITIES ..................................................................... 109Caius Lăzărescu - AUTOMATION AND TECHNOLOGIZATION OFTHE POSTAL SERVICES ............................................................................. 116Ştibli Florin - THE NEW EDGE IN KNOWLEDGE: HOWKNOWLEDGE MANAGEMENT IS CHANGING THE WAY WE DOBUSINESS ...................................................................................................... 120Ursu Vasile Dorel - AN ANALYSIS OF ROMANIAN MANAGEMENTDURING THE CRISIS IN 2008 – 2011 ......................................................... 126Emanuela-Alisa Nica - ROMANIA’S POPULATION BETWEEN 2005AND 2009: A QUANTITATIVE STUDY ON THE EVOLUTION OFPOPULATION AND MORTALITY ………………………………………. 136Miloş Marius Cristian - DEMOGRAPHIC CHALLENGES ANDSUSTAINABILITY OF PUBLIC PENSIONS EXPENDITURES ……….... 142Instrucţiuni pentru autori ................................................................................. 149


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Index de autori

Abrudan Denisa 55Achim Monica Violeta 84Blidişel Rodica Gabriela 90Borlea Sorin Nicolae 84Boroacă Luis-Raul 1Bostan Ionel 20Breban Ludovica 84Ciurlău Loredana 14Csongor Csősz 62Dănoiu Dana 31David Delia 47Dondera Octavian Florin 77Duda-Dăianu Dana Codruta 55Dumbravă Partenie 62Dumescu Florin 31Grosu Veronica 20Klein Ladislau 31Lăzărescu Caius 116Mărculescu Ana-Maria 77Mateş Dorel 20Miloş Marius Cristian 142Nica Emanuela-Alisa 136Pribeanu Gheorghe 98Sabou Felicia 109Ştibli Florin 120Szabo Ioan Alexandru 47Ursu Vasile Dorel 126Virag Nicolae Paul 20


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FISCAL POLICY AND ECONOMIC GROWTH INFRANCE, GERMANY, AND GREECE

Luis-Raul Boroacă„Alma Mater” University of Sibiu, 57 Someşului Str., 550003 Sibiu, Romania

Telephone: 0768415028, e-mail: [email protected]

AbstractFiscal policy is a major component of a country’s economic policy. To counteract thenegative effects of economic or extra-economic factors, the state can use a series ofcountercyclical policies. Fiscal policy is one of the most important short term policies thatcan be applied at the macroeconomic level. Fiscal policy can therefore affect a country’seconomic development. Using statistical software the author examines the possiblecorrelations between fiscal policy and economic growth in three EU countries: France,Germany, and Greece. The period took into consideration for the study is 1996-2009.Keywords: fiscal policy, economic growth, deficit, GDP, correlation

1. IntroductionThis article focuses on the study of the influence of fiscal policy on

economic growth. As a case study the author took into account three countries inthe European Union: Germany, France, and Greece. The period took intoconsideration is 1996-2009. The choice of the three countries was made on theprinciple of "extremes": Germany and France represent two of the strongeconomies of the European Union (and, especially, of the Euro area); Greecerepresents an economy severely affected by the financial world crisis.

In theory, economic growth can be approached from several points ofview.

Main indicators used in the case of economic growth are Gross DomesticProduct (GDP), Gross National Product, Gross Domestic Product per capita, andGross National Product per capita (Jessua et al., 2006).

In close connection with the concept of "economic growth" appears thenotion of "economic development".

The relationship between economic growth and economic development is arelationship from part to whole. Economic growth turns into economicdevelopment when growth involves structural and qualitative changes at the levelof the national economy and positive changes in the quality of life (Băbăiţă et al.,2003).

Fiscal policy can foster economic growth and human development througha series of channels.



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Fiscal policy represents the way in which the government uses expenditureand revenue collection (i.e. taxation) to influence economic activity (Sullivan,Steven, 2003).

The influence of fiscal policy may be at the macroeconomic level (e.g.,through the influence of the budget deficit on growth) or at the microeconomiclevel (e.g., through its influence on the efficiency of resource use) (Gupta, 2004).

At the macroeconomic level, the government can influence aggregatedemand through public spending and tax rates.

In a situation where there is a budget surplus (i.e. public expenditure islower than government revenue), then it means that the state spends less than itreceives through taxes. In the case of a budget deficit (i.e. public expenditure ishigher than public revenue), then it means that the state spends more than itcollects through taxes (Hardwick et al., 2002).

2. Theoretical correlations between fiscal policy and economic growthTo study theoretical correlations between fiscal policy and economic

growth, one has to choose the concrete economic indicators to be taken intoaccount. Thus, in the case of fiscal policy, the author chose as an indicator, thebudget deficit which reflects comparative developments in public revenue andpublic expenditure. In the case of economic growth, the author chose as anindicator, gross domestic product (GDP).

To highlight possible influences of fiscal policy on economic growth, theauthor started from a basic macroeconomic identity. This macroeconomic identityis represented by Equations (1)-(3).

Y= C + G + I + NX (1)

Y = Yd + (TA – TR) (2)

Y = C+ S + (TA – TR) (3)

In Equations (1)-(3), Y represents output. In Equations (1) and (3), Crepresents consumption. In Equation (1), G is government expenditure; I isinvestment; NX is net export. In Equation (2), Yd is disposable income. InEquations (2) and (3), TA stands for taxes, and TR represents transfers to theprivate sector. In Equation (3), S represents savings in the private sector (Băcescu-Cărbunaru, 2002).

Fiscal policy, through taxes, on one hand, and public expenditure, on theother hand, can influence the level of output in the economy.

Fiscal policy has an expansionary character, stimulating economic growth,when public expenditure is higher than public revenues. The expansionarycharacter of fiscal policy consists in the fact that an increase in public expenditureG leads to increasing aggregate demand; therefore, increasing production Y isstimulated. Such a situation can be explain by Equation (1).


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Fiscal policy may be turned into an expansionary policy by reducing taxes.Thus, in Equation (2), if taxes TA are lower than transfers TR, then there will be anincrease in output. Lower taxes lead to an increase in disposable income, whichstimulates the availability of the population for consumption, and the availability ofcompanies for investment; consumption and investment growth will lead to anincreased aggregate demand, and, eventually, to stimulating the growth of outputY.

Fiscal policy is restrictive, inhibiting economic growth, when publicexpenditure is lower than public revenues. In Equation (1), the reduction in publicspending G leads to a decrease in aggregate demand and, eventually, a decrease inthe level of output Y.

Raising the level of taxes turns fiscal policy into a restrictive policy whichinhibits economic growth. By increasing taxes, the state diminishes the level ofdisposable income Yd, which is reflected in the reduction of consumption and,eventually, in the decrease of aggregate demand; the reduction of aggregatedemand results in a decrease in output Y.

There are situations where (expansionary or restrictive) fiscal policy doesnot have the desired effects in the economy, due to the action of economic orextra-economic factors.

Using Microsoft Excel, the author compared the dynamics of the budgetdeficit and GDP, respectively, in order to estimate an equation that should describethe correlation between the two economic indicators (GDP and the budget deficit),for France, Germany, and Greece. The method used in order to estimate theregression equation is the method of least squares. The regression equationestimated by the statistical software has the form of Equation (4).

Y = C(1)*X + C(2) (4)In Equation (4), Y is the dependent variable; X is the independent variable;

C(1) is the coefficient of the independent variable; C(2) is the intercept. In the caseof this study, Y stands for GDP, and X represents the budget deficit.

3. The impact of fiscal policy on economic growth in France, Germany, andGreece

In the case of France, fiscal policy in the years 1996-2009 had anexpansionary character.

As one can see in Figure 1, during 1996-2007, the expansionary fiscalpolicy in France was reflected in the annual growth of GDP.

The dynamics of GDP did not always observed the stance of fiscal policyin France. For example, in 1997-2000, although there was a decrease of theexpansionary stance of fiscal policy, GDP recorded an upward trend.

In 2008-2009, the expansionary stance of fiscal policy in France had notthe expected effect on GDP. During the period, France's GDP had annual declines.In 2009, while the budget deficit increased, GDP had a decline in comparison withits level recorded in the previous year.


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Figure 1. Dynamics of GDP and budget deficit in France

Data source: http://data.worldbank.orgData graph: author’s own processing

The graphs in Figure 2 illustrate the evolution of fiscal policy andeconomic growth in Germany in 1996-2009.

http://data.worldbank.org


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Figure 2. Dynamics of GDP and budget deficit in Germany


The stance of fiscal policy in Germany was generally expansionaryin 1996-2009. Fiscal policy was restrictive only in the year 2000 (as shownin Figure 2).

The expansionary stance of fiscal policy in Germany was reflected inthe annual growth of GDP in 1996-1999, 2001-2002, 2004-2008.

In spite of the restrictive fiscal stance, Germany’s GDP increased in2000.

In 2003 and 2009, the expansionary fiscal stance in Germany did notdetermined annual increases in GDP. By the contrary there were decreasesin GDP.

The graphs in Figure 3 illustrate the dynamics of fiscal policy andeconomic growth in Greece in 1996-2009.



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Figure 3. Dynamics of GDP and budget deficit in Greece


As shown in Figure 3, the fiscal policy in Greece had anexpansionary character in all the years of 1996-2009.

Despite the expansionary fiscal position, Greece's GDP increasedonly in 1996-2007. In the years 2008-2009, GDP recorded a decreasingtrend.

4. The mathematical modelling of the correlationsOn the basis of the tabular data presented in Figure 1, one can make

an analysis of the correlation between GDP and the deficit in France, for theyears 1996-2009. Using Microsoft Excel, the author made such an analysis;the results of the analysis are summarised in Table 1.

The coefficient of determination “R Square” shows the proportion inthe variation of the dependent variable Y (around its mean Y-bar) thatdepends on the independent variable X.

As shown in Table 1, R Square is 0.6828. It means that 68.28% ofthe variation of the dependent variable Y around its mean is explained bythe independent variable X. In the case of France, Y stands for the GDPgrowth and X stands for the deficit.

Table 1Analysis of relationship between GDP and deficit in France (1996-2009)a) Regression Statistics



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Multiple R 0.8263R Square 0.6828Adjusted RSquare

0.6564

Standard Error 0.97Observations 14

b) Analysis of Variancedf SS MS F Significance F

Regression

1 24.3173 24.3173 25.842 0.0002

Residual 12 11.292 0.941Total 13 35.6093

c) Regression CoefficientsCoefficients Standard Error t Stat P-value

Intercept 4.6944 0.6464 7.2621 0Cashsurplus/deficit (%of GDP)

0.9465 0.1862 5.0835 0.0002

Source: author’s own processing

Multiple R (i.e. square root of R Square) shows the correlationbetween Y and Y-hat (i.e. the predicted average Y value for a given X,found by using the regression equation).

As given in Table 1, Multiple R is 0.8263. It means that thecorrelation between Y and Y-hat is of 82.63%. In the case of France, Ystands for the GDP in 1996-2009.

P-value (see Table 1) is called “probability value” or “marginalsignificance level”. Given a P-value, one can tell at a glance whether thenull hypothesis of a zero coefficient is rejected or accepted. For example, ifone is performing a test at the 5% significance level, a P-value lower than0.05 is taken as evidence to reject the null hypothesis of a zero coefficient.

Significance F (see Table 1) is the P-value (or the marginalsignificance level) of the F-test. The F-test (see “F” in Table 1) is a test ofthe hypothesis that all of the slope coefficients (excluding the constant, orintercept) in a regression are zero. For example, if one is performing a test atthe 5% significance level, a P-value of Significance F lower than 0.05 is


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taken as evidence to reject the null hypothesis that all slope coefficients areequal to zero.

As shown in Table 1, both Significance F and P-value are lower than0.05. It means that, for a 5% significance level, the null hypothesis of a zerocoefficient is rejected for each coefficient (because the P-value of eachcoefficient is lower than 0.05); the null hypothesis that all slope coefficientsare equal to zero is rejected, too (because the Significance F is lower than0.05).

Given the analysis results in Table 1, there is a correlation betweenY and X; the regression equation is Equation (5). According to the equation,a unit increase in the independent variable X determines a 0.94-unit increasein the dependent variable Y.

Y = 0.94*X + 4.69 (5)

In the case of France, the variables in Equation (5) are GDP Growth(i.e. Y) and Cash Surplus/Deficit (i.e. X). During the years 1996-2009, thedynamics of the budget deficit had a significant influence on GDP growth:greater deficits determined increases in GDP.

The graphic representation of Equation (5) is the regression lineLinear(GDP Versus Deficit) in Figure 4.

Figure 4. Relationship between GDP and deficit in France


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On the basis of the tabular data presented in Figure 2, the authormade an analysis of the correlation between GDP and the deficit inGermany, for the years 1996-2009. The results of the analysis aresummarised in Table 2.

Table 2Analysis of relationship between GDP and deficit in Germany (1996-2009)

a) Regression StatisticsMultiple R 0.523R Square 0.2735Adjusted RSquare

0.213



Regression

1 16.2666 16.2666 4.5191 0.0549

Residual 12 43.1941 3.5995Total 13 59.4607


Intercept 2.5784 0.865 2.9806 0.0114Cashsurplus/deficit (%of GDP)

1.0567 0.497 2.1258 0.0549


As shown in Table 2, R Square is 0.2735. It means that only 27.35%of the variation of Y around its mean is explained by the independentvariable X. In the case of Germany, Y stands for GDP growth and X standsfor the deficit.

As given in Table 2, Multiple R is 0.523. It means that thecorrelation between Y and Y-hat is of 52.30% (when R Square is0.2735). In the case of Germany, Y stands for the GDP in 1996-2009.


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As shown in Table 2, both Significance F and P-value are greaterthan 0.05; the only exception is the P-value of the intercept. It means that,for a 5% significance level, the null hypothesis of a zero coefficient is notrejected for each coefficient (because the P-value of a coefficient is greaterthan 0.05); the null hypothesis that all slope coefficients are equal to zero isnot rejected, too (because the Significance F is greater than 0.05).

Given the analysis results in Table 2, the correlation between Y (i.e.GDP growth in Germany during 1996-2009) and X (i.e. the deficit inGermany during 1996-2009) is too weak; the regression equation that couldbe obtained from the analysis is not good enough to be used.

Table 3Analysis of relationship between GDP and deficit in Greece (1996-2009)a) Regression StatisticsMultiple R 0.8186R Square 0.6702Adjusted RSquare

0.6427



Regression

1 47.8975 47.8975 24.3912 0.0003

Residual 12 23.5646 1.9637Total 13 71.4621


Intercept 6.9861 0.8817 7.9234 0Cashsurplus/deficit (%of GDP)

0.6159 0.1247 4.9387 0.0003


On the basis of the tabular data presented in Figure 3, the authormade an analysis of the correlation between GDP and the deficit in Greece,


11

for the years 1996-2009. The results of the analysis are summarised in Table3.

As shown in Table 3, R Square is 0.6702. It means that 67.02% ofthe variation of Y around its mean is explained by the independent variableX. In the case of Greece, Y stands for GDP growth and X stands for thedeficit.

As given in Table 3, Multiple R is 0.8186. It means that thecorrelation between Y and Y-hat is of 81.86%. In the case of Greece, Ystands for the GDP in 1996-2009.

As shown in Table 3, both Significance F and P-value are lower than0.05. It means that, for a 5% significance level, the null hypothesis of a zerocoefficient is rejected for each coefficient (because the P-value of eachcoefficient is lower than 0.05); the null hypothesis that all slope coefficientsare equal to zero is rejected, too (because Significance F is lower than 0.05).

Given the analysis results in Table 3, there is a correlation betweenY and X; the regression equation is Equation (6). According to the equation,a unit increase in the independent variable X determines a 0.61-unit increasein the dependent variable Y.

Y = 0.61*X + 6.98 (6)

In the case of Greece, the variables in Equation (6) are GDP Growth(i.e. Y) and Cash Surplus/Deficit (i.e. X). During the years 1996-2009, thedynamics of the budget deficit had a significant influence on GDP growth:greater deficits determined increases in GDP.


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Figure 5. Relationship between GDP and deficit in Greece


The graphic representation of Equation (6) is the regression lineLinear(GDP Versus Deficit) in Figure 5.

5. ConclusionsAccording to the statistical data, during 1996-2009, France,

Germany and Greece had predominantly expansionary fiscal policies.However, the effects of the expansionary stance of fiscal policy weredifferent in the three countries.

In France and Greece, expansionary fiscal policy determinedincreases in GDP during 1996-2007.

In Germany, GDP increased in each year of the period 1996-2009,excepting the years 2003 and 2009.

The year 2008 marked the beginning of economic decline for bothFrance and Greece; on the other hand, in 2008, Germany's GDP increased.In 2009, GDP decreased in all three countries, perhaps because of thefinancial world crisis.

In the case of France and Greece, there is a mathematical correlationbetween the budget deficit and GDP growth for the period 1996-2009. In thecase of Germany, there is not such a mathematical correlation.


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ReferencesBăbăiţă, I., Silaşi, G., Duţă, A., Imbrescu, I., 2003, Macroeconomie,

Editura Mirton, TimişoaraBăcescu-Cărbunaru, A., 2002, Analiză macroeconomică, Editura

Economică, BucureştiGupta, S., 2004, Helping countries develop: the role of fiscal policy,

International Monetary Fund, Washington, DCHardwick, P., Langmead, J., Khan, B., 2002, Introducere în

economia politică modernă, Editura Polirom, Iaşi.Jessua, C., Labrousse, C., Vitry, D., Gaumont, D., 2006, Dicţionar

de ştiinţe economice, Editura ArcSullivan, A., Steven M. S., 2003, Economics: Principles in Action,

Pearson Prentice Hall, New Jerseyhttp://data.worldbank.org, 19 February 2012



14

THE IMPACT OF MONETARY AND FISCAL POLICIESON PUBLIC FINANCIAL MANAGEMENT

Loredana Ciurlău„Constantin Brâncuşi” University from Târgu-Jiu, Faculty of Economics and Bussines

Administration, Victoria street no. 24, Tg-Jiu, Gorj, Romania [email protected]

AbstractFiscal policy is the main component of financial policy. Being a component of economicpolicy, taxation must lead to economic objectives. Maintaining equilibria macroeconomiccannot be blamed solely in charge of monetary policy, fiscal policy and that the revenuemust have a role in support and to bear the load efforts to stabilise. Large deficits aredangerous for current account, because they are associated with a greater risk of producingan adjustment steep in the exchange rate and high volatility of exchange rate has majorimplications on the stability and macroeconomic monetary, in general. This means thatcountries should his election budgets so as to cope with growing demand from the privatesector and to take necessary safeguard measures against potential crises, whereas the extentfiscal deficit contributes directly to the magnitude current account deficit.Keywords: financial policy, monetary policy, fiscal policy, the budgetary constraint, fiscalpolicyJEL Clasification: E31, G21

Introduction:The current financial and economic crisis has a strong effect on public

finances, meaning that the reduction in economic activity has led to a decrease inbudgetary revenues, increased deficits and public debt to rise. In addition, supportbanks with problems in the major industrialized countries, resulted in pumpingliquidity into the system, but also in the acquisition of assets will be uncertain,finally all attention on government debt.

The creation of an environment conducive to sustainable convergence inRomania requires, among other things, a stability-oriented monetary policy andstrict implementation of fiscal consolidation plans. At the same time, Romania isconfronted with numerous challenges from the perspective of economic policies.

Body of the paper1. Fiscal policyFiscal policy may have important macroeconomic effects, especially in the

short term, the use of various tools leading to differentiated results. Thus, a changein budget expenditure leads to an increase in the share of the public sector in theeconomy, while a decrease in the rate of taxation will permanently increase the



15

disposable income, leading to growth in consumer spending, the default to privatesector development of the economy. The choice between these two instrumentswill achieve social benefits depending on the desired results from a higherconsumption of multiple products or services that are geared to the public sector.Another factor which may be taken into consideration is the choice for consumersto increase consumption expenditure or to save as a result of the growth of incomedue to a reduction in the rate of taxation. If you opt for the second option, theimmediate effect is less noticeable effect on production, the latter manifested long-term investment by transforming economies. This differentiation does not appear inthe case of modification of the budgetary expenses, the effect being immediatelyfelt in aggregate demand and production. Differentiation between the twoinstruments of fiscal policy is reflected and character changes. Thus, a change intax rate leads to an effect much more strongly than in the case of a temporarychange that could be offset by fluctuations in the economy. As regards theamendments to the budget expenditure, the temporary nature of these has an impactfar more powerful.

2. Links between fiscal-budgetary policy and monetary policy:If in terms of monetary policy, the Member States of the European Union

failed to reach a consensus and to support the creation of the single currency, fiscalpolicy is far from being won permission to everyone, because no State is notwilling to give up the right to collect taxes from its citizens in the way they want to.

The occurrence of tax competition between countries, they are increasinglyinterested in attraction of taxable bases throughout the market, which has a specialimportance because capital will move in directions to maximise earnings in theglobal market. Most states will have a competitive advantage that will be present inthe total revenue in the short term and at a high rate of economic growth in themedium and long term.

The harmonization of the tax system in Romania becomes a challenge interms of adoption of proportional taxation system and the lack of a clear concept offiscal policy. Inducing significant changes often, tax legislation has impacted theflexibility of the requirements and objectives of the economic development ofRomania.

Should be noted the relationship between fiscal-budgetary policy andmonetary policy, the first influencing the second through the impact that it has inan effort to reduce the rate of inflation, the basic objective of monetary policy. Thisinfluence manifests itself in three different ways (Marin J, Penalosa J.M., 1997):


16

Figure no. 1 ,, Relations between fiscal-budgetary policy and the monetary”

The fundamental aspects of the current relationship between budgetary andfiscal policies-from the perspective of their monetary impact on public financialmanagement can be summarized as follows (Rodriguez l. Saiz, Parejo Gamir J.A.,1994):

• in the first place is to transform the policy into a passiveinstrument, which depends on fiscal policy, thus giving a monetary asset control,allowing greater possibilities of success in the fight against inflation;

• in the second, if you want to maintain this type of control and thepreservation of its independence, the Central Bank must compensate for actionfocused on factors that generate cash from financing the deficit, which means greatdifficulties for the ,,sterilization”, especially in the case of very high levels ofpublic deficit. The implementation of monetary policy is never easy, and undercontinuous and apparent Central Bank creates difficulties, may render it almostimpossible;

• in the third line should be mentioned and the problems derivedfrom the crowding-out effect of housing wealth effects and the second case, andwhich are not perfectly known, but also seem to have a remarkable influence on theefficiency of applied policy (both fiscal and monetary). It is not only economicproblems but also political; and if you add them and those of a technical nature,derived from the sterilization policy of the Central Bank, it may be understood that


17

it is almost impossible in reality, as important public deficits and rising to influencemonetary control objectives.

The problems derived from the effect of crowding-out must be made twofurther specification, which seem relevant. On the one hand, to produce the effectof crowding-out, it is necessary that the private sector may not find other ways offunding, which would be obtained in three ways:

• Fourthly, there is a new type of problem, which is taking shape inthese last years in the implementation of monetary policy at international level, andthat the government deficit has a remarkable. Namely, those arising from theprocess of financial innovation quickly and, more specifically, the effects of themassive issues with payment value in the short term, both private and publicfinancing deficit for efficient use of an active monetary policy control.

This innovative process affect this policy assuming an increase in financialexpertise, an increase in interest rates, an increase in the financial risks andreduction of parallel financial stability, greater demand monetary instability, anamplification of the concept of capital which also include debt securities, bothprivate and public, with payment on very short notice.

All these processes, of which one part derived from action methods ofbanking and public finance management will make more difficult theimplementation of monetary policy.

3. Inflation targeting:Romania has to combat inflation in two plans: fiscal and monetary. In

Romania, the fiscal policy plays a very important role because that directly controlsa significant percentage of the cost of the entire economy.


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The decision to resume the decrease in interest rate for monetary policyadopted by the National Bank of Romania in November 2011-from 6,0% to 6.25has had regard, in particular, significant improvement of the evolution of inflationand the current perspective, especially the short term – involving preserving rateforecast annual inflation over the years 2011 and 2012 in the range of variationaround the central point of 3% of the inflation targeting. The second consecutivedecision to reduce by 0.25 percentage points of the interest rate for monetary policyadopted by the National Bank of Romania in January 2012, was motivated bystrengthening the appropriate pace of disinflation would be easy by the CentralBank previously forecast. The Board of Directors of the National Bank of Romaniahas decided to reduce the level of 0.25 percentage points of the interest rate formonetary policy from 5.5% to 5.25% per annum, new historical minimum, in linewith analysts expectations, and maintain quotas for reserve holdings by banks.

The annual inflation rate continued to trend downward, reaching down tothe level of 2.6% in February 2012, from 3,14% in December 2011. Decline in theannual inflation rate to a minimum history is the result of economic and financialprogramme are set out in the framework of agreements with the European Union,the International Monetary Fund and other international institutions.

Against the background of the assembly appropriate to maintain amonetary conditions in a broad sense, the absorption of the impact of higher valueadded and relatively favourable trends in prices of food products have contributedto the rapid deceleration of inflation.

4. Conclusions:In conclusion, the strengthening of inflation within the range of variation

around the target creates favorable financial stability and achieving sustainableeconomic growth. However, the risks associated with domestic electoral context,along with the uncertainties related to the developments in the externalenvironment, the capital flows and volatile prices, advertises a judicious calibrationhas continue to conduct monetary policy with a view to the effective anchorage andexpectations to ensure price stability over the medium term.

The National Bank of Romania reiterated that achieving the objectives ofprice stability and financial committments in the context agreed in the context ofagreements with the European Union, the International Monetary Fund and otherinternational financial institutions, is essential to achieve a sustainable economicgrowth. In this context, to accelerate the absorption of European funds and thegradual recovery of domestic demand will lead to a recovery on a sustainableeconomy.

References:Angelescu C., Socol C., Socol A.G., ,,Politici economice”, Editura

Economică, Bucureşti, 2009;


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Chirleșan D., Metodele acțiunii bancare și gestiunea finanțelor publice”,Editura Universitatea A.I. Cuza, Iaşi, 2008;

Dumitru I., „Strategii de politică monetară”, Editura Universitară,Bucureşti, 2009;

Hoanţă N., „Gestiunea financiară a întreprinderii”, editura C.H. Beck,Bucureşti, 2011;

Manolescu G., „Politica monetară în perspectiva globalizării”, EdituraUniversitară, Bucureşti, 2009;

www.bnr.ro

www.bnr.ro


20

CONSIDERATIONS ON THE CRITERIA, PARAMETERSAND TAX IMPLICATIONS OF DEPRECIATION

*Dorel Mateş, **Ionel Bostan, **Veronica Grosu, ***Virag Nicolae Paul*West University of Timisoara, Faculty of Economics and Business Administration, West

University of Timisoara, J.H. Pestalozzi Street, No. 16, 300115, e-mail:[email protected];

**Ştefan cel Mare University Suceava, of Economics and Public Administration, Suceava,e-mail: [email protected]; e-mail: [email protected]

***Assistant Phd Candidate West University of Timisoara, Faculty of Economics andBusiness Administration, Timisoara, J.H. Pestalozzi Street, No. 16, 300115,

[email protected]

AbstractThe literature presents several methods of depreciation. In Romania, not all depreciationmethods are recommended by existing legislation. In this paper we propose to addressthrough the income tax three methods of depreciation of assets, which are recommended byour country's legislation, and to highlight the tax benefits of their application within theentities. In the first part we propose to define what are the criteria for evaluating of a assetsdepreciation and accounting parameters of the assets depreciation. In the second part of thepaper will be presented depreciation methods as linear, diminishing and accelerating withthe tax implications.Key words: Assets, depreciation, tax

Introduction

Tangibles are represented by assets generating economic benefits ownedby a business over a long period. Assets of tangibles nature involved in severaleconomic cycles not consumed at first use, does not change shape in the process ofproduction, allocation of property value and the processes involved is madeconsistently throughout the life span (economic life).

The depreciation understand the systematic allocation of the depreciableamount of an asset over its useful life.

In this paper we propose to address three methods in terms of taxdepreciation of property and to highlight the tax benefits of their application withinthe entities.

1. Criteria for evaluating the depreciation of assetsDepreciation of assets is a process of decline in value.Causes of impairment include:






21

- Natural wear and / or abnormal due to normal operation and / or toointense that the asset;

- Deficiencies in maintenance and repair work;- External causes (fires, explosions, weather, etc..)- The emergence of more efficient asset of technical, technological,

aesthetic, performance, etc..Depreciation forms are can be classified as:- Their nature;- After the retention time.Depreciation forms are represented schematically:

Fig. 1 Depreciation forms

The evaluation assets impairment involves consideration of the followingcriteria:

a) The useful life.It's called economic life of usefulness is determined that an entity has

estimated for the asset subject to depreciation. Except land that is considered tohave an unlimited life on other assets, the useful life is determined based onprofessional judgment and business strategy on the property.

Determining the useful life of an asset is based on:- The estimated amount of use, based on production capacity or estimated;- Obsolete estimated based on operating conditions;

Depreciation

By nature After the retentiontime

Physical affected the physicalintegrity, performance,appearance, etc.. Can bothpermanent and temporary.

Moral: it affected theirattractiveness due to theemergence of property better.Can be both permanent andtemporary.

Permanent or irreversible:to quantify and record thedepreciation. Can bothphysical and moral

Temporary or reversible: toquantify and is highlighted bythe creation of valueadjustments (formerprovisions for depressionment reversible). Can be bothphysical and moral


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- Obsolescence, occurred as a result of changes or improvements inproduction process or structure due to changes in market demand;

- Legal limits on the use of the asset (eg leases).Currently in our country the useful lives (times of use) for property, plant

(called tax assets) are established by Government Decision in the "Catalogue ofuseful life and classification of assets" (GD 2139/2004).

The life of an asset may be extended by a number of improvements thatadd performance or may diminish due to changes in technology or marketstructure.

b) The volume of activity or output.It is used in buildings, special buildings, mines, mines with extraction

solution by probes, quarries, mining of solid minerals, whose term of duration ofuse is limited exploitable reserves and can not receive other uses after depletion,and and investments for stripping.

If their depreciation calculation is done according to the relationship:

A = A Re x Ea A - annual depreciation;where: A Re - amortization 1,000 tons of exploitable reserve; Ea - the annual extraction of useful mineral (in thousand tons);

where: Vj - fair value of property; Re - exploitable reserve of useful mineral substances, (in thousand tons)

at the start of each financial year.In accordance with Law 571/2003 on fixed capital depreciation,

amortization recalculate per product unit is:- From 5 to 5 years in coal mines and quarries, as well as investments for

the overburden;- From 10 to 10 years in saline;- Year when any significant changes (10%) in volume exploitable reserves.

2. Parameters accounting of depreciation of propertyParameters of depreciation accounting, expressed variables (sizes) are

determined according to the amount of operating expenses that will affect theoutcome of each accounting period.

Under the laws of our country they are:- Input value (cost);- Time (rate) of depreciation;- Date of commencement of depreciation accounting;- System (system or method) of depreciation.a) The input.Is determined by specific methods of procurement (input unit) of property.


23

This can be represented by: purchase cost, production cost, utility value,input value, fair value.

b) Rule (share) of depreciation.Is represented by a percentage amount calculated according to the relation:na = 1/Dvu x 100where: na - payback time or rate;Dvu - useful life (during the economic use);The useful life means life and economic use is:- The period during which an asset is expected to be available for use by an

entity in years;- Number of product units or similar units that are expected to be obtained

by using asset entity.Norm of depreciation amortization depends on the regime used. So if

degressive and accelerated depreciation amortization time is influenced by certainmultipliers and when taking into account technological obsolescence, the durationof use recalculated taking into account its influence.

c) Date of commencement of depreciation accounting.Under the laws of our country, depreciation of property is to begin next

month commissioning until full recovery of the input value.This time may be influenced by the enterprise development strategy, thus

changing the depreciation.International Standards of Accounting depreciation is calculated from the

date of entry into the unit.

d) depreciation regime.Is considering how to determine the irreversible impairment of property

suffered during the operation.The most important parameter aimed at integrated report accounting - tax

on depreciation.According to International Accounting Standard No. 16 "assets",

"liquidation regime should be chosen according to the probability of generatingfuture economic benefits associated with the asset".

Depreciation regime should be applied consistently (on a consistentmethod) unless there is a significant change from baseline in the development ofeconomic benefits associated with the asset.

Depreciation for each accounting period shall be recognized as an expense,unless it is included in the carrying amount of another asset.

Although the literature devoted several schemes of depreciation ofproperty (proportional, progressive, regressive, etc. summation figures.) Currentlegislation in Romania recommends the following modes: linear, degressive andaccelerated.


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Importance in the integrated report accounting - taxation, leads us topresent distinctly showing each respective fiscal consequences of use in themanagement of the company.

3. Tax implications of depreciation of methodsCareful analysis of the concepts, criteria and parameters on depreciation

lead to the conclusion that it causes fiscal implications to the management ofeconomic entities.

Fiscal implications are mainly generated by system (method, system)damping and other parameters on which the entity's management may intervene toinfluence the outcome of tax due to tax default budget and treasury.

Linear depreciation methodLinear depreciation regime, is to include uniform costs of running a fixed

amount of input value (depreciable) a fixed proportion to its useful life.Liquidation regime is considered just in terms of fiscal management in

terms of normal economic and legitimate in terms of normalizatorului.The principle is:- Determining the norm of linear depreciationnal = 1/Dvu *100where: nal - time line depreciation; Dvu - useful life.- Determining the annual depreciation (Aa):

Aa = Vi x nal

Vi - the value of the asset or cost.

Given the need to include depreciation as a result of each accountingperiod (month) shall be determined monthly amortization (Al) according to therelation:

Al= Aa/12From the relations shown that regardless of the output produced or the rate

at which assets are used, the depreciation will be the same from one accountingperiod (month) to another. The only parameter that could affect the company'sfiscal management is the date of operation of the asset. On it may occur as follows:

- Commissioning of assets without formalities of reception;- Unduly extend the technological testing, during which property generates

economic benefits, without affecting the operating costs;- Receipt of property to carry out technological tests for demonstrations

and exhibitions, but in fact is used for productive activities (sales documents -subsequently drafted purchase);

- Recording of the receipt of property and depreciation calculation theirimpact on costs without receiving actual (real).


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Compared with current practice in Romania International AccountingStandards provide:

- Deducting the original value or residual value of the revalued asset;- Estimating the useful life of the entity.The linear method is used by most of the Romanian entities due to the

simplicity of calculations, (depreciation amount from the same accounting periodto another) and tradition (custom).

Degressive depreciation methodDegressive depreciation regime, is considered one of the systems

derogatory depreciation of property, it allows recording of depreciation higherearly in idle and as he approaches the end of useful life depreciation decreases.

The method aims to encourage the modernization of the productiveapparatus. Depreciation is greater in the first years of operation. Also, maintenanceand repair costs increase with the use of property which makes the overalloperating expense represented by depreciation and maintenance to flatten overtime, because of higher depreciation expense is associated with lower maintenancein the early years sunlight-readable, and vice versa during the aging of the asset.

Depreciation is determined by the time (rate) of degressive depreciation,calculated by multiplying the norm of certain linear depreciation coefficients,depending on the useful life of property, namely:

- 1.5 for a useful life of 2 to 5 years;- 2 for a useful life of 5 to 10 years;- 2.5 for a useful life of more than 10 years.Jurisdiction approval degressive depreciation regime, it is the Board of the

economic entity, that the administrator for non-profit legal entities.Diminishing balance method corresponds to a policy of investment,

because it allows recovery from the first year most of the capital assets.Accounting practice in the field are two types of application methods:- Variant without the influence of obsolescence (AD1);- Version with obsolescence influence (AD2).International Accounting Standards recommended also other options,

namely:- Applies a constant rate of depreciation on a variable basis (ie net book

value or amortized value remaining);- Applies a variable percentage of depreciation on a constant basis (book

value);- Calculate the quantity of products produced, km traveled, number of

hours of operation, etc..

Depreciation version without diminishing the influence of obsolescence(AD1)

For the version of degressive depreciation calculation is AD1 followingsteps:


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- Determine the time of degressive depreciation (nad) according tothe relation:

K-multiplier (1.5, 2, 2.5) depending on the useful life (economic use).- Determine the depreciation for the first year (A1), by multiplying the

input (Vi) with normal depreciation of the asset that is diminishing: A1 = Vi x nad- Determine the depreciation for the years ahead, by applying the

rule of diminishing the value of remaining depreciation amortized until thedepreciation is equal to or less than the annual depreciation resulting from dividingthe remaining number of years remaining until the expiration useful life.

Since the condition is not fulfilled until the end of useful life, intangible isamortized linearly considering the remaining value (VRA) and the remainder ofamortized (Ms).

Integration scheme of the set for the second year and next may bepresented as follows:

- Determine the remaining amortized value (VRA) in year II: Vra = Vi – A1For the useful life between 2 to 5 years, k = 1.5, for a duration of 5 to 10

years, k = 2, and for a duration> 10 years, k = 2.5.- Depreciation for the year 2 and the following:- A2… = Vra x nad

Ai until Ad ≤ _Vra_______ Dra (in years)

Dra - the remainder of amortized (in years)- Depreciation in year "i" to end of useful life.By the way are influenced by the results of each accounting period,

depreciation generates diminishing fiscal implications as follows:- Recording a higher amortization in the first years of operation of

property, would bring down the financial profit and income tax, which will resultin maintaining treasury;

- Recording of depreciation in the second smallest of useful life of propertywill increase profit and income tax, leading to decrease cash by paying a highertax.

Recording method degressive depreciation as AD1 version does notexempt from tax on profit entity, leading only to delay its payment. This is

xKxDvu

nad )1001

(=xKnn alad =


27

important especially in terms of inflation, the actual payment (the amountoriginally established) will be in a devalued currency.

In these conditions, the early use of depreciated assets degressivedepreciation will record higher values and lower financial results, and in recentyears depreciation will be lower which will entail higher financial results. In thefirst case we will record a lower tax and in the second a higher tax (while the otherexpenses and income are constant).

If degressive depreciation accounting will record the corresponding valuesof economic depreciation (linear) consemnându tax differences being mentioned inthe "tax statement".

Accelerated depreciationIt is considered most advantageous depreciation regime in terms of

economic entities tax interest.Summary of depreciation is the first year (12 months) has a rate of 50% of

the value of the tangible fixed assets (machinery, etc.).For subsequent years, annual depreciation is calculated using the remaining

amortized value and number of years remaining until the end of useful life.Integration scheme for calculating depreciation as accelerated method is as

follows:a) For the first year of use: A1 = Vi x 50 %where: A1 - amortization related to the first 12 months of use asset. Vi- the value of the asset.b) For subsequent years (the second year and until the expiration of

normal use):For subsequent years A2 ÷ n = Vr / Dra or nar = 1/Dr x 100where:

A2 ÷ n - annual depreciation since the second and until the expiration of normal use of the asset Vr - amortized value remaining nar - normal depreciation on the amount remaining Dr - length (number of years) remaining amortization.In years in which use of accelerated approval was conditioned by territorial

bodies of the Ministry of Public entities have established a file in support consistsof:

- Data presentation;- Indicators of economic efficiency;- Indicators of financial efficiency.Each of the indicators was calculated for both linear damping regime and

for the accelerated.


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All indicators have been established by a standard score. For indicators thatare influenced by accelerated depreciation regime is set to reduce allowable levels20% or 50% of the standard score for the linear depreciation regime.

Tax implications of accelerated depreciation manifests on tax deductibleexpenses in the first 12 months of operation, has a quota of 50% from the value ofthe asset and the next years the unamortized remaining value. This means that inthe first year, we record a significant depreciation expense, leading to lower profitsand income taxes.

In coming years, the costs are lower, leading to increased financialperformance and corporate tax reduction experienced by the treasury, following thepayment of income tax to the budget. In terms of inflation such payments shall bemade in depreciated currency, which is also a tax advantage for the enterprise.

For businesses, accelerated method present tax advantages even moreimportant as the useful life of assets is shorter.

The directors of the entity or persons performing the duties ofadministrators accounting policies will result in an internal manual. Upon theapproval of accounting policies by administrators, staff responsible for executionof the accounting department should comply strictly accounting policies.

4. Example:It acquires a manufacturing line at a cost of 80,000 umn, VAT 24%. The

useful life of 5 years. Required to calculate and record depreciation in thefollowing systems: linear, digressive without influence obsolescence (AD1) andaccelerated.

A. Linear method:nal = 1/Dvu x 100 = 1/5 x 100 = 20%,where: nal = linear depreciation system DVu = useful life

Am Anl = nal x Vi, whereAm Anl = annual depreciation calculated in linear systemnal = linear depreciation systemVi = input valueAm anl = 20% x 80,000 = 16,000 u. n m / year

B. Degressive depreciation method, without the influence ofobsolescence (AD1)

nad = k x nal,where nad = degressive depreciation rule

- 1.5; DVu between 2 - 5 years k = f (DVu) = - 2; DVu between [5.10 years)


29

- 2.5; DVu over 10 yearsnal = linear depreciation systemIn our case: nad = 2 x 20% = 40%- In year 1:Amd1 = nad x Vi, whereAmd1 AD1 = depreciation in the system, for the first year of use.Amd1 = 80,000 x 40% = 32,000 u.m.n- In year 2:Since 2:Amd 2 ... andVRA x nad, until the amount so obtained <= VRA, where Amd i = 2 ... degressive depreciation obtained by AD1 method,

for the year 2, ..., iVRA = depreciated value remaining after the previous yearnad = degressive depreciation ruleNrar = number of years remaining for amortizedAmd 2 = 48,000 x 40% = 19,200 48.000 / 4 = 12.000 results that AMD 2 = 19.200 u.m.n- In year 3:Amd 3 = 28,800 x 40% = 11,520 28 .. 800/3 = 9600 results that AMD3 = 11,520 umn- In year 4:Amd 4 = 17,280 x 40% = 6912

17,280 / 2 = 8.640 results that AMD4 = 8.640 umn for 8640<6912

- In year 5:Amd Amd 4 = 5 = 8640 u.m.n

C. Accelerated depreciation method:A1 = Vi x 50% = 80,000 x 50% = 40,000A2 = Vr / Ms = 40,000 / 4 = 10,000A3 = A4 = A5 = A2 = 10,000

Table no. 1 Values calculated for the linear, degressive and accelerateddepreciation methods

Year Vi Linear Degressive Accelerated1 80.000 16.000 32.000 40.0002 80.000 16.000 19.200 10.0003 80.000 16.000 11.520 10.0004 80.000 16.000 8.640 10.0005 80.000 16.000 8.640 10.000


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ConclusionsAlthough the literature devoted several schemes of depreciation of

property, as mentioned in this article the current legislation in Romaniarecommends the following modes: linear, degressive and accelerated. Lineardepreciation method is considered standard and accelerated depreciation anddegressive amortismentele are considered derogatory depreciation methods, whichdepreciation is calculated based on supplements of tax provisions over theeconomic depreciation (linear).

Is justified by the tax advantage obtained as depreciation expense are taxdeductible.

Apply in countries where accounting is connected to taxation. Taxdepreciation is intended to maintain operational significance that keeping contentcurrent and the net result, which depends on tax options traders.

Separate presentation of the three methods of depreciation was motivatedby the desire to highlight the integrated accounting report with the depreciation ofproperty taxation. At the same time we also highlighted the consequences of usingthe company's fiscal management of the three types of depreciation.

AcknowledgementsThis article is a result of the project „Doctoral Programme in Economics at

European Knowledge Standards (DOESEC)" . This project is co-funded by theEuropean Social Fund through The Sectorial Operational Programme for HumanResources Development 2007-2013, coordinated by The Bucharest Academy ofEconomic Studies in partnership with West University of Timisoara

BibliographyDorel Mateş, Contabilitatea evenimentelor şi tranzacţiilor între standarde,

directive şi reglementări fiscale, Editura Mirton, Timişoara, 2009Duţescu A., Ghid pentru înţelegerea şi aplicarea Standardelor

Internaţionale de Contabilitate, Editura CECCAR Bucureşti,Ion Puşcaşu, Dumitru Cotleţ, Dorel Mateş, Bogdan Cotleţ, Cosmin Pistol,

Contabilitatea şi fiscalitatea entităţilor economice, Editura Miton, Timişoara, 2008Ristea M., Contabilitatea şi Fiscalitatea Întreprinderii, Editura Tribuna

Economică 1995Virag Nicolae Paul, Costea Ciprian Dan, Politici şi opţiuni contabile în

cercetarea fluxurilor de stocuri, Studia Universitatis “Vasile Goldiş” Arad SeriaŞtiinţe Economice Anul 20/2010 Partea a III – a

IAS nr. 36 „Deprecierea activelor”, Editura CECCAR 2007Reglementări contabile conforme cu Directivele Europene, pct. 65, Editura

Irecson, Bucureşti 2006


31

ENVIROMMENTAL PROBLEMS IN TODAY ECONOMYOF ARAD COUNTY

*Dana Dănoiu, **Florin Dumescu, **Ladislau Klein*Environment Protection Agency, Splaiul Mureşului FN, 310132, Arad, Romania,

[email protected]**Vasile Goldis Western University Arad, Faculty for Economics,

15 Eminescu Str., 310086 Arad, Romania, [email protected]

AbstractThe economics - ecology relationship is discussed with special focus on Arad County. Theresearch is focused on problems of air quality, as the other environmental factors were infocus in the autors’ previous papers. Problems connected to sulfur dioxide, nitrogen oxides,volatile organic substances, ammonia emissions are emphasized. One of the main problemsis considered to be that connected to the greenhouse effect producing gases.Keywords: sustainable development, environment, economy, county, pollutants

1. IntroductionThere is a huge potential in intersection of economics and ecology in

influencing changes within communities. Sustainability has a dominant role inassuring a healthy future for the community. In spite of extending globalization,people have to operate in their local communities, according to principles ofsustainability, and a holistic and multidisciplinary system approach is necessary(Beaton R., Maser Chr., 1999).

Such way of thinking and acting supposes, among others, taking intoaccount provisions of national and international standards (Baron V., 2001).According to the SR EN ISO 14001 standard, environment is defined as includingair, water, earth, natural resources, flora, fauna, human beings and the relationshipsamong all of them. According to provisions of the standard, organizationscompulsory must have procedures for monitoring the environmental effect of theiractions. This is valid not only for the enterprises but also for communities and inthis case monitoring is a duty of local councils and/or state authorities.

The environmental audit is one of the main ways of regular and fullanalyses regarding the impact produced by an economic actor (Sadgrove K., 1998),either enterprise, or community. It comprises data bases for best decisions in thefield, increases trust towards the organization, can offer an alarm if a dangeroccurs. An environmental audit deals with all the environmental factors that can beaffected.

In previous studies, the authors of the present paper offered data andmodels for analyzing pollution problems regarding different ambient factors orareas, such as water (Dumescu F., Danoiu D., 2011), soil, and natural protected




32

areas (Dumescu F., Danoiu D., 2009), or regarding the polluting influence ofindustry (Klein L., 2008). Also ethical aspects of the environmental dealing withware quality were object of previous studies, including the question of wastedeposits (Dumescu F., 2003, Dumescu F., Klein L., 2005). A rather complex studyof the county that treated among others the perspectives of sustainabledevelopment, compared to regions in Slovakia and Bulgaria was carried out insidea common project (Dumescu F. et all, 2007). A historical approach of developmentand aspects regarding sustainability of industry in Arad was object of a ratherextended study (Klein L., Dumescu F., 2008).

Sustainable development, including the question of pollution, is a fieldstudied in many respects, including its international nature. So, according to studiescarried out in Hungary (Gurzo I., 2009), agricultural areas, similar to the plain partof Arad County, have the same problems in the neighbor country as in Romania.Some similarities can be found also in other acts aiming to help sustainability, forinstance in dangerous waste management (Szira Z., Varga E., 2008).

Other problems connected to the studied object are those regarding wasteand recycling (Lopusni J., 2003).

The present paper makes the image complete by taking pollution ofatmosphere into study.

Atmosphere is an important factor that houses or influences processeswhich take place on the earth surface and at a certain depth of that surface (HollandH. D., 1983). Hydrologic cycle, chemical and mechanical alteration,photosynthesis and decomposition of organic matter on mainland and inside theocean, waves and marine currents, also the most of the sea water chemistry dependon atmosphere. So as the oceans, atmosphere can be considered a reservoir butthere are some important differences. While oceans are rather homogenous,heterogeneity of the atmosphere can be important mainly at more than 100kmheights. This process is important as in the higher part of the atmosphere the flowof photons originating in sun is at the origins, for instance, of ozone. Otherimportant phenomenon, that takes place in the atmosphere due to human activity, isthe increase in CO2 content. As about sulphur components, SO2 and H2S are soquickly removed from the atmosphere, that their concentration is very law, exceptthe zones close to powerful sources.

Some other problems connected to the studied object are that of waste andrecycling (Lopusni J., 2003).

2. A short presentation of Arad County and its economy2.1. Geographical dataArad County with its 775,409 ha represents 3.3% of the total surface of

Romania and is the 5th county as regards surface in Romania. It is situated in theWestern part of the country at the crossing point of the IVth Trans-European roadwith the planned Russia – Serbia road. The county is a border one with Hungary.

The population of the county presents a decreasing trend; on January 1st,2010 it consisted of 458,920 persons (average density 59.0 inhabitans/km²), the


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number of urban population being higher than that of the rural one. The populationlives in one municipality (Arad), nine towns (Chişineu Criş, Curtici, Ineu, Lipova,Nădlac, Pâncota,Pecica, Sântana, Sebiş), 68 communes, and 270 villages.

The underground and surface water and the woods are the most importantnatural regenerable resources, while diferent rocks (magmatic, metamorphic,sedimentary rocks), oil structures and thermal/mineral springs are the main naturalnon-regenerable resources in Arad County. These resources are present as aconsequence of the geological and hydrographical structure of the area.Geologically Arad County partly covers two areas, namely the Carpatic and thePannonic one. Relief is layered being ranged in tiers from the East with the 1486mhigh Gaina peack to the West with the 80m high plain at Zerind.

From a hydrographic point of view the county belongs to the Mures, CrisulAlb, Crisul Negru and Bega hydrographic basins. Among these rivers the highestflows are registered on Mures - it has an average flow of 154 m3/s at the Aradcheck point, but it can reach more than 2.000 m3/s endangering the area withfloods. It is to take into account also the flood danger on Crisuri as well. Thenecessary protective construction are achieved in both hydrographic basins(Dumescu, Klein, 2011, Bekescsaba).

Also some lakes are in the county, the natural ones mainly in the meadowof the Mures river, but the greatest is an artificial one at Tauti, in the Crisurihydrographic basin.

The underground water is an important resource in Arad County, becauseof its high quality, high flow, and repartition in layers beginning with low depthones on most of the county surface. Most of these resourses are suitable fordrinkwater and for industrial water supply, but there are also mineral and thermalunderground resources that are used in therapeutic and wellness aims.

2.2. Climatical dataArad County is characterized by a temperate continental moderate climate

with oceanic influences. Climatical data are collected in five meteororologicalstations throughout the county.

The main temperature data measured in 2010 at the Arad station are asfollows: max. 35.2 oC, min. -16.8 oC, average temperature 11.0oC. The yearlyaverage temperatures for the last five years presented the highest values in the 2007– 2009 period, followed by lightly decreasing ones in 2010. The total annualprecipitation measured at the Arad station in 2010 are some higher than thosemeasured during the previous years, namely 799.1 l/ m2 in Arad, and some evenhigher in the mountanous area (1049 l/m2 at Şiria). There is an increasing trendbetween 2006 – 2010. Abundant rains can produce floods; in 2010 such localfloods affected in some manner localities in Arad County, including towns such asIneu or Chisineu Cris or parts of Arad, the county seat.

3. Air qualityIt is considered to be rather difficult to have a controll on air quality

because of rapid disipation of pollutants discharged into atmosphere and due to


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lack of possibilities to clean the air after the pollutants were discharged. Thereforeit is obvious to retain pollutants before discharging or to replaces pollutingsubstances with no polluting or less polluting ones.

Air is the main vector that contributes to globalizing pollution by transportof pollutants on long distances, by acidic rains, by destroying the ozone layer andby global warming.

3.1. Polluting discharges into the atmosphere3.1.1. Suphur dioxide discharges (SO2)SO2 discharges for 2010 are presented in table 1 and 2. The data in the

tables prove that the most important SO2 source is the energetic industry thatrepresents 97.5% of the such type discharges. Inside Arad County there are ninehigh capacity burning equipments, seven of them in the Hydrocarbon BurningElectrical and Thermal Energy Producing Company and two of them in the LigniteBurning Electrical and Thermal Energy Producing Company. This equipment ispart of the National Program for Reducing Discharges till the end of 2013 but untilnow not any step was done to reduce that discharges.

Tab. 1.Total SO2 discharges in 2010 in Arad County

Arad County 2006 2007 2008 2009 2010

Yearly discharge 11.666 10.988 8.634 7.530 8.624

Source: self processing

Tab. 2.Sources of SO2 discharges in Arad County in 2010

Sources SO2 (t/year)

Burning processes in energetic industry 8.397Nonindustrial burning devices 154

Burning processes in processing industry 73Total 8.624


The evolution of the yearly SO2 discharges is comprised in table 3.

Tab. 3.Evolution of sulfur dyoxide discharges (t/an)

Arad 2006 2007 2008 2009 2010

Yearly discharges 11.666 10.988 8.634 7.530 8.624



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A constant decrease can be seen for the 2006 – 2009 period and an increaseby 14.55 in 2010 compared to the previous year.

3.1.2. Nitrogen oxides dischargesNitrogen oxides discharges and their sources are presented in table 4.

Tab. 4.Sources of nitrogen oxides discharges in Arad County in 2010

Sources NOX (t/year)Burning processes in energetic industry 477Nonindustrial burning devices 633Burning processes in processing industry 68Road transport 2.282Total 3.460


It can be concluded that the main source of nitrogen oxides are the roadtransport activities (69%), while the energy producers have a 14% contribution andthe no industrials 17%.

In table 5 the evolution of the yearly discharges can be seen.

Tab. 5.Evolution of nitrogen oxides discharges (t/year)

Arad 2006 2007 2008 2009 2010

Yearly discharges 5.806 1.001 4.811 4.126 3.460


If the figure for 2007 (when the discharges produced by road transport werenot counted, so making it not comparable with he others) is not taken into account,a constant decrease can be seen. The decrease can be explained by twodevelopments:

- renewing of stock of cars, by replacing the old cars by new ones,that observe the EURO 3 and EURO 4 norms;

- reducing of nitrogen oxide discharges at the lignite using energyproducer, according to the measures established by the environment protectionautority – namely recycling of burned gases and reducing the air flow to thefirebox.

3.1.3. Ammonia dischargesSome of the agricultural activities, namely burning of biomass resulted in

grubbings, or fermentation of residual materials from live-stock farms, are the mostimportant polluting ammonia sources (87% of the total). Also ammonia emergesfrom some of the agriculturally cultivated vegetables.


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Also an important source of ammonia in the atmosphere (12%) is the badwaste management in all its phases (e.g. collecting, transport, storage). Such wayhigh quantities of ammonia result in fermentation processes favored by humidityand high temperature in the environment.

Tab. 6.Ammonia sources in the environment

Sources Ammonia (t/year)Non-industrial burning equipment 27Burning in precessing industries -Waste treating and storing 510Agriculture 3.659Total 4.196


During the 2006 – 2010 period the ammonia discharges into theatmosphere had a decreasing trend (tab.7)

Tab. 7.Evolution of ammonia discharges (t/year)

Arad 2006 2007 2008 2009 2010

Yearlydischarges

5.260 4.795 4.798 4.427 4.196


3.1.4. Volatile nonmethanic compounds dischargesThis group of substances is represented by benzine, petroleun ethers,

perchlorethylene, benzene, acetone, chloroform, esters, phenols, carbon sulfidesetc. They result as pollutants in road transport, certain industrial activities, and fuelcombustion.

According to the legal provisions (Government Decision 699/2003) 19equipments were taken into acount in the county as using such compounds forcleaning and painting metal and wood surfaces, for shoes and ready-made clothesmanufacturing, and for chemical cleaning of textiles.

Tab. 8.Sources of volatile nonmethanic compounds

Sources t/yearNon-industrial burning devices 6.472Extraction and ditribution of fosile fuels 38Use of solvents and of other products 514Road transport 1.074


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Manufacture processes 51Other sources (e.g. woods) 2.829Agriculture (manure management) 1.755Total 12.733Source: self processing

The above data prove that the non-industrial burning devices are the mostimportant sources of volatile compound emissions with, an up to 51.2%contribution.

Tab. 9.Evolution of volatile nonmethanic compounds discharges (t/year)

Arad 2006 2007 2008 2009 2010

Yearlydischarges

8.157 5.562 7.562 8.400 12.733


It can be underline that the figure for 2010 represents a substantial increasecompared to the previous years, this being due to the high level and increase ofdischarges in agriculture and in forestry.

3.1.5. Powder suspension dischargesSituation of this type of discharges is comprised in table 10 and its

evolution is in table 11. It can be seen that the highest ammount of powder isdischarged by the nonindustrial enegy users. The low level of didcharges fromenergetics is the result of installing electro-filters reaching 99.6% efficiencies at theArad Electro-Thermal Company.

The data prove that beginning with 2008 a process of increasing powderdescharges started. The increase is due to the worsening economic situation ofpopulation that determined a high rate return to the use of wood and coal inresidential heating, but also to the higher number of demolishing sites. Not in a lessmanner the rather bad state of roads is a source of powder.

Tab. 10Sources of powder discharges in 2010

Sources Powder t/yearBurning devices in energetics 176Nonindustrial burning devices 5.108Burning in processing industry 152Road transport 264Total 5.700



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Tab. 11Evolution of powder discharges

Arad 2006 2007 2008 2009 2010discharges

t/year3.261 2.764 3.195 4.781 5.700


3.1.6. Heavy metal dischargesHeavy metals are considered to be systemic pollutants, it meaning that after

entering the human organism these metals produce specific injuries in certainorganes even if their concentration is very low.

Tab.12Heavy metal discharges

Discharges Kg/yearBurnings

Metal Inenergetics

Nonindustrial

In industrialprocessing

Total

As 72,37 7,23 0,18 79,78Cd 9,68 10,63 0,20 20,51Cr 47,73 22,13 1,95 71,81Cu 2,10 61,26 1,11 64,47Hg 15,04 3,98 0,08 19,82Ni 64,22 37,35 33,79 135,36Pb 77,04 285,10 2,56 364,70Se 233,21 3,58 0,01 236,80Zn 43,20 940,68 6,73 990,61


It appears that the non industrial burnings are the main source of heavymetals in air.

3.2. Surrounding air qualityDischarges of pollutants into the local atmosphere as well as long distance

transport of pollutants from other areas can have a negative influence on the qualityof ambient air, therefore monitoring of air quality parameters inside inhabited areasis not only useful, but also compulsory.

In Arad County air monitoring is carried out mainly in Arad City wherealmost the entire industry of the county is concentrated and a high density ofpopulation and an intense traffic is registered. But also Nadlac as an importantroad-border crossing point and some other localities were taken into account. Airmonitoring in that areas is carried out by using a net of automatic stations but alsoby semi-automatic short lasting local measurements.


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3.2.1. Semi-automatic monitoring of ambient airGaseous pollutants were monitored by sampling in sensitive areas such as

crowded street crossings, intensely circulated streets and NO2, SO2 şi NH3 weremonitored. The results were compared to the Romanian standard in force STAS12574-87.

Tab.13Gaseous pollutants concentrations

Concentration mg/mcArea Sampling point

NO2 SO2

Arad A crowded square (“Podgoria”) 0.0236 0.0266

Arad A crowded square (“UTA”) 0.0260 0.0069

Arad Narrow street 0.0233 0.0180

Arad Main roads 0.0237 0.0253

Arad Municipality (average) 0.0241 0.0192

Other localities 0.0232 0.0128

Max. permitted concentration 0.3000 0.7500Source: self processing

It can be concluded that in not any of the points the permitted maximalconcentration was exceeded. The values measured for gaseous pollutantsconcentrations in the smaller towns were lower than those measured in Arad.

Tab. 14Evolution of yearly average concentrations for NO2 and SO2 (mg/m³)

Pollutant 2006 2007 2008 2009 2010

NO2 0.022 0.024 0.028 0.022 0.024

SO2 0.008 0.010 0.012 0.013 0.019


Figures presented in table 14 prove that no significant variation in yearlyaverage concentrations of NO2 and SO2 occurred.

A manual monitoring of solid pollutants, a way to emphasize impactpollution, was carried out by sampling for sedimentable dust analyses in six pointsin Arad City and in five points in other towns of the county. The results arecomprised in table 15. Date prove that the highest amount of sedimentable dust wasfound near the electric power plant that is placed on the road that enters the cityfrom the East. Here 58.33% of the total measurements were exceeded. Accordingto the point of view of the authorities this was so due to traffic as to meteorological


40

conditions, but the authors’ opinion is that also the contribution of the power plantis to be taken into account.

Tab. 15Yearly average concentration of sedimentable dust

City/town

Sampling point

Max.addmittedvalueg/m2 month

Yearlyaveragevalueg/m2/month

Exceedingfrequency(%)

Electric powerplant

19.50 58.33

Şaguna Street 3.87 0.00

UTA area 8.41 0.00

Grădiştedistrict

6.42 0.00

Arad

Roşiori district 4.17 0.00

Lipova Lipova 4.11 0.00

Pecica Pecica 2.30 0.00

Sînleani

Sînleani 3.84 0.00

Nădlac Nădlac

17

3.97 0.00


Tab. 16Evolution of yearly average concentrations for sedimentable dust (g/m2/month)

Arad 2006 2007 2008 2009 2010

Yearly average 5,75 8,34 6,67 7,06 7,02


The average concentrations are lower than the values comprised in theRomanian standard in force (STAS 12574/1987).

3.2.2. Automatic monitoring of surrounding airTwo automatic monitoring devices (symbolized AR1 and AR2) placed in

Arad and one in Nadlac town (AR3) are in use as part of the national network, allof them working continuosly in representative places in accordance with thelegislation in force:

a. AR1 placed in Arad is a traffic/industry station placed in an areawith intense traffic;

b. AR2 placed in Arad in a residential area for pointing outpopulation exposure to urban pollution;


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c. AR3 placed in Nadlac town at the way out towards the countryborder is a suburban and traffic station.

The monitoring devices carry out analyses namely sulphur dioxyde (SO2),nitrogen oxides (NO, NO2, NOx), carbon oxyde (CO), suspended powder, ozone(O3) and procursors of ozone such as benzene, toulene, ethil-benzene, xilens. Theanalyses methods are the legal ones. The measured values are correlated to thepolluting sources and to the meteorological data.

The results of monitoring are continuously transferred to the local agencyof the environment protection authority and, simultaneously they are posted up onan electronic panel placed in a central square of the city.

3.2.2.1. Nitrogen dioxideThe results for nitrogen dioxide are inside the legal value (200 µg/mc).

Generally the values for AR1 station are higher than those of the others. Thisproves the importance of traffic in NO2concentration, but no exceeding of the legallimits appeared.

3.2.2.2. Sulphur dioxideFor this pollutant all of the measured values are significantly lower than the

limit established for protection of human health, which is 350 μg/m3, and the houraverage values are lower than the alert value, which is 500 μg/m3.

During the winter, when the inhabited spaces have to be heated, highervalues are registered at AR2 station, placed in a residential, non industrial area.Also it can be underlined that at AR1, positioned not far from the coal usingthermo-electric power station lower values are registered during the period betweenMay and November, when the station is shut down. Unfortunately until now theplant did not achieve investments to reduce polluting effect.

3.2.2.3. Suspended powderThe AR1 and AR2 stations are equiped with measuring devices for dust in

suspension that deliver hourly and daily average data. The average data obtaineddurig the period taken into account are inside the legal provisions (Order592/2002), but there were days with exceeding that figure (50 μg/m³). The highervalues are due to the traffic in the area, to the influence of heating devices, cleaningthe area (including vegetation burning), and to the meteorological factors duringthat operations (low atmospheric pressure).

3.2.2.4. Carbon monoxydeAnalyses results prove that during the winter CO concentration increases at

all the stations. The increase is due to the effect of domestic heating, and, in case ofAR1 and AR3 it is due also to the traffic. At not any of the stations the eight hoursaverage value for protecting human health is exceeded (acording to the legalprovisions – Order 592/2002 the highest admitted value is 10 mg/m³).

3.2.2.5. BenzeneDuring 2010, measurements concerning benzene and its organic derivatives

such as toluene, etilbenzene, o-xylene, m-xylene, p-xylene were carried out. Theconcentrations were checked at the AR1 and AR3 stations and in both cases theannual average was under the legal provision, namely those of Order 592/2002.


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Some higher concentrations occur due to the influence of traffic, of fuel stationsplaced in neighborhood, or of other local influences e.g. a bakery at AR3 station.

3.2.2.6. OzoneWhile the ozone existing in stratosphere protects life on Earth, the

troposphere ozone is very toxic and is the main pollutant in the atmosphere of theindustrialized countries and cities. Its precursors emerge from industry and traffic.Ozone is generated from precursors by electrical discharges, photochemicalreactions or reactions with free radicals. As its density is 1.66 times higher thanthat of air, ozone remains in the layers near the soil. It easily decomposesgenerating oxidant free radicals.

Nitrogen oxides NOx, volatile organic compounds, and methane are themain primary pollutants that lead to ozone and other oxidizing matter in loweratmosphere. Sources of such ozone generating primary pollutants are fossil fuel(coal, petroleum derivatives) combustion, fuel storage and distribution, use oforganic solvents, household and industrial waste composting. The amount of ozonepresent in troposphere is highly variable as the materials that are its source arewidely transported.

Monitoring of ozone in Arad County is achieved by AR1 and AR2 stations,the first one for traffic and industry and the second for the urban background. Thehighest ozone concentration was registered during the summer when sun radiationhas the highest intensity, but not any of the results exceeded neither the informationlimit for human health protection – 180 µg/m³, nor the protection limit for healththat is 120 µg/m³. In 2009 generally higher concentrations in ozone were registeredcompared to the other years.

3.3. Local effect of air pollutiona. Emissions of gases with acidic effect, such as NOx and SO2, lead to

acidic rains. Acidic rains and deposits (e.g. dust) produce global and local troubles,and result in conversion of two types of pollutants, namely SO2 and NOx , and canbe transported on long distances. Such way they can act either in the area wherethey are produced or can be transported by aer on long distances. They affectmainly health, namely lungs and breathing apparatus.

Tab. 17Precipitations analyses results for 2010

Ponderated averagevalues

Studied periodMinima

l pHvalue pH

Conductivity(µScm-1)

Acid/Totalprecipitations

Jan. and Feb. 5.706.0

5 224.31 1.00

December 5.355.9

0 149.28 1.00

Jan., Feb. and Dec. 5.35 5.9 195.52 1.00


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9

Mart., Apr., and Mai 5.405.8

8 118.88 1.00

Jun., Jul. andAug. 4.735.7

2 55.28 1.00

Sept., Oct., and Nov. 3.985.3

7 99.73 1.00January till

December 3.985.7

3 107.62 1.00Source: self processing

The direct efffect of polluting with SO2 and NOx can be perceived throughthe quality of precipitations. Inside Arad County such mesurements are carried outin two aplacements, namely the Arad meteorological station and the Sanleanipluviometric station. Parameters such as pH, conductivity, acid and alcalineproperties (Tab. 17.). The above figures lead to the following findings:

- the minimal value of pH=3.98 was found at the Aradmeteorological station, during a rain with 22.61 l/m2 in the 6.09 – 12.09.2010period;

- all the rains had the pH value less than 6.5, so all of them are to beconsidered acidic.

Table 18 presents the evolution of main indicators that are characteristic forprecipitations, for the last five years.

Tab. 18Evolution of the main indicators of precipitations, for the last five years

Ponderatedaverage values

YearpHmin.

pHConductivity(μScm-1)

R =acid precipitations/total precipitations

2006 4.30 6.40 78 0.372007 4.22 5.86 99 0.952008 4.92 5.24 89 1.002009 4.87 5.92 98 0.992010 3.98 5.73 108 1.00


The presented data prove that 2006 was a year with the lowest incidence ofacid precipitations and beginning with 2007 all the rains had mostly acidproperties.


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b. Ozone is the main component of the smog that is characteristic for thegreat cities. It can affect eyes, breathing system, and can reduce resistance towardsinfections. To reduce ozone concentration, emission of substances that produce it,namely NO2 and volatile organic substances must be reduced. Renewing theautomobile stock, a process that is going on is expected to reduce ozone content inatmosphere.

c. Powder discharges from industrial activities, from household ones andespecially discharges resulted in traffic sometimes exceeded the 50 μg/mc legallimit. It happened mainly in Arad city, and also in town of Nadlac. However thedaily permitted amount was not exceeded.

d. Carbon mono-oxide CO discharges can emerge from household heatingand they were found around station AR2. Meteorological conditions, such as lackof wind, can favor its gathering up.

3.4. Major environmental accidentsNot any important environmental accident was registered during 2010.

Only one incident occurred, when a fire affected two storing cells of the wastedump of Arad city. The fire was produced by the magnifying glass effect that led toself fire. The direction of wind was favorable as it did not transport the smoketowards the inhabited area. The fire was put out with water and by covering withearth. The event lasted for 1½ hours.

3.5. Dangers for air qualitySo as it was during the previous years, for 2010 and for the future the

energetic industry and traffic are the main atmosphere polluting sources in AradCounty. Due to renewals of the automobile stock and to improvements in itsquality a slight reducing of pollutants discharge can be remarked. Alsoimprovements in fuel combustion, in fuel quality and better control of emissions atimportant burning systems did and will contribute to improving quality ofatmosphere in Arad County.

The main air polluting sources are shortly treated below.a. Electro-thermal plant Arad (lignite burning plant)It uses lignite and methane as source of energy for its two boilers, 80MWh

each for industrial steam and for one 403 MWh energetic boiler. They are the mainpollutant with sulphur dioxide, nitrogen oxides and powder. The plant is placedoutside the city. For retaining powder electro-filters are provided. The filters wererepaired in 2010 and consequently now the powder emissions are inside theregulations. Also gases recycling after the burning process and reducing the air ratein burning were achieved, such way the emissions are maintained inside thecompulsory value (570 mg/m³).

Another important polluing place is the ash and slag dump. The windcarries out the ash and slag, therefore investments for humidifying and for raiseingdam were carried out but they are not effective enough, the powder affectingsurroundings, mainly during summer.


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b. Electro-thermal plant Arad (hydrocarbons using plant)There are two energetic boilers, of 75 and 57 MWh respectively, and five

hot water boilers, 116 MWh each. This plant is inside the central part of the city.,and uses gas and fuel oil with under 1% sulphur content. Is the main pollutant withSO2, NOx and powder.

c. TrafficTraffic produces most of the CO, NOx and CO2 that is discharged into the

atmosphere. Also traffic has most of the indirect responsibility for presence of dust,proved by analyses. At least partly this can be connected to the manner of cleaningthe roads and the vehicles and to the manner of making air-tight transport devicesused for powdery materials. The continuous increase in vehicle number is also oneof the grounds of this type of pollution. In this respect traffic re-organizing andassuring its fluidity can have an important positive effect. The round-roads topermit reducing traffic inside localities, mainly inside Arad city, that are partlyachieved and partly planned, will reduce this type of pollution.

3.6. Trends and future dutiesSome strategic activities are compulsory in Arad County to prevent and

reduce air pollution as follows:- reducing emission of the most important pollutants, namely sulfur

dioxide, nitrogen oxides, volatile organic substances, ammonia;- using the “pollutant pays” principle in the real economy;- achieving such concentrations for the gas discharges that prevent

climate changes.4. ConclusionsThe achieved study proved that the state of the environment in the county is

closely linked to the economic developments and to the protective steps.For the 2006 – 2009 period a constant decrease and for 2010 an increase in

sulphure dioxide discharges was found. For the same period a decrease of nitrogenoxides emisions was demonstrated due to renewing the automobiles and mainly thetracks existing and circulating inside the county and also to the improvementsachieved at the energy producers. As regards volatile compound emissions, non-industrial burning devices are the most important sources; in 2010 a substantialincrease appeared due to discharges in agriculture and in forestry. In 2008 aprocess of increasing powder discharges started, due to the high rate of return touse of wood and coal in residential heating. The rather bad state of roads is asource of powder. Non industrial burnings are the main source of heavy metals inair.

Gaseous pollutants were monitored by sampling in sensitive areas such ascrowded street crossings or intensely circulated streets and NO2, SO2 şi NH3 weremonitored. The results were compared to the Romanian standard in force STAS12574-87, and in not any of the points the permitted maximal concentration wasexceeded. Not any important environmental accident was registered during 2010.

Some strategic activities are compulsory in Arad County for preventing andreducing air pollution as follows:


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- reducing emission of the most important pollutants, namelysulphur dioxide, nitrogen oxides, volatile organic substances, ammonia;

- using the “pollutant pays” principle in the real economy;- achieving gas discharges concentrations that prevent dangerous

climate changes.

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Sustainable Development, Boca Raton, London, New York, Washington D.C., pp.1 - 16;

Baron V., 2001, Practica managementului de mediu, ISO 14001, Edituratehnică, Bucureşti, pp. 19-21, 63 - 95;

Dumescu F., 2003, Etika v ekonomickom prostredi II, Banska Bystrica,Slovakia, 32 – 39;

Dumescu F., Klein L., 2005, Acta Oeconomica No. 18, Banska Bystrica,Slovakia, 86 – 90;

Dumescu F. et all, 2007, Acta Oeconomica No.23, Banska Bystrica,Slovakia, 33 – 34;

Dumescu F., Danoiu D., 2009, Partea I, Studia Universitatis „VasileGoldiş” Arad, Seria Ştiinţe Economice, 44 – 48;

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Bucureşti pp. 221 - 274;Klein L., 2008, Studia Universitatis „Vasile Goldiş” Arad, Seria Ştiinţe

Economice, Partea a II-a, 1 - 14;Klein L., Dumescu F., 2008, Problems of Marketing and Management in

Globalisation, Proceedings of the 6th International Scientific Symposium, BanskaBystrica, Slovakia, 98 – 105;

Lopusny J., 2003, Acta Oeconomica No. 15, Etika v ekonomickomprostredi II, 157 – 161;

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Szira Z., Varga E., 2008, Kitekintes-Perspective, Bekescsaba, Hungary,252 – 259.


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ASPECTS REGARDING THE MECHANISM OF BANKLENDING FOR INDIVIDUALS

David Delia *, Szabo Ioan Alexandru *** lecturer PhD, Western University of Vasile Goldiş Arad, Faculty of Economics

Sciences, E-mail : [email protected]** Assoc.Prof, PhD, Western University of Vasile Goldiş Arad, Faculty of Economics

Sciences, E-mail:[email protected]

AbstractThe crediting transactions are very important within the intermediation activity which thecommercial banks perform and these represent at the same time the main asset transactions.The manner of approach of this activity differs depending on the type of the client who canbe an individual, a legal entity or a credit institution.We aim at emphasizing aspects related to the loans granted to individuals by commercialbanks and especially at underlining the importance of the choice regarding the riskevaluation method when analyzing the credit file. In regards to the research methodology,we used the descriptive method. We conducted a qualitative research based on theobservation of some aspects, as well as a quantitative one. The conclusions of the achievedstudy are presented at the end of this paper.Keywords: commercial banks, lend mechanism , individuals, credit scoring method,discriminatory analysis.JEL Classification: C02, G21

1. Introduction:It is necessary to mention what the credit means in order to understand the

importance of the credit granting activity. Etiologically speaking, the word “credit”has its roots in the Latin word ,,creditum-credere” which means” to believe”, “ totrust” or to “put one’s trust in something/someone”. The origin of this notionreveals a psychological element necessary for the existence of the lendingtransaction which requires “trusting”. The credit formed the object of a variousresearch within the specialized field, leading to diverse opinions. The professor W.Sombrat offers a synthetic definition saying that: “The credit represents the powerthat one has of buying without having cash”.

In a similar manner, the professor C. Gide defines the credit as being “theexchange of a given wealth with a future wealth”. The professor F. Leitner definesthe credit as an “economic act which makes a right to grow on the side of anindividual in order for him/her to dispose permanently of the goods or servicesoffered by another individual, for the time it was given.

Professor V. Stanescu shows that” it’s about a credit operation or that wefind ourselves in front of an economic fact, called credit, every time it comes aboutan amount of money, made at a certain moment, on the behalf of an economic

mailto:E-mail:[email protected]



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subject, with the obligation for the last one to refund later on, at a certain date, thereceived amount, plus an amount of money which has the name of interest orinterest rate.

Professor A. Page defines the credit as being “the exchange of a certainmonetary value for a future monetary value.”

During its historic evolution, the credit came into many forms which, eventhough these appeared in time, as a response to diverse needs, they had periods ofcoexistence with the economic life of the humankind.

The distinction among the types of credit is given by the complexity of therelations which are established between partners on the occasion of the grant andreceipt of the loan. The more elements which constitute the credit areaccomplished, the closer we are to a credit type which is closer to the moderneconomy.

The banking entities offer credits to individuals, Romanian or foreignresidents or non-residents, who are at least 18 years old.

The types of credits given to individuals are classified from the point ofview of the credit duration being on short term respectively on long term.

- The short term loans are solicited for acquisitions of: vehicles,electronics.

- The long term loans are solicited for acquiring real estates.The main conditions which need to be fulfilled when soliciting loans are:- The person needs to be employed on a base of a contract for a

determined period of time and he/she should obtain an income which can assurethe monthly payment of their rates and interest rates. The solicitor can be: a retiredperson, employee with a labour contract for a certain period of time, legal entitywhich can achieve incomes according to the income declaration confirmed the taxadministration.

- To open a current bank account in which to deposit the advanceasked by the bank from their own resources and subsequently the monthly rateswhich have to be refunded;

- To assure the guarantee for the solicited credit and thecorrespondent interest rates;

- To assure the guaranty for the solicited loan and the correspondentinterest rates;

- To accept the amounts given by transaction. There are exceptionsin the case of the treasury loans which are put at the disposal of the solicitor incash, added up to 6 wages/ pensions.

- Not to show up with pending obligations or unpaid debits atdeadline towards the third party;

- To participate with their own resources when performingbusinesses (of the project) in order to solicit the loan. The quantum of these isestablished by bank in accordance with solicited loan category.


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2. Methodology and dataAs well as in the case of the loans granted to legal entities, the bank needs

to evaluate the risk at which it’s exposed through the loan granting process for thenatural persons. The procedure used with the purpose of analyzing loan risk takesinto account certain inconveniences as would be the following: the high number offiles and a low granted amount, the investigational process which is difficult.

These aspects trigger a series of costs on the behalf of the bank whichwould go for the increase of the expenses borne by the legal entity, solicitor of theloan. The increase of the expenses leads to the discouragement of the solicitor. Inorder to surpass these inconveniences, the banks have the possibility to select theloan solicitors by using the credit-scoring method.

This method evaluates the reliability of the client by subjective criteria: theliving condition of the client, their job, the length of time of their activity withinthe same workplace, the familial situation, the number of dependents, their income.

The documents solicited to the natural persons with the purpose of grantinga loan are the following: the loan application signed by the solicitor of the loan, thecertificate attesting the monthly income of two guarantors; the sale & purchasedocument authenticated by notary for the bought estates; the ownership orconcession documents of the space; the construction permit; notices, agreements,etc, bills or sale & purchase contracts for the long-term goods; work specificationgiven by the authorized Organs for buildings, renovation, reparations;

The bank will perform the credit-scoring on the base of the documentationand of the received pieces of information from the solicitor, and it will appreciatewhether the solicitor is eligible for refund and for guaranteeing the loan and theinterest rates.

An estimation model of the scoring is given by table no. 1 (Hempel G,Coleman A, 1990):

The application of the credit-scoring system was exemplified in the tableabove and it involves gathering all the points achieved by the solicitor and for theresult to be compared with the number established as limit between the approvaland rejection of the loan granting.


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- table no 1-Credit-scoring system (characteristics and shares)

Points Points

1.Main living space(own or on rent)

a) Own (in renovation process) 40b) On rent 8c) No answer 8d) Other situations 25

2.The living duration for the actualresidencea) Under 6 months 12b) 6 months – 2 years 15c) 2 years – 6 2

1 years 22

d) Over 6 21 years 35

e) No answer 83.Duration of the actual job

a) Under 1 21 years 12

b) 1 21 years – 3 years 15

c) 3 – 5 21 years 25

d) Over 5 21 years 48

e) Retired 48f) Child support (public assistance) 25g) At home 25h) Un-employed 12i) No answer 12

4.The age of the solicitora) Under 45 years old 4b) Over 45 years old 20c) No answer 4

5.Banking referencesa) Current account and savings 60b) Current account 40c) Account of savings 40d) Loan and current account and savings 30e) Only loan 10f) The loan hasn’t been received yet 10g) No answer 10

6. Credit cardsa) Main and for shopping 40b) Only main 40c) Only for shopping 30d) No answer 10

7. References of the financialcompanies

a) One 15b) Two or more 10c) None 5d) No answer 10

8. Incomesa) 0 – 10 000 $ 5b) 10 000 – 15 000 $ 15c) 15 000 – 30 000 $ 30d) Over 30 000 $ 50

9. Monthly paymentsa) 0 – 100 $ 35b) 100 – 300 $ 25c) Over 300 $ 10d) No payments 45e) No answer 10

10. Unfavourable evaluationsa) They haven’t been investigated 0b) They aren’t emphasized 0c) Two or more unfavourable

evaluations 20d) One unfavourable evaluation 0All the evaluations are positive 15


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Further on, we will present an evaluation model of the loan through scorewhich involves the discriminatory analysis. The discriminatory analysis is astatistic method which allows the distinction of many homogenous categoriesregarding the preset criterion staring from a set of pieces of information whichcharacterize each individual.

This requires going through two stages:1. The determination of the categories and pieces of information

which characterize each class;2. The use of the analysis results for the new solicitors.In the base of the crediting files performed and archived by bank, the

clients are divided in to two categories: good clients who refunded the credits atdeadline without recording any incidents and bad clients who didn’t refund creditsor who were late with their refund.

In both situations it’s necessary to find criteria which to characterize themwell. Hence, the following aspects can be followed:

a) the determination of the solvability criteriaOn the base of the supplied pieces of information within the loan file,

information about address, age, familial situation, income will be withheld. Thereare 20-30 pieces of information which are withheld and which will lead to thedistribution into categories of the good clients and the bad clients. The pieces ofinformation related to the two categories are:

- Bad clients: they have no account in bank, no phone number, theyare divorced, with no stable job, and aged between 25-30 years old, they aren’t theowners of the place they live in;

- Good clients: they have a bank account, they are married, theyhave a phone number, and they are the owners of the place they live in.

b) Determining the total note( score)There is a mark for each criterion which substitutes the share depending on

the importance: “The discriminatory analysis lays emphasis on the fact that manycriteria are more important than others and it allows to calculate the share whichhas to be associated to each one of them.

For each file, the shares attributed to the solvability criteria will begathered getting the final mark (the score)”. In case the discriminatory analysis wasdone correctly, the two classes show distinctly.

c) The determination of the limit markIt consists in determining the limit mark under which the probability for a

client to be unsolvable is very high. It goes to the determination of the optimal limitmark which is supposed to eliminate most of the bad clients and the least of thegood ones. A profitability analysis of the good and bad customers should beperformed in order to get the aforementioned optimal mark.

This fact involves the evaluation of the contribution of each client tothe bank’s profit. The evaluation will be positive for the good clients and negativefor the bad ones as a consequence of the expenses that the bank will have withthese, inclusively the loss borne by bank as a consequence of the non-recovery of


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the loan. The optimal mark will be considered that one which influences the profitof the bank favourably.

Further on, we will present an empiric study performed on a number of1200 credit files. After the solvability criteria have been attributed to the marks,summed up for each file, there is a final mark obtained. By separating the badcustomers from the good ones, the following results can be obtained:

-tabel no.2-Total marks obtained by clients

The total ofobtained marks

Good clients Bad clients

50 0 15100 30 10150 70 20200 150 30250 190 20300 160 45350 150 30400 56 20450 94 5500 100 5

Total 1.000 200Source : calculus made by the authors

3. Results and discussion

As a result of the profitability analysis of the files, a conclusion wasreached: reported to 100 lei of credit, each good client contributes on average with15 lei of profit for the banking society and each bad client generates a loss of 85 leifor the bank.

In case the bank establishes the limit mark to be 150, there are 100 goodclients and 45 bad clients who are eliminated. The profit changes as it follows: -150*15 + 45*85 = -2250 + 3825 = + 1575 lei

In case in which the limit mark established by bank is 200, there are 250good clients and 75 bad clients who are eliminated. The profit changes as thefollowing: - 250*15+ 75*85= -3750 +6375 = + 2625lei.

If the bank establishes the limit mark to be 250, there are 440 good clientsand 95 bad clients which end up eliminated. The profit changes in the followingway: -440*15 + 95*85= -6600 + 8075 = + 1475 lei.

As we can notice from this example, the choice for the mark 200 generatesthe most favourable situation on the profit.

Once the limit mark was established, all the loan demands will be analysedfrom the perspective of the pieces of information used during the discriminatoryanalysis.


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The questioner by which the profitability criteria are established as well astheir share must have a simple formulation in order to help the verification of theloan analyst of the loan solicitor’s declarations.

There are different questioning patterns depending on pieces ofinformation solicited by each bank, but these comprise mainly questions related to:the neighbourhood and the home of the solicitor, his/her job, duration at the sameworkplace, phone number, banking references, the familial situation, the number ofdependents and definitely the size of the obtained incomes.

Even though it is attractive, the credit scoring method represents a series ofproblems, two of the most important being:

1. The selection of the amount of files which makes the object of thediscriminatory analysis;

2. Stable discriminatory criteria.In regards to the first problem, the credits performed and accepted by bank

aren’t representative for the discriminatory analysis because the bank haseliminated through the classical analysis method of each client, the clients withhigh non-profitability risk.

In order to surpass this situation, which doesn’t represent actually thereality, the banking society has three possibilities:

- To avoid a double analysis of the files;- To include in the analysis the files which were rejected by the

credit officers who analysed by the classic method. This way, the number of thebad clients would increase;

- To accept all the loan demands in order to constitute a sample forthe discriminatory analysis.

Statistically, this possibility is the best because it eliminates the first twoinconveniences

From the point of view of the costs, this possibility leads to an increase inthe bank’s loss. If this increase will be compared subsequently by the submissionof the evaluation method by score- by an increase of the profits for banks, i.e. thedecrease of the loss, the acceptance of all credit demands on a certain period isjustified.” ( Stoica M., 1999)

The second problem related to the establishment of the profitability criteriais as severe as the previous one because the criteria taken into account: income,profession chance from one year to another, having a dynamic feature due to thechanges in the economic life and the social one of the country. In this respect, theprofitability criteria must be revised periodically.

The problems stated above underline the weaknesses of the credit scoringmethod, but they do not eliminate its efficacy.

4.Conclusions:The choice of the evaluation method for loans in case of the natural

persons represents is an extremely important element at the moment of the loan


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granting. The credit-scoring method as it results from the content of the paper isefficient, but it presents disadvantages as well.

The banks, depending on their own politics, will choose the model whichthey consider the most advantageous from the point of view of the estimated profit.

The conditions for the loan granting take into account aspects related to:the volume of the credit, the duration of the benefit, the refund deadline, the rates,the interest rates, the grace period, and the guarantees.

All these conditions are negotiated with the client, getting at the end to anagreement related to the crediting operation and the terms, in which the loancontract is to be closed. In the situation in which the analysis of the loan solicitor’sreliability has a convenient result for the banking society, the documentationspecific to the loan analysis will be forwarded with the purpose of being approvedby the competent body.

5.Acknowledgement,,This work was supported by the project "Post-Doctoral Studies in

Economics: training program for Elite Researchers - SPODE" co-funded from theEuropean Social Fund through the Development of Human Resources OperationalProgramme 2007-2013, contract no.POSDRU/89/1.5/S/61755 ".

Bibliography1.Bosno, C. ; Dardac, N. 2002. Banking management, The Economic

Publishing House, Bucharest City, Romania,2.Booth L., 2003 „Discounting Expected Values with Parameter

Uncertanty”, Journal of Corprate Finance, vol.9, no5(October),505-519;3.David Delia, 2009, Contabilitatea bancară a creditelor acordate

clientelei nefinanciare, Editura Gutenberg Univers, Arad, Romania4. Maricica Stoica – Management bancar ,Editura Economica 1999,

pag.825. George Hempel, Alan Coleman – Bank Management, Editura John

Wiley &Sons, New York, 1990, p. 4866.www.bnr.ro


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CROSS-BORDERS COOPERATION INSIDE THEEUROREGIONS. CASE OF DKMT ROMANIAN

EUROREGION

*Duda-Dăianu Dana Codruta, **Abrudan Denisa*Tibiscus University from Timisoara, **West University of Timisoara

AbstractThe present article point out some characteristics of the euro-regions, their aims

and objectives as cross-border cooperation forms. One of the definitions assigned to theeuro-regions specifies that they are territorial structures created in order to intensify theinter-regional and cross-border cooperation, by creating a coherent space of economical,scientific, social and cultural development.

The cooperation pattern within the euroregions gets a great support from the EU,this being considered a preceding exercise for the adherence to this organization by theparticipating countries and as a micro-experiment regarding the implementation of thecommunity relationships among the areas of the candidate states. The aims and theobjectives of the euro-regions can be characterized through a great typological diversitydetermined by content, all of these being the basis for the results of their activities.

The last part of the work paper overlights the characteristics and the evolution ofDKMT Euroregion and its importance for the regional development.

Key words: Euroregions, cross-border cooperation, regional development,European Union,,This work was supported by the project "Post-Doctoral Studies in Economics: trainingprogram for elite researchers - SPODE" co-funded from the European Social Fund throughthe Development of Human Resources Operaţional Programme 2007-2013, contract no.POSDRU/89/1.5/S/61755".

JEL Classification: Q10, R11

1. The concept presentationThe enlargement of the European Union, especially to Central and Eastern

Europe, included as part of his draft harmonization of building contiguous borderareas by promoting and supporting cooperation projects border on all plans and in awide variety of forms. In this respect, in recent 20 years, was established andpromoted the term Euro cross-border cooperation, with a strong spatial extension,which generally suggests the desire of states of to take part in this processirreversible of the contemporary period.

Initially there was a wide variety of meanings for this term or a multitudeof attempts to name these structures territorial cross-border cooperation. From awide range filtered to accept in recent years and applied through the year, and theextent and depth of understanding the mechanisms of formation, operation andextension of these trends to promote cultural identity and stability and economic


56

development, mainly in Europe and Central East will attempt to summarize someof the most suggestive and identifiable territorial possible definition of thesesystems.

From the beginning it is essential to underline that the form in which theywere designed and created the Euroregions or cross-border cooperation and otherforms of this type are not aiming at the establishment of regional governancestructures through a voluntary association of various structures natural andadministrative border.

Once we made this statement is much easier to understand the objectivesthat are close and of course the prospects of these territorial structures, possibleterritorial systems, in the process of enlargement of the European Union and morethan elimination by applying optimal solution accepted by all partners, borderdispute by trying to transform areas of divergence in the areas of convergence.

Analyzing the definitions accepted in the scientific literature, we canappreciate that the differences depend by the area of application. The degree offavorability or restrictively differ between EU Member States and the states fromEastern Europe, and to some extent for each country in particular, on the otherhand.

Conceptual base is definitively the same - to promote cross-bordercooperation and the gradual elimination of restrictions imposed by politicalboundaries. Thus, the Association of European Border Regions (AERF) states that:"within the geographic scope of cooperation, cross-border structures arecommitments to cooperation between local governance structures and regionalsituated along the border in line with promoting the common interest and to raiseliving standards for border populations [1].

In another definition states that Euroregions may be identified as localstructures created in order to enhance cross-border and interregional cooperation,through a coherent area of economic development, scientific, social and cultural.We noted that the basic objective is to create a border running on differentintegrated fields. Euroregions also shown that particular forms of over-frontierscooperation of local authorities. They involve local authorities’ association of twoor more neighbors, forming a unit area, characterized by certain features orcommon interests [2].

Underlining those presented, we can appreciate that: Euro cross-bordercooperation is a voluntary association, in compliance with national andinternational laws, of administrative-territorial structures of the state entities ofvarious levels, in view to eliminate the territorial isolationism, the creation of acultural approach framework or reconstruction of systems of this type, and last butnot least, establishing a core of economic development in order to achieve abalance between center and periphery and in a more advanced stage of territorialsystems functional. It is a preparatory and pre-integration phase of these countriesin the European Union and to promote good neighborhood policy with contiguousareas of operation of this process.


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By this summary-definition we have tried to emphasize the conceptual andapplied framework to what is charged inside the Central and Eastern Europe area atthe turn of the millennia, through the Euro-border cooperation.

Given the dynamics of this process and the existence of some differencesbetween the implementation and the functionality of this Euroregions inside theEuropean political framework, we not exclude the possibility that within arelatively short term, the theoretical announce synthesized and stated previously tobecome insufficient or too far in terms of practical applicability in different areasof Europe.

2. Structural Characteristics of the EuroregionsBeside the role in promoting mutual trust and cooperation, Euroregions

have contributed for economic development and cooperation in Western Europe.This experience is translated as a background with high speed towards Central andEastern Europe, but here the problem of perceptual great diversity of instrumentsand means of implementation.

In Europe there is a wide variety of such Euro-regional structure, caused bya wide range of criteria.

The firs Euroregion - Reggio Basiliensis, now renamed TriRhena -occurred at the border between Switzerland, Germany and France in 1963,followed by others in the border area between Benelux, Germany and France, afterwhich it expanded at a pace fast, so currently, there are a hundred such structuresfor cross-border cooperation extended from the Atlantic Ocean until to the Westpart of the ex-soviet space.

It’s very important to underling that the model of collaboration in theEuroregions is broad supported from the European Union; it can be considered anexercise preceding accession to the organization of the participating countries or asa micro-experiment for the implementation of community relations between thecandidate states’ regions.

Being the great diversity of acceptance regarding the content and skills ofcross-borders cooperation Euroregions, with the aim of clear structuraldemarcations of them, the Association of European Border Regions (AEFR)applies the following criteria to identify the contents and default Euroregions skills,identifying with: Associations of local or regional authorities located on the both sides of

border state, in some cases having the structure of the General Assemblylike leadership structure:

Cross-border associations with permanent secretariat, administrative andtechnical team with own resources:

Under private law, associations of non-profit organizations or foundationslocated in a part or the other of the border, in agreement with the nationalin force laws;

Associations, based on public law, based on inter-state agreements, withimplications on other issues, involving local authorities.


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Particularly interesting is a good algorithm of good Euroregion proposedby Andre Louis inside which can find a very explicit logical schema and amechanism for implementation, operation and development of such structures forcross-border cooperation[4].

3. The aims and objectives of EuroregionsEuroregions goals and objectives can be characterized by a variety of

typological determined content, actors and actions, all of them sitting on the resultsof their activities. In general, the Euroregions basic aims of promotingunderstanding and cooperation at all levels and forms of culture and also of theeconomic cooperation.

Each Euroregion establish its own objectives, which for the most part areclosely related to the objectives established by the European regional policy todate. All goals and objectives Euroregions take a number of factors among whichthe most important are the geographical, cultural, economic, etc.

Tabel no.1.: Some general characteristics of EuroregionsNo. Motivation Characteristics1 Geographical area In a border area that could become a

center for economic development2 When will take place a such

approachThere is a tradition of collaboration, butwithout implementation of anEuroregional institutionsIdentifying the type of institutions thatgenerate Euroregional tradition ofcollaboration

3 Extension Not very extensive, the optimumdimension being between 3,000 and10,000 kilometers

4 Population Moderate number, the optimal valuebeing between 500,000 and 1 millioninhabitants

5 Internal and externalnetworks

Depending on the external extension oftheir territory and density, theEuroregions can be adjacent and morecontinuous

6 Euroregional institutions a) On short-term objective: development,mobilization and organization fortransformation in a functional institutionin Euroregion’s areab). Use of internal and external resourcesc). General perspective for readjustment

7 Functions Creating the sense of indispensability for


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4. The case of DKMT EuroregionCooperation in this format has its origins in the bilateral cooperation

between Timiş (Romania) and Csongrád (Hungary), Regional CooperationProtocol Danube - Mures - Tisa, signed in 1997

DKMT’s objective is the development and broadening of relations betweenlocal communities and local representatives in environmental, economic,education, culture, health, science and sport fields, and cooperation in perspectiveof European integration.

DKMT’s partners: are: Romania: counties Timis, Arad, Caras-Severin, Hunedoara; Hungary: counties Csongrád, Békés, Bács-Kiskun, Jacz Nagykun Szolnok Serbia: Autonomous Province of Vojvodina

The DKMT’s population is 5, 4 million and the DKMT’s area is 77.600km2

General Assembly represents the deliberative organisme of cooperation.The President in office is elected by the General Assembly forming by heads ofregional authorities, for a period of one year, according to the principle of rotationbetween countries. Currently, the president is Mrs. Anna Magyar, president of CJCsongrad (Hungary).

DKMT’s Secretariat is composed by 3 persons delegated, each one fromthe Romanian, Hungarian and Serbian parts, based on internal agreements betweenthe regional leaders of the three countries.

Working groups study and draw up programs and projects, make proposalsand draw up reports on activities from the General Assembly. Steering Committee- 3 presidents of regional authorities, one from each country.

Agency for Cooperation Development DKMT realises activities conductedby both public and economic utility, for ensuring funds needed for the developmentof regional DKMT cooperation [3].

Regarding the projects being implemented, we must underline the followings: opening of new border crossing points: rail (to Berliste - Iam)- important for

the restoration of the oldest railway lines in Romania: Oravita - Iam (Ro) -Bela Crkva / White Russian / Weisskirchen (Serbia) - Socol -- Bazias (ro), roadand rail (at Socol)-out of isolation to the Danube enters the country and

cooperation, that will be urgentlyfollowed by the safety feeling ofEuroregion concept.

8 The functions’ stage and theinstitutions

The existence of 5 chronologicalsequences: active mutual knowledge, theindispensability of cross-bordercooperation, tangible cooperation, culturalactions, euroregional sense of safety.

Territorial coverage Able to reaction in the local, national andEuropean context.


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improve the natural riches offered by the National Park Iron Gates, road andrail to Gradinari (CS / RO) - Markov ( VS / Serbia) which will support aproject and cultural tourism in the Caras-Severin and the Vrsac. The projectaims the promotion of cultural tourism, wine-growing area of Vrsac - Markov -Gradinari and natural heritage, tourism and industrial zone Anina - Oravita -Iam.

modernization and development of road infrastructure in the area Naidas -Socol - Bazias, with funding from the Neighborhood PHARE Program 2004-2006 Romania - Serbia.

creating a border industrial park between Caras-Severin and South BanatDistrict (following the model of industrial park creating between the APVojvodina and Hungary).

creating etnocentre to facilitate the study and preservation of folk customs andtraditions, crafts, and folklore.

a circuit tour on the both side of the Danube border in two natural parks: theIron Gates Park (South Caras-Severin and Mehedinti) and Park Đerdap (Borskiand Braničevski districts).

creating an joint alert system to prevent disasters (flooding, environmentalaccident / pollution, etc.). between DKMT’s states. It wants a common systemof information management and joint logistics (site, common equipment,communication system for mailing information) to stay in real time all relevantinformation on flows and water quality.

"Center for monitoring and coordinating disaster -Caras-Severin". Applicant isPublic Service and Rescue Dispatch Disasters in the Directorate of PublicManagement and Private Domain of Caras-Severin county. Partners:Inspectorate for Emergency Situations "Semenic" Command and to prevent theflooding of municipal Vârşeţ.

"Vocational School of Tourism" for preparing the specialists of high level inthe tourism field.

5. ConclusionsBetween the advantages creating by Euroregions, must be remembered:

The process of European integration involves regional cooperation, such asborder regions contribute to the preparation for accession countries in theEuropean Union;

Euroregions contribute to the diminish of tensions and to maintain the stabilityin the Balkans area;

Euroregions represents a necessary stage in the process of transition from thegeostrategy to geoeconomy;

Euroregions engage humain and material resources that would otherwiseremain unused.

In the same time, it’s important to mention the disadvantages that couldappear:


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Euroregions generate agreements that local authorities could intervene in thepolicies of countries involved;

Euroregions creates the possibility that some local communities to signagreements against their own governments;

Border regions are often isolated from the centers of decision-making andeconomic activity. Thus, these experience special problems such as lack oftransport infrastructure; birth rate much higher than mortality; underdevelopedservice sector, inadequate technological infrastructure, but can be solvedthrough regional economic cooperation;

There is lack of cooperation between national authorities and local or regionalone;

There's the inability of authorities to involve people in processes ofcooperation.

Some governments are concerned that Euroregions are located at greatdistance from the central trying thus to undermine and diminish, enhancing cross-border relations with its neighbors.

Cross-border cooperation is not of course limited only to those alreadymentioned, diversification of fields of action and as a consequence of the status ofconstituent members of these cross-border cooperation. Thus, the said they can addinterest to the activities of the populations of border areas: social, health, education,waste management, water resources, conservation and environmental protection,management and organization of space, tourism and recreation, transportation,prevention and combat natural disasters.

6. AcknowledgementThis work was supported by the project "Post-Doctoral Studies in

Economics: training program for elite researchers - SPODE" co-funded from theEuropean Social Fund through the Development of Human Resources OperationalProgramme 2007-2013, contract no. POSDRU/89/1.5/S/61755

ReferencesIlies Alexandru, Romania. Euroregions, University of Oradea Publishing

House, Oradea, 2004Prisecaru Petre, Common Policies of the European Union, Economic

Publishing House, Bucharest, 2004*** Revue “Geopolitica: European Union, where?”, 3th year, no.13,

Topform Publishing House, Bucharest, 2005*** Revue “Geopolitica : Border areas of cooperation - the sources of

conflict or stability?, 4th year, no.20, Topform Publishing House, Bucharest, 2006


62

ACCOUNTING POLICIES APPLIED BY ENTITIES ANDTHE VALUE OF FIXED ASSETS

Partenie Dumbravă, *Csősz CsongorUniversity „Babeş-Bolyai”, Faculty of Economics and Business Administartion, ClujNapoca, no. 58-60, Teodor Mihali street, Romania, [email protected],

[email protected]*

AbstractThe objective of this paper is to present the accounting policies applied by mediumtaxpayers in Covasna county and analyse the factors of influence over choice of accountingpolicies related to tangible assets. The study contains an analysis of answers given byrespondents to the questionnaire sent, with regard to: evaluation bases, revaluation of thetangible assets of the entities, used amortization methods and the depreciable value. Theresults obtained among other, show that the greatest effect on accounting policy choiceshave influence factor no. 7 - The tangible assets value in the financial statements presentthe true and fair view of them.Key words: accounting policy, evaluation bases, revaluation, accounting depreciation, taxdepreciationJEL classification: M41

1. IntroductionThe purpose of the financial statements is to provide a fair view of the

entity’s assets and provide information about the financial position,performance and cash flows of an entity, information which would be useful forusers, in their economic decision making. The accounting policies applied byentity’s have major influences on the financial statements, so establishing theaccounting policies which the entity use consistentlyis an important activity, which is closely relation to the evaluation.

The notion of accounting policies appeared in the United States between1973-1985 due to efforts of FASB to devise an accounting theory, a conceptualframework for formulation of accounting standards. In this sense, accountingpolicies refers to all professional steps made by an entity to ensure efficientinformation (formation of the true and fair view). Evident that these “steps” are infact decisions / choices / options based on professional judgment, for example: howto account an operation (recognition, evaluation), disclosure in financialstatements.

2. Literature reviewDictionary of Accounting of the Oxford University Publishing House

defines accounting policies as “specific accounting bases and continuously used by


mailto:[email protected]*


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an organization in preparing their financial statements; this bases are consideredand determined by de entity as the most adequate to present fairly its financialresults and operations; policies are focused on specific topics such as “pensionschemes”, “the goodwill”, “research and development costs”, “operationsdenominated in foreign currencies”, etc...” (Hussey, 1999).

A more nuanced definition belongs to Nobes (1999, cited by Feleagă andMalciu, 2002, p 13), who argues that “the accounting policies are detailed methodsof assessment, measurement and recognition (finding) that an entity has chosenbetween the generally accepted by law, accounting standards and businesspractices. These policies should be used continuously and must be published. Theannual Report of an entity will include an annex with the accounting policies whichwere applied in the financial statements.

In a narrow sense those principles, guidelines, value and subdivisionframeworks means the accounting policies, under which can build and operate theaccounting system of an entity. In a larger sense, under accounting policy meanseverything that is necessary to describe an entity’s accounting system. In thisapproach accounting policy is “system documentation” for the entity’s accountingsystem (Bosnyák, 2003).

Fekete (2009) noted that while the Anglo-Saxon world have made effortsto generalize the practice of conceptual frameworks, focused on financial reporting(Feleagă, 1999), in continental Europe, due to normalization by the GeneralAccounting Plan normalizers have imposed strict and detailed rules on the practice(behavior) of entities. According to Haller & Walton (2003 cited by Fekete, 2009)the situation in Europe has changed with the start of elaboration of the Europeandirectives in 1969 and radically after the accession of Great Britain and Ireland tothe European Union in 1973, reflected in the exposure draft in 1974 – namely wasintroduced the “true and fair view” concept.

Why are these things important in analysis of the accounting policy? – askFekete (2009) in his work. Because the normalizator, by with accounting policiesprovide to entities (more exactly accounting practitioners) free to choose in theirdemarches and their professional judgments, in other words the Authority delegateon self normalization accounting.

Accounting policies are developed to provide, through of the financialstatements, relevant and credible information in order to know the true and fairview of the performance and financial position of an economic entity. If there areseveral accounting policies available in accordance with International AccountingStandard, the entity’s management has the possibility to choose between them andthe policy chosen must be applied consistently (Feies, 2010). Haţegan et al., (2010)have defined similar accounting policy, as follows: management should useprofessional judgment in developing the accounting policy that provides the mostuseful information to users, financiers, auditors and others who read the financialstatements.

Regarding the regulatory requirements for accounting policies notice twolevels, specify Petre et al. (2010), namely:


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a) regulation by law, which was done by including in the Law31/1990 regarding Commercial companies, republished with subsequentamendments, of the requirement of approval the accounting policies byadministrators. In this sense, the art. 142 par. 2 letter.

b) provide that between basic competences that can not be delegatedto the directors, the Administrative Board has powers to: “establish accountingpolicies and financial control systems and approval the financial planning”.

c) Regulations by secondary legislation issued by institutions withaccounting regulatory attributions (Accounting Law 82/1991, MFO 1752/2005 andMFO 3055/2009 for approval of accounting regulations harmonized with Europeandirectives)

In the definition of accounting policy, the Romanian legislator position isexpressed in the MFO 3055/2009, section 267, which is identical to the position ofthe IASB. Are made in addition some clarifications: section 267 (1). Accountingpolicies are the principles, bases, conventions, rules and practices applied by anentity in preparing and presenting the annual financial statements. Examples ofaccounting policies are: choice of property depreciation, revaluation of fixed assetsor preserve their historical cost, capitalization of interest or recognitionas anexpense, choosing the method of inventory assessment, etc…

Petre et al. (2010) writes that to establish the accounting policiesadministrators must take into account the economic context in which companiesoperate as well as the requirements contained in the law or applicable accountingregulations. In this regard it will consider the following aspects:

- the need to ensure continuity of application of accounting policies- probability of applying International Financial Reporting Standards- the entity affiliation in a group of companies or preparation the

consolidated annual financial statementDuţescu (2003) believes that the accounting policies include general

aspects realating to the basic problems of organization of financial reporting andspecific aspects relating to the options of accounting treatment for some economicoperations or economic factors, treatment in the sense of Fekete (2009) addressthree key issues: synchronization, recognition and disclosure.

These three essential problems are defined as follows:• Presentation of information – which information to be presented in

the financial statements, respectively what kind of indicators (quantitativeinformation) and which explanations (qualitative information) should include thefinancial statements.

• Recognition - in which structure of the financial statementsincorporate the accounting information (generated by economic operations orclosing-adjustment). For it is necessary to clarify two aspects: identification –identifying by conceptual basis or by explicit rules of the financial statementsstructures, and evaluation how quantify the financial statement structure,respectively evaluation basis and method.


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• Synchronization – when is presented (in concrete terms for whichperiod to make reporting) and recognition (identification and evaluation),respectively when grasp the realization of the economic operation within thefinancial structures (Fekete, 2009).

As mentioned above Duţescu (2003) believes that the accounting policiesinclude general and specific aspects, general aspects include: problems ofconception and formulation of accounting policies, which requires define and useof specific terms of policies (changes, estimates and errors) and general problemsconcerning financial reporting, aimed at organization of financial reporting throughthe (1) the presentation, format of the financial statements, the level of detail, kindsof narratives included in the notes, and (2) of evaluation: evaluation basis,estimation techniques and hypotheses made, significance levels, respectivelyspecific aspects include: problems / specific details related accounting norms forpresentation of financial statements in the different countries.

IASB argues that the information about the accounting policies used by anentity, is essential for users of financial statements in interpreting of the financialstatements (IAS 1). In his work Hope (2003) investigates whether the accountingpolicies disclosure influences forecast dispersion and forecast error by analysts inconnection with profit of the entity. Using a multicountry sample, Hope documentthat the extensiveness of accounting policy disclosure, as measured at the firmlevel by CIFAR (Center for International Financial Analysis and Research), issignificantly negatively associated with forecast dispersion and forecast error, andthat such disclosures have incremental explanatory power over and above all otherinformation in the annual report. These findings are consistent with the intuitionthat accounting policy disclosures reduce analysts’ uncertainty about forecastedearnings and support the standard setters’ view that such disclosures are importantfor users of financial statements.

3. Methodology and dataFor this empirical study we use the questionnaire – as research technique

that includes a predetermined set of questions, so constructed as to ensureposibility to analyze the respondents opinions. We want to analyze by thequestionnaire the accounting policy applied for tangible assets by mediumtaxpayers in Covasna county between 2008 – 2010: the evaluation bases used byentities, application of impairment and revaluation, revaluation reasen, analyze theused amortization methods and the depreciable value, analyze the other cost inrelation with tangible assets respectively we what to analyze the influence factorsfor selection of the accounting policies related tangible assets.

4. Results and discussionsTo achieve the empirical study we developed a questionnaire with 20

questions that we sent to medium taxpayers entities in Covasna county. Thequestionnaire had questions related to how are recognition the assets of the entities,evaluation bases used, impairment recognized at tangible assets, the depreciation


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method used and questions about revaluation and depreciation of fixed assets,respectively about the influence factors for selection of the accounting policiesrelated tangible assets. This questionnaire was designed for financial managers andaccountants, how are responsible to organizat the accounting of the entities. Thepopulation consists of 187 entities, accordance with Order 2731/2010 fororganization of the Public Finance Administartion of medium taxpayers at PublicFinance Administartion for medium taxpayers within County General directoratesof Public Finance and of the Public Finance of Bucharest, to which was sent thequestionnaire, the number of responses was 26. The specialty literature suggeststhat for the results of a questionnaire to be considered sufficiently relevant isnecessary to obtain a response rate of 5%. In our case the number of responsesreceived and validated is 26, result a rate of 13.90%, considered to be relevantenough to extend at the entire population of medium taxpayers in Covasna county.

Analysis of answers given by respondents is presented below:

Yes 26No 0

1. Accounting policies and internalcontrol systems are approved bymanagers? Total 26

Accounting policies and internal control systems are approved bymanagers in analyzed sample.

a) Economic criteria 0b) Value and useful life prescribed by taxlegislation

18

c) Both of them 8

2. Tangible fixed assetsrecognition:

Total 26

To recognition of fixed assets used in the majority of entities analyzedvalue and useful life prescribed by tax legislation, in 8 cases is taken into accountalso the economic criteria for recognizing tangible assets.

a) Historical cost – basic rule 1b) Revaluated value – alternative rule 0c) Historical cost and revaluated value 25

3. Evaluation bases usedto present tangible assetsin anual financialstatements: Total 26

The evaluation bases used to present assets in annual financial statementsof the studied entities the largest share of evaluation bases is the joint evaluationsystem (historical cost and revaluated value) in number 25, representing 96.2% of


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the total, historical cost is evaluation base for a single entity representing 3.8% andthe alternative rule is not used by any entity as single evaluation bases.

a) Are recognized in the balance sheet 0b) Are not recognized in the balance sheet, but are 0c) Are not recognized in the balance sheet, because theyare not

26

4. Impairmentof tangibleassets:

Total 26

During the period 2008-2010 at the entities analyzed do not wererecognized impairments to assets because have not been such changes in assetsvalue, according to answers provided by respondents.

a) Are recognized in the balance sheet 22b) Are not recognized in the balance sheet, but are 0c) Are not recognized in the balance sheet, because theyare not

4

5. Revaluationreserve oftangible assets:

Total 26

In the sample only four entities are not recognized revaluation reservewhich represents 15.4% of the total.

a) Revaluations were made by independentassessor

19

b) Revaluation were made by commission 3

6. Revaluations of fixedassets are made by:

Total 22

It can be noted that most of the entities analyzed, has used the services ofan independent evaluator. In the sample only three entities revaluated the tangibleassets with commission made by the entity, the other in number of 19 were madeby independent evaluators. To test the staff who made revaluation within theanalyzed entities we applied the binomialtest.

Binomial TestCategory N Observed

Prop.TestProp.

ExactSig. (2-tailed)

Group 1 Revaluations weremade by independentassessor

19 .86 .50 .001

Group 2 Revaluation weremade by commision

3 .14

Revaluations offixed

assets aremade by

Total 22 1.00


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How the limit of signification is < 0.05 (Sig. = 0,001) that meansindependent assessors predominate in a significantly greater extent compared withthe commission made by the entity of the tested sample.

a) Fair evaluation 17b) Transfer of responsability 2c) Fair evaluation and transfer ofresponsability

0

7. Reason for choicebetween independentassessor and commission:

Total 19

The entities who for the revaluation of assets have used the services ofindependence evaluators, motivated the choice by the fact that independentevaluator can better determine the fair value (fair evaluation), the percentage being89.5% of all responses, others were motivated choice by transfer of responsibilityin a number of 2 entities, representing 10.5% of all responses, respectively thethree entities that made the revaluation by commission made by the entity, so didnot have to answer this question.

Reason for choice between independent assessor and commission

Frequency PercentValid

PercentCumulative

PercentValid Fair evaluation 17 65.4 89.5 89.5

Transfer ofresponsibility

2 7.7 10.5 100.0

Total 19 73.1 100.0Missing System 7 26.9Total 26 100.0

Land 0Buildings 12Land and Buildings 9All of tangible assets 0

8. Revalued tangibleassets:

Total 21

Within respondents 12 entities have revalued construction in 2008-2010and 9 entities were revalued land and buildings of patrimony entity. Further, withCrosstabs we can noted that in 2008-2010, independent evaluators have revalued at12 entities buildings and at 6 entities buildings and land, respectively at the threeentities that evaluation committee revalued the land and building.


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Revaluad tangible assets in 2008-2010

Frequency Percent Valid PercentCumulative

PercentValid Buildings 12 46.2 57.1 57.1

Land andBuildings

9 34.6 42.9 100.0

Total 21 80.8 100.0Missing System 5 19.2Total 26 100.0

Case Processing SummaryCases

Valid Missing Total

N Percent N Percent N PercentRevaluations offixed assets aremade by *Revalued tangibleassets in 2008-2010

21 80.8% 5 19.2% 26 100.0%

Revaluations of fixed assets are made by * Revalued tangible assets in 2008-2010Crosstabulation

Revalued tangible assetsin 2008-2010 Total

Count BuildingsLand andBuildings Buildings

Revaluations were made byindependent assessor 12 6 18

Revaluations offixed assets aremade by Revaluation were made by

commission 0 3 3

Total 12 9 21

Presentation the fair value of the buildings inthe annual financial statements

7

Determine the taxable value of the buildings 13Both of them 1

9. The reason ofrevaluation ofbuldings is:

Total 21

To test the reason of buildings revaluation: presentation the fair value ofthe buildings in the annual financial statements or determine the taxable value ofthe buildings we applied the binomial test. The purpose of binomial test is to


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compare a proportion with a specified value. In this test was not taken into accountwhere the response was both of reasons.

How significant is >0.05 (Sig. = 0,263) that means, determine the taxablevalue of the buildings reason not predominate in a significantlygreater extent compared with the presentation the fair value of the buildings in theannual financial statements of the respondents.

a) Yes 18b) No 8

10. Consider correct in point of view ofaccounting, the obligation under the taxcode to revaluate in every three yearsthe buildings of the entities:

Total 26

Entities who answer afirmatively for above question argued by thefollowing:

• Because it provides true and fair view (current value, marketvalue) of the buildings of the entity’s financial statements

• So reflects in the accounting the real market value of the buildingsat that date

• The accounting value follows the market trends• The buildings value is reflects better in the annual financial

statements• The property market change dramatically from year to year. While

three years is a lot of changes, changing economic purpose of the buildings, such asis necessary to revaluate the buildings

• Give the correct market value, for the management of the entityabout the buildings

• Because it provides frequent revaluation of buildings, therefore thefinancial statements present the fair view of patrimony

• If there were no this requirement many entities would neglectbuildings revaluation. By this measure entities are required to revaluated and bythis, implicitly, the buildings are made at fair value

• Application of rates of tax on real buildings value

Entities who answer negatively for above question argued by thefollowing:

• Taxation influences in a negative way the accounting principles• Taxation requires to revaluate• Because the accounting need to be separate to from taxation, not to

impose taxation evaluation methods for accounting• The assets revaluation should be correlated to property market –

buildings market


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• To plan the revaluation of the buildings to each entity whenconsider necessary, not be required

• Revaluations should be made only for the fair presentation of theassets at fair value and not for tax considerations

• Because reduces the debt ratio of the entity (if the buildings valueincreases)

a) Presentation the fair value of the assets in theannual financial statements

7

b) Increase the value of the entity by revaluationupwards of the assets and reduce the dept ratioof the entity

1

c) Both of them 1

11. The reason ofrevaluation othertangible assets is:

Total 9

For the majority entities which have revalued land the reason is to presentthe fair value of fixed assets in annual financial statements, the responses sharebeing of 77.8%.

a) Entry value (Historical cost – basic rule) 4b) Entry value, after revaluation fair value(Revaluated value – alternative rule)

21

c) Entry value, after revaluation just as entryvalue (Revaluated value – alternative rule)

1

d) Entry value - Residual value 0

12. The depreciableamount of tangibleassets:

Total 26

For 80.8% of respondents value depreciable assets is the input value, afterthe revaluation fair value, for 4 entities depreciable amount is historical cost, notcarrying revaluation and for am entity the depreciable value is historical cost andafter revaluation of tangibele assets.

a) Straight-line amortization 21b) Degressive amortization 3c) Accelerated amortization 1

13. Amortizationmethods used byentities:

d) Degressive and accelerated amortization 1Total 26

At 5 entities is used degressive and accelerated amortization methods.Degressive depreciation method is used in four cases for equipment depreciationand in two cases for motor vehicles, accelerated depreciation method is used forequipment depreciation.


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In the analyzed period has not changed any entity method of depreciationduring the assets utility period, respectively the useful life of fixed assetsestabilished in the entity’s accounting policy is equal to the useful life provided bythe Government decision on all of the 26 entities analyzed. Also should be notedthat only an entity recognized residual value for the motor vehicles of the entity,so at the other entities depreciable value was equal to the input value (historicalcost or revalued amount.

a) To reflect how the economicbenefits are consumed of the tangible assetsby de entity

4

b) To reduce the entity profit, respectivelythe profit tax due

1

14. For what reason areused degressive and / oraccelerateddepreciation methods:

Total 5

Within respondents 80% of entities which used degressive / accelerateddepreciation they used to reflect how the economic benefits are consumed of thetangible assets by de entity, only one entity has used thesemethods of depreciation of tax considerations.

a) Yes 14b) No 12

15. There are cases where accounting depreciation differsfrom tax depreciation:

Total 26

Entities how answer affirmative for above question described in thefollowing cases when between fiscal and accounting depreciation is difference:

• If the entity owns assets outside of operating activities• If the entities who have invested in depreciable fixed assets or

depreciable invetion patents and where was deducted amortization expenses 20%of the input value as required by law, at the date of operation of the asset or patentinvention

• In case of revaluation of assets, depreciation from 1 May 2009 ofrevaluation reserves are not deductible. Mentioned in connection with this responseas follows: From May 1, 2009, depreciation expense related to the revaluationreserves are still considered deductible expenses, but depreciation expense relatedto the revaluation reserves which were established after January 1, 2004 areconsidered taxable incomes, that the share of depreciation expenses related torevaluations are taxed on the extent of registration these expenses, so thedepreciation does not reduce the taxable base of entity, increasing the income taxowed by them. For this reason in accounting practice financial managers andaccountants consider is not tax deductible expenses.

• If the asset is used only for a period in fiscal year (for seasonalactivities)


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• If the asset is not used, the asset is preserved for a period time

a) Are incorporated in asset value 16b) Are not incorporated in asset value 10

16. In the acquisition cost oftangible fixed assets cost oftransport, handling andinterest:

Total 26

To the question: In the acquisition cost of tangible fixed assets cost oftransport, handling and interest answered affirmatively 16 representing 61.5% oftotal and negatively 10 entities representing 38.5% of total.

a) The asset value is amortized over aspecified duration

13

b) The asset value affects the currentresult

13

17. If the tax value of the assetis less than the limit valueestablished by Governmentdecision and duration of use ismore than one year: Total 26

It is interest results received to the above question half of the questionedsustain that assets are depreciated and the other half say that these assets affect thecurrent result, respectively are registered to current expenses as inventory items.

a) Are incorporated in asset value 19b) Are registered at current costs 7

18. The refurbishment(renovation), maintenanceand repair costs of tangibleassets in “questionable,interpretable” cases:

Total 26

For most entities renovation (refurbishment), maintenance and repaircosts of tangible asstes in “questionable, interpretable” cases areincorporated in asset value, the share of positive responses was 73.1% of allentities.

In this empirical study within medium taxpayers in Covasna countythe last investigated aspect in connection with the accounting policy usedfor tangible assets is to analyze the factors of influence over the accountingpolicies choices. We formulated seven factors that may have effects ontangible assets accounting policies applied, being established fiveclassifications: 5 – major effect, 4 – important effect, 3 – average effect, 2 –minimal effect, 1 – without effect.


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Table no. 1 Analysis of factors of influence over choice of accounting policiesrelated to tangible assets

Factors of influence Average Variance Modus Median1. Reduction in value

of profit tax3,50 1,36 5 4

2. Ensuring maximum useof tax benefits

3,85 1,05 4 4

3. With the evaluationmethods used, thefinancial statements topresent a positive imagefor entity’s creditors

4,00 0,75 4 4

4. The tangible assets imageobtained under appliedevaluation methods to beconsidered reliable by thefinancial auditor

3,15 1,08 3 3

5. In the case oftax inspections theevaluation methods usedto be considered adequateby inspectors

2,65 1,32 3 3

6. Specific needs ofinformation of theentity’s owners

3,62 0,90 4 4

7. The tangible assets valuein the financial statementspresent the true and fairview of them

4,35 0,89 5 5

Cumulative 3,59 1,05 4 4

In the Table no. 2 we can observe that, of the seven factors four factorsinfluence average is above the average of the cumulative factors. The greatesteffect on accounting policy choices have influence factor no. 7 – The tangibleassets value in the financial statements present the true and fair view of them. Alsowe can observe that the smallest effect on accounting policy choices have theinfluence factor no. 5 – In the case of tax inspections the evaluation methods usedto be considered adequate by inspectors.


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Table no. 2 The average and variance of factors of influence over choice ofaccounting policies related to tangible assetsFactors of influence Average Variance

7. The tangible assets value in the financialstatements present the true and fair view ofthem

4,35 0,89

3. With the evaluation methods used, thefinancial statements to present a positiveimage for entity’s creditors

4,00 0,75

2. Ensuring maximum use of tax benefits 3,85 1,056. Specific needs of information of the entity’s

owners3,62 0,90

1. Reduction in value of profit tax 3,50 1,364. The tangible assets image obtained under

applied evaluation methods to be consideredreliable by the financial auditor

3,15 1,08

5. In the case of tax inspections the evaluationmethods used to be considered adequate byinspectors

2,65 1,32

5. ConclusionsFirst, we conclude that the majority of the entities to recognition the

tangible assets do not take into account economic criteria it also are recognizing atthe value and useful life prescribed by tax legsilation. It also the majority of theentities does not use other method than the linear method of depreciation, so by inmany cases are not reflected correct how the economic benefits are consumed ofthe tangible assets, so we conclude that the recognition and amortization of fixedassets is significantly affected by taxation.

Within the analyzed entities 25 of 26, us the mixed evaluation bases fortangible assets evaluation. Most of revaluation (86.4%) being made by independentevaluators. The main reason to employ the services of independence evaluatorswas: fair evaluation, meaning that the independent experts can determine the assetsvalue better than the commission within the entity.

In connection with the obligation under the Tax Code to revaluate theentity buildings every three years, our view is similar to respondents who answerednegatively to question four. If we consider correctly the influence of taxation, fiscalpolicy on accounting, then we can’t talk about fair view financial statements whichare made based on professional judgement. Taxation would not be to requireaccounts to use certain methods of evaluation, respectively revaluation of assets ofthe entity, that should be plan by entity experts, and the date of the revaluation tobe established with professional judgement, so to be made when is necessary.


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Also we can conclude in relation to expenditure incorporated in the valueof assets, accounting tratementul if the tax value of the asset is less than the limitvalue established by Government decision and duration of use is more than oneyear, respectively about refurbishment, maintenance and repair costs of tangibleassets in “questionable, interpretable” cases within each entity are managed underprofessional judgment of directors / accounting experts.

In relation to the factors of influence over the accounting policies choicesrelated to tangible assets the most important factor according to answers providedby respondents is: the tangible assets value in the financial statements present thetrue and fair view of them, we before making the empirical research we predict thatthe most important factor will be the factor no. 1 – Reduction in value of profit tax,as a result of research has shown that the average of influence of this factor isunder the average of the cumulative factors.

ReferencesBosnyák, J. (2003) Efectul procedurilor de evaluare contabilă asupra

situaţiei proprietăţi, veniturilor şi situaţiei financiare ale entităţilor (Számviteliértékelési eljárások hatása a vállalkozások vagyoni, jövedelmi és pénzügyihelyzetére), Teză de doctorat, Budapesta

Feies, G. H. (2010), Politici contabile şi opţiuni în cercetarea capitalurilor(Accounting policies and options in the research of the capitals), Annals. EconomicScience Series (XVI), pp. 560-564

Fekete, Sz. (2009), Cercetare conceptuală şi empirică privind raportărilefinanciare din România şi Ungaria, Editura Casa Cărţii de Ştiinţă, Cluj-Napoca.

Feleagă, N. & Malciu, L. (2002), Politici şi opţiuni contabile, EdituraEconomică, Bucureşti.

Haţegan, C.-D., Imbrescu, C.-M. & Pavel C. – D. (2010) Elaborarea şiaplicarea politicilor şi procedurilor contabile, Revista Studia Universitis „VasileGoldiş” Arad, nr. II/2010, pp. 343-51.

Hope, O-K. (2003), Prezentările politicilor contabile şi prognozeleanaliştilor (Accounting Policy Disclosures and Analysts’ Forecasts),Contemporary Accounting Research Vol. 20 No. 2 (Summer) pp. 295–321.

Hussey, R., (1999), Dicţionar de contabilitate (Dictionary of Accounting),Oxford University Press, Second Edition.

Petre, G., Avram, M., Duinea, E. (2010), Politici contabile – întrenecesitate şi obligaţie legală, Revista Audit Financiar, Anul VIII. Nr. 1, pp. 36-41.


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FROM ACCOUNTING CONVERGENCE TOACCOUNTING HARMONIZATION UNDER THEAUSPICES OF ECONOMIC GLOBALIZATION

Ana-Maria Mărculescu, Octavian Florin DonderaWest University of Timisoara, Faculty of Economics and Business Administration, 16 J. H.

Pestalozzi street, Timisoara, 300115, [email protected]; [email protected]

Abstract:In the current international economic context is urgently needed more than ever atransparency of business information. This situation is caused by the fact that economicdecisions are based on accounting information, and knowing the regional and internationalaccounting rules is crucial to have a correct interpretation of the business connections in theworld.The misleading barriers between the independent economic systems, local, national andothers the same, have had throughout the history significant implications on the economicpolicies adopted in each of these systems. Liberalization of capital movements andworkforce provides the premises of exploitation the existing opportunities (employment,savings, investments, so.) in the technological and economic environments but also thefiscal and monetary models.Keywords: internationalization, globalization, harmonization, convergence, competition.JEL classification: M41

IntroductionThe beginning of the XXI century confirms that the national destinies are

influenced by the global competition forces, so that the operational, financial andinvestment decisions have significant international implications.

Research methodologyThe study seeks to capture accounting developments from the notion of

internationalization to the globalization of accounting, respectively from theinternational accounting harmonization to convergence. In this way we proceededat making a deductive research, and also inductive to determine the factors thathave caused to give up a terminology in favor of another. To achieve this scientificapproach we have studied and presented several relevant points of view from thespecialized literature foreign and domestic of the last twenty years.

In terms of scientific research we consider that the debate on globalizationand international accounting convergence will be with us as long as they will try to




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achieve a referential if not unique at least one that has commonly used rules,principles and a unified terminology worldwide.

Nowadays we are witnessing a globalization process accounting, as part ofeconomic globalization. In his turn, the globalization reflects a phase of theinternationalization process of the companies through which the material form ofthe economic activity is subject to the abstract logic of capital exchange andinformation.

Even if sometimes the term internationalization is used as synonymouswith the globalization, some authors claim that these terms are not interchangeable.This is because, internationalization would require, to add an alternative languageto the national one, which may determine the modification in a positive or negativeway of the national requirements and conditions, does not cause the permanentreplacement of the national framework. However, in recent decades, the terminternationalization became obsolete and is used increasingly less often than that ofglobalization.

Economic globalization is seen by some authors as "the reached stage bythe real and long lasting process of the economy internationalization".

According to this concept, we can say that the connection between theconcepts involved would be like:

Business internationalization Economic globalization Internationalaccounting harmonization

Accounting globalization aims to transform the accounting system into afinancial and economic model, which will inform more correctly and quickly theusers of accounting information.

According to some authors “international accounting harmonizationrepresents the internationalization of accounting by promoting the interests ofglobal accounting standards in which the global interest has priority over thenational one.”

At the opposite pole, authors such as C. Cooper, points out that"globalization suggests a tendency towards homogenization and standardization.Globalization affects our understanding of accounting with related effects onterritory, environmental and social sphere in which the accounting is held".Furthermore he believes that the relationship between true value and globalizedworld is given by the ability of accounting data to capture the economic reality in aworld increasingly complex and globalized.

Amplification of the globalization of international capital markets andnational economies tend to form a unique mechanism in terms of global economicdevelopment, experts in the field, considering that the last two decades havewitnessed an upward trend of economic opening.


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Both global and national scientists believe that hyper competition andglobalization are the two phenomena that generates a complex businessenvironment. These phenomena creates not only a state of turmoil and turbulencein the competitive environment and generates changes in market conditions, butalso requires changes and developments within organizations.

International accounting harmonization is the process by which nationalrules and regulations differ from country to country, sometimes divergent, areimproved to be comparable.

This phenomenon allows the elimination of the main obstacles in achievinginternational comparisons. The main argument in favor of harmonization is thesearch for efficiency in international transactions. The lack of uniformity andcomparability of accounting information is a barrier to international investment.

A second motivation that leads to harmonization of accounting systems isthe desire to unify the conditions of competition between countries.

Taking into account the trends of globalization, companies prefer to use auniform accounting system. In the first phase they aspire to an effective economicoperating.

In a market economy, accounting harmonization has as object to organizethe operating rules for the market accounting information, in order to optimizefinancial communication.

Accounting information can be viewed as a specific "law" product becauseproduction, its presentation and distribution must be regulated. Optimization offinancial communication requires control of the report quantity-quality/price,regarding to accounting information.

Accounting harmonization is needed to prevent disturbances that mayoccur between supply and demand for accounting information. In thesecircumstances those involved in the process of harmonization, in their role asjudges of the social game of accounting, must find solutions to reduce the inherent"depreciation" in organization of the accounting system.

The fundamental issue of accounting harmonization is related also to thecredibility given to accounting. The statement is based on the level of confidenceof the users regarding the situation in which the same company, for the sameperiod, in different countries has different images of equity size and results, as aresult of compliance with the current rules in these countries.

Through those mentioned, international accounting harmonization is apositive phenomenon of which achievement is determined by the currentdevelopments in economic life in general and accounting in particular.

But, like any process, accounting harmonization has some limits ofapplicability, due to the following issues:

• in disadvantage of harmonization can be shown that this breaks the socialequilibrium, ignores the specific role of accounting in each country. Achieving it


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requires costs incurred essentially by small and medium enterprises, while thebenefits accrue mostly to large companies;

• Another problem is the definition / setting space that will manifestreconciliation, if it should take into account all firms or limit to some, especiallythe listed companies, companies with share capital or the ones with exceed acertain level of size;

• For some companies, harmonization involves significant costs.A full harmonization can be achieved only if there is a social and economic

environment (tax legislation, company law, financing, business managementsystems).

Accounting convergence is the process where accounting standards aredeveloped in such a way so it can be able to lead to the same fact or purpose, byhighlighting the similarities between national - regional - international.

Access to finance on capital markets is conditioned by the fulfillment ofsome conditions regarding financial communication, fixed by local accountingrules. However, given the importance of U.S. financial markets in the finance ofglobal economy, US GAAP accounting referential performs a major influence inthe international accounting normalization process. Therefore, any company thatwants to use funding from the Americans markets must prepare its financialstatements according to US GAAP.

On such a background, the main actors of the global market started tobecome more and more interested in the existence of a single accountingreferential, represented by accounting rules of good quality, that would allowfinancial communication between operators of the international capital markets.

The solution of compromise was found in October 2002, when theinternational organization of accounting harmonization(IASB) and the Americanorganization (FASB) have signed an agreement (called "Norwalk "), aimed toensure the convergence of accounting references issued by the two organizations ofaccounting regulations.

The officials of the two organizations of accounting normalization havedeclared that the insurance convergence regarding the accounting standards atglobal level means the alignment of accounting rules considered base by adoptingdoctrinal variant considered to be the best: if U.S. GAAP norm is better it will bechanged the international standard and vice versa. On the other hand, accountingconvergence implies also a alignment of the national accounting references to theIFRS standards issued by IASB, until this time IASB had made a series ofagreements with organization of accounting normalization from different countries.

In essence, the term of "harmonization" was replaced with "convergence",which denotes an increase of compatibility between global accounting references(IFRS and U.S. GAAP) as a result of the importance of U.S. financial market in theglobal economy.


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Difficulties in achieving accounting convergence at global levelThe obstacles that interferes in achieving accounting convergence are

related first of all to the differences quite accentuated existing between the nationalaccounting systems, and secondly targeting the difficulties to apply theinternational standards of financial reporting in countries with different accountingtraditions ( for example: the high complexity of international standards, thedifficulties regarding terminology, interpretation).

Nobes (1998) highlighted in his studies many factors considered over thetime to influence national standards of some country and whose existence is relatedto maintain international differences. Among these are: the legal system, thedominant system of finance, taxation, and also the education level, age, accountingprofession, stage of economic development, culture, geo-political, linguisticeconomic, social.

Larson and Street (2004) consider that two of the most important barriersthat are in front of accounting convergence are related to the complex nature ofIFRS (including financial instruments), and the guidance of national accountingsystems to taxation.

Ding (2005) has shown that cultural values justified in a greater degree thedivergence between national accounting standards and IFRS than the legal system.

Ristea (2006) believes, however, that the environment, including culture,have an indirect effect on the occurrence of differences between accountingsystems, a direct role being played by the financial system of enterprises, in whichpolitical factors can be added.

Epuran and Megan (2006) reveals that most companies report as mainobstacle to the convergence realisation the complex nature of standards,particularly those issues regarding financial instruments or fair value. Anotherimportant obstacle is the strong relationship between the accounting and taxation,manifested mainly in continental European countries, where one of the mainobjectives of accounting rules are to determine taxable income. However, authorspoint out that financial statements prepared according to IFRS are mainly orientedto meet the information needs of capital markets, which significantly differ fromthose of tax authorities.

Zeff (2007) sets out four reasons that could affect the proces ofinternational accounting convergence: problems of interpretation, problems oflanguage,terminology problems and political interference. Interpretation of IFRSrepresents an important step towards their effective implementation. If this is notdone constantly, thecomparability of financial information can not been sured.Language problems are determined by standard translation from English in otherlanguages. In addition, some term scan be defined or interpreted differently fromcountry to country. The differences between countries and the existence of somedeveloped small capital markets and the durability of accounting traditions are verydifficult to overcome difficulties which also involves high costs to be disposed of.


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The cultural and political differences, and the way of doing business, maycontinue to impose barriers to achieve a single financial communication systembecause a single set of accounting standards can not reflect the differences resultedfrom national business practices, wich result from differences between institutionsand cultures (Armstrong et al, 2010.).

As a conclusion of the above mentioned we must be realist and fully awarethat the way to achieve a true accounting globalization will be long and difficult.

There are still many countries which have not raised the issue to give upnational accounting rules. In these circumstances it would be necessary to conceivea convergence proces in terms of procedure to be better understood and to avoidinconsistent and superficial implementation of accounting standardsand to allowcompanies to face up to the changes that may occur.

Regarding the international accounting harmonization, we believe that its aascension will be developed into a report of power between professionalorganizations, political organizations, major multinational corporations and highlydeveloped nations.

Acknowledgment: This work was supported by the strategic grantPOSDRU/ CPP107/DMI1.5/S/78421, Project ID78421 (2010), co-financed by theEuropean Social Fund within the Sectorial Operational Program Human ResourcesDevelopment 2007 – 2013.

References1. Armstrong, C., Barth, M., Jagolinzer, A., & Riedl, E. (2010).

Market Reaction to the Adoption of IFRS in Europe. The accounting review, 31-61.

2. Bogadan, Victoria “Armonizarea contabila international”, EdituraEconomica, Bucuresti, 2005;

3. Bunget, O. C. „Normalizarea şi reglementarea informaţiei înprocesul reformei contabile din România” Congresul profesiei contabile dinRomânia, Ed. CCECAR, Bucureşti, 2004;

4. Casta J. F., Colasse B., “Juste valeur-enjeux techniques etpolitiques”, Ed. Economica şi cabinetul Mazars, Paris, 2001, pg. 182

5. Collase, B. “Contabilitate generală”, Ed. Moldova, Iaşi, 1995 -traducere de Neculai Tabără;

6. Cooke, S.” Accounting standards” International Tax Review, Jul2001;

7. Cooper, D., R. Greenwood, B. Hinings, and J. Brown”Globalization and nationalism in a multinational accounting firm: The case ofopening new markets in Eastern Europe” Accounting, Organizations and Society,no.23, 1998;


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8. Deaconu A., „Impactul convergenţei contabile asuprareglementărilor şi practicilor nationale” volumul conferinţei „Contabilitateamileniului III”, Editura Sincron, Cluj-Napoca, 2003

9. Dima, Ştefana „Contabilitatea evenimentelor si tranzactiilorcomerciale. O abordare globala”;

10. Ding, Y., Jeanjean, T., & Stolowy, H. (2005). Why do nationalGAAP differ from IAS? The role of culture. International Journal of Accounting.

11. Epuran, M., Megan, O. (2006). Convergenţa contabilă în condiţiileregionalizării. Revista de Economie teoretică şi aplicată - supliment , 167-174.

12. Feleagă N., Malciu L. „Provocările contabilităţii internaţionale lacumpăna dintre milenii, Editura Economică, Bucureşti”, 2004;

13. Ionescu, C. “Informarea financiară în contextul internaţionalizăriicontabilităţii”, Ed. Economică, Bucureşti, 2003;

14. Larson, R., & Street, D. (2004). Convergence with IFRS in anexpanding Europe: progress and obstacles identified by large accounting firms’survey. Journal of International Accounting, Auditing and Taxation, Vol.13, Issue2 , 89-119.

15. Mustaţă R., “Sisteme de măsurare a armonizării şi diversităţiicontabile între necesitate şi spontaneitate”, Editura Casa Cărţii de Ştiinţă, ClujNapoca, 2008;

16. Nobes, C. (1998). Towards a General Model of the Reasons forInternational Differences in Financial Reporting. Abacus , Vol.43, No.2.

17. Ristea, M., Olimid, L., & Calu, D. A. (2006). Sisteme contabilecomparate. Bucureşti: Editura CECCAR.

18. Tobă, D. “Globalizarea- progres sau dezastru?”, TribunaEconomica, nr. 34, 2006;

19. Zeff, S. Commentary: Some obstacles to global financial reportingcomparability and convergence at a high level of quality. The British AccountingReview, 2007, 290-302

20. ***http://www.ifrs.org

http://www.ifrs.org


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THE ACCOUNTING TREATMENT APPLICABLE TOTHE STRUCTURAL FUNDS IN ACCORDANCE WITHTHE INTERNATIONAL FINANCIAL STANDARDS –

IAS20

*Breban Ludovica, **Achim Monica Violeta, ***Borlea Sorin Nicolae*„Vasile Goldiş” Western University of Arad, E-mail: [email protected]** „Babeş Bolyai” University of Cluj-Napoca , E-mail: [email protected]***„Vasile Goldiş” Western University of Arad , E-mail: [email protected]

AbstractThe European funds, according to the Emergency Ordinance no. 63/1999, are defined asbeing the financial contributions of the European Union, represented by the amounts ofmoney which are transferred to the Romanian Government by the EU Commission, as anon-refundable financial assistance. The structural funds are post-accession funds financedby the EU budget, having as purpose to support the member states, in fields of interest as:education, research, agriculture, the SMEs’ development, etc. In this context, specialattention is brought upon the less-developed regions. In regards to the way of informing the beneficiaries of the Program, these must beaware of the nature of the European funds regarding the implementation of the projects inquestion. Hence, at the moment when the contract is signed between the contractingauthority (It’s an institution (public or private) which closes a contract with an inverstorregarding the implementation of an investment program of the aforementioned investor atthe moment when the investor doesn’t get involved directly and completely in theorganisational activity of granting the finances.and the delegated authority and beneficiary,the category of the offered financial support will be specified explicitly, i.e. from thecommunity budget or the state budget, as the allocated amount, the contribution of eachbeing expressed in percentages or absolute value.Keywords: the government grant, grants related to assets, non-monetary grants, therefundable grantsJEL Classification: M41

1.Introduction

The governmental grants represent the assistance given by the Government inthe form of resource transfers to an entity with the condition of the last one torespect, in the past and in the future, certain conditions regarding the operationalactivity of the aforementioned entity. The grants exclude those forms ofgovernmental assistance which cannot be attributed reasonably to, a certain value,as those transactions with the Government which cannot be distinguished from theentity’s ordinary commercial operations.





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Those grants which are related to assets represent governmental grants and theirgrants require as main condition for the beneficiary entity to buy, build and acquireby any means long-term assets. Also, there can be even secondary conditionswhich restrict the type and the asset placement or periods in which these are to bebought or held (in other words, money in return for the acquisition of the long-termassets). Non-monetary grants at the fair value represent those governmental grantswhich don’t have as purpose monetary transactions, but terrains and other types ofassets. Grants related to incomes consist in all the governmental grants different fromthe ones for assets (example, the money in return for jobs, respectively versuswages).

2. The presentation of the governmental grants within the financial statements

The governmental grants, including the non-monetary grants at the fair value,aren’t acknowledged as long as there isn’t enough certainty that:

a) The entity can respect the conditions attached to the agreement and thatb) The grants will be received, in other words, the entity has to adopt a

cautious attitude when it comes about recognizing grants.. The governmental grants are recognized, on a symmetrical basis, as income onthe periods correspondent to the expenditures related which these grants have tocompensate. In the case of the grants submitted to amortisation, these periods are easily tobe identified, being usually, the amortisation durations. In the case of the non-amortised assets, the grants will be recognized as incomes for the periods whichconfirm the cost of the achievement of those obligations. In case the governmental grant comes out into the transfer of a non-monetaryasset, as terrains or other resources, then it’s necessary to evaluate the fair value ofthis non-monetary asset recognizing both the grant and the asset at fair value.

• The grants for assetsThe governmental grants for assets, inclusively the non-monetary grants at

fair value, appear in the balance sheet either as a postponed income or through thededuction of the grant from the cost of the asset in order to obtain the itsaccounting value.

Example:

The MAX society has as main operational purpose to collect and to cleanthe used water and it receives from the Government the amount of 500 000 lei forthe acquisition of modern equipments designed to clean the household water. Thecost of these acquisitions is 650 000 lei. The lifetime duration of the equipments is


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5 years. The amortisation method is the lineal one. The net profit before thereflection of the annual amortisation and of the incomes from grants is 50 000.The implications of the two ways of presentation within the balance sheet for thereceived grant are the following:

1. The presentation of the grant as a postponed income:Extras from "The situation of the financial position" – Years 1 - 5

Elements 1st Year 2ndYear 3rd Year 4th Year 5th YearEquipments 650.000 650.000 650.000 650.000 650.000Cumulatedamortisation

(130.000) (260.000) (390.000) (520.000) (650.000)

Equipments – the netaccountingvalue

520.000 390.000 260.000 130.000 0

The receivedgrants

500.000

Extras from "Situation of the global result" – Years 1 – 5Elements 1st Year 2ndYear 3rd Year 4th Year 5th YearThe estimated Net profit

50.000 50.000 50.000 50.000 50.000

Incomes fromgrants

100.000 100.000 100.000 100.000 100.000

Expenses withtheamortisation

(130.000) (130.000) (130.000) (130.000) (130.000)

The net result 20.000 20.000 20.000 20.000 20.000

The accounting entries are the following:a. The recognition of the grant:

500.000 lei Grants toreceive

= Grants forassets

500.000 lei

b. The receipt of the grant:500.000 lei Cash = Grants to

receive500.000 lei

c. The transfer of a percentage from the grant to incomes at the end of the firstyear:

100.000 lei Grants forassets

= Currentincomes from

100.000 lei


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grants

d. Entering the amortization correspondent to the first operational year of theequipment:

130.000 lei Expenses withthe

amortisation

= Theamortisation ofthe equipment

130.000 lei

2. The presentation of the grant by the deduction of the granted asset value:Extras from "The situation of the financial position" – Years 1 - 5

Elements 1stYear

2ndYear

3rdYear

4th Year 5th Year

Equipments 150.000 150.000 150.000 150.000 150.000

Cumulated amortisation

(30.000) (60.000) (90.000) (120.000) (150.000)

Equipmentsbalance sheet value

120.000 90.000 60.000 30.000 0

Thereceived subventions

They don’t appear in the position within the financialstatements as a specific row element

Extras from "Situation of the global result" – Years 1 – 5Elements 1st

Year2ndYear 3rd

Year4thYear

5thYear

The estimated netprofit

50.000 50.000 50.000 50.000 50.000

Incomes fromsubventions

They don’t appear in the position within the financialstatements as a specific row element

Expenses with the amortisation

(30.000) (30.000) (30.000) (30.000) (30.000)

The net result 20.000 20.000 20.000 20.000 20.000


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The entries in accounting are the following:a. The acquisition of the equipments:

650.000 lei Equipments = Non-currentasset suppliers

650.000 lei

b. The recognition of the grants pending to be received:500.000 lei Grants

pending to bereceived

= Equipments 500.000 lei

c. The receipt of the grant:500.000 lei Cash = Grants pending

to be received500.000 lei

d. The entry for the amortisation correspondent to the first year of the equipments’operation:

30.000 lei Expenses withthe

amortisation

= Theamortisation ofthe equipments

30.000 lei

The example illustrated above proved that regardless of the recognitionmethod of the governmental grant for assets, its implications on the indicators fromthe financial statements remain the same.

• The grants related to income will be presented in “The situation of theglobal result” as it follows:- In a distinct position or- In a cumulative position as it would be “Other incomes” or- They can be deduced within the reporting of the related expenses.

3. The refund of the government grantsA government grant which becomes refundable is entered as an adjustment of

an accounting estimate.• The refund of the grants for assets

The IAS 20 stipulates the refund of a grant related to an asset, which appears,generally, as a result of the infringement of the stipulated conditions, it appears inaccounting in the financial statement as a growth of the asset’s net accountingvalue or as the reduction of the postponed income’s balance with the refundableamount.

In regards to the situation of the global result, the situation is treated, as achange of the accounting estimation as well. The value of the refundable amountmust be recognised in the statement of the global result during the change, which


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means the period in which it becomes probable that the conditions necessary forreceiving the grant will not be fulfilled.

4.The presentation of the pieces of informationThe following pieces of information must be presented within the financial

statements regarding the governmental grants:a) The accounting rules adopted for the governmental subventions,

including the presentation methods adopted within the financialstatements;

b) The nature and the value of the governmental subventions recognisedin the financial statements and indicators regarding other means ofgovernmental assistance which the entity benefited directly from; and

c) Conditions imposed and un-fulfilled as other convergences attached tothe governmental subventions recognised in the financial statements.

5. ConclusionAll the performed operations within the project as well as those done by

the beneficiary and his/her partners within the project will be reflected in theaccounting documents of the beneficiary and supported by the supportingdocuments. The relevant supporting documents underlie the entries in accountingand they stand for the responsibility of the persons who filled them in, stamped andapproved them as well as of those who entered them in accounting.

.

Bibliography :Breban Ludovica, Situatiiile financiare anuale ale entităţii economice,

ediţia a III-a, Editura Risoprint Cluj-Napoca, 2012Borlea, N., Breban Ludovica, Achim Monica Violeta, Contabilitatea

financiară conformă cu directivele europene, Editura Risoprint Cluj-Napoca, 2011Standardele Internaţionale de Raportare Financiară-IFRS, Editura

CECCAR Bucureşti, 2011Ghid privind accesarea, contabilitatea, fiscalitatea, auditul şi

managementul proiectelor cu finanţare europeană, Editura CECCAR, Bucureşti,2011

OMFP nr. 3055/2009 pentru aprobarea Reglementărilor contabileconforme cu directivele europene, publicat în M.O. nr. 766 şi 766/bis

OMFP 1917/2005, pentru aprobarea Normelor metodologice privindorganizarea şi conducerea contabilităţii instituţiilor publice, Planul de conturipentru instituţiile publice şi instrucţiunile de aplicare a acestuia, cu modificările şicompletările ulterioare, în cazul instituţiilor publice, publicat în M.O. nr.1186/2005


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ELECTRONIC ACCOUNTING INFORMATION INLOCAL PUBLIC ADMINISTRATION

Rodica Gabriela BlidişelWest University of Timişoara, Timisoara, Romania

AbstractMajor changes in information technologies characterize the current period throughwhich humanity creates the conditions shift from information society to theknowledge. In this context of the changing of the public administration through theimplementation of ITC and the reform that lead to the new public management, ourpaper wants to see the development of E-governance in Romanian local publicadministration and the influence of the main financial indicators on e-governanceelements. Countries adopt e-governance in ways that reinforce traditionalbureaucratic structures, cultures and links from administration to citizens andpolitics, in some cases making these traditional forms more responsive. The paperstudies the accounting information disclosed on the internet sites of public sectorentities. The research use an empirical approach to test impact of the quality ofaccounting information on e-financial reporting in public sector. The research use aquantitative methodology, based on surveys and author's observations. The methodschosen in this paper are reliable for this empirical study that tries to identify at anational level the problems that could improve the financial information disclosed bythe public sector. The paper aims to measure the financial performance in localpublic administration and the main indicators of e-governance. The main objective ofthe paper is to make a model that demonstrates the impact of the local publicadministration financial performance on the e-governance. Due to the fact that themain problem of the Romanian local public administration is the lack of performancetools that could improve the e-governance, the research wants use an empiricalapproach to test the impact of the financial performance on the local publicadministration on e-governance. The research use a quantitative methodology, basedon surveys and author's observations.Key Words: financial reporting, public sector information technology processJEL Classification: M40, M48

1. IntroductionIn recent years, important changes have occurred in governance, which has

evolved in this time from hierarchical bureaucracy to participatory governance,where the role of citizens in public decision-making process is more direct.Romania, a young democracy reborn over the iron curtain of socialism, passedduring the last decade through a reform of the public sector. Starting with thereform of the public management, both at central and at local level, the Romanianpublic sector has further passed through the public financial reform, especially


91

through the law regarding the local public finances. Moreover, as regards theRomanian public accounting, accrual accounting (in accordance with InternationalPublic Sector Accounting Standards) was put into practice both at the localgovernment and the central government levels starting in January 2006 (Tiron,Popa, Blidisel, 2009).

LITERATURE REVIEW1. IntroductionInformation and Communication Technology (ICT) enables increased

operational efficiency, quality and transparency. Also, the introduction of ICTleads to substantial changes in power relations between all stakeholders.

The new role of information and communication technologies assists thegovernment in delivering a huge transformation. The final destination of thistransformation is an electronic government, which has been recognized, in additionto e-commerce as one of the most important arenas of ICT applications in today'sworld.

It can be said that the transformation of government is a feature and areference to a mature e-government. All programs and projects to be implementedin the creation of e-governance, such as e-documentation, e-registration, and e-workflow, etc.. will inevitably lead to redesign the flow of business and arestructuring of governments. Interface with customers is moving from office desksand windows to computer screens. Also customers are moving from telephone,telegraph, fax to networks supported by the Internet. Together, these changes willlead to changes in the functioning and restructuring of government.

The increased mobility of information worldwide workforce, knowledgeand expertise can be transported instantly, helping to improve the competitivenessand performance.

We live now in an information society and a knowledge-based economywhere knowledge management is essential.

Major changes in information technologies characterize the current periodthrough which humanity creates the conditions shift from information society tothe knowledge. In this context of the changing of the public administration throughthe implementation of ITC and the reform that lead to the new public management,our paper wants to see the development of E-governance in Romanian local publicadministration and the influence of the main financial indicators on e-governanceelements.

Countries adopt e-governance in ways that reinforce traditional bureaucraticstructures, cultures and links from administration to citizens and politics, in somecases making these traditional forms more responsive.

One step toward a more evolved model of governance is linked to the newpublic management (NPM) model. The NPM postulates that the governmentalentity is driven by a mission and operates strategically like a business unit, beingconscious of cost efficiency. In this model, governance bureaucracies turn into


92

strategic business units, competing with each other, and citizens becomecustomers. The focus shifts from laws and regulatory conformity to the “rules ofthe marketplace”, that is, economy and efficiency; the accounting and the budgetbase are moved from cash to accrual basis. In this way, the financial function isreformed into one based on cost savings and incremental revenues. NPM alsoargues that privatization is the mechanism to establish efficiency, efficacy andquality in the delivery of public services, as Emanuel Savas asserts, “privatizationis the New Public Management” (Savas, 2000, p 319). According to Cooper (2004)in NPM administrations are not ethically neutral from the electorate; they haveethical obligations to the citizens and citizens should participate in managementcontrol and decisions.

Several studies show that there is a convergence in approach taken bydifferent governments: the measures include budgetary reductions, deregulation,new technologies, new management methods, new tools and criteria for evaluation,decentralisation, devolution, flexibility in personal matters, service quality,customer orientation and privatisation (Pollit, 1993, Wollmann, 2003).

Thus performance evaluation has become a key element in the public sectorreform of many countries.

Financial information supplied by government agencies needs to fulfillcertain characteristics that meet stakeholders needs. The literature indicates thatthe following are key characteristics for digital governmental financial reporting:(a) completeness of the accounting information; (b) timeliness; (c)understandability or clarity; (d) comparability; (e) relevance; and (f) reliability.

Many other studies measured the internet disclosure index LPA using anitem-based approach, following the models of Buzby (1975) and Cooke (1989) thatwere the first to have developed the concept of “disclosure index.” Many otherauthors that have used this kind of index in their research (e.g., Chavent et al.,2006; Popa, Blidisel, Farcane, 2008).

As in the studies by Hartung (1992) and Fisher et al. (2005), multivariablelinear regression was used to test the association between dependent andindependent variables. In this research paper will be testing the information relatedto public sector accounting disclosed by local public administration: the budgetlevel of the local public administrations as an element of financial performance andother information, contact information, website, e-mail, information about LPAmanagers and departments; planned and approved budget, budgetary executionaccount, financial statements, internal audit report; public relation with citizens,public interest regulations and documents, e-tax, online participations at councilmeetings. There was assigned the value of “one” to every item disclosed on theLPA’s website and value “zero” otherwise.

2. Analysis & data processingStarting from the factors that influence the financial reporting of public

sector accounting in local public administration, we want to test the factors thataffect the changes of these elements.


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The research methods used are quantitative, based on content analysis. Weused factors like economic conditions, social conditions, environment,administrative conditions, political condition as well as profesional influence inorder to demonstrate the impact changes in public sector accounting. For thispurpose we used the cluster analysis that illustrates the cummulative changes inpublic sector accounting financial reporting taking into account 41 public sectorentities and ranking each of the variables from a scale of 0 to 1.

Moreover, the table 1 and 2 show the cluster analysys of the selectedvariables and the aglomeration schedule.

Table 1. Case Processing SummaryCase Processing Summary(a,b)

Cases

Valid Missing Total

N Percent N Percent N Percent

41 100.0 0 .0 41 100.0

a Squared Euclidean Distance usedb Average Linkage (Between Groups)

ANALYSIS &DATA PROCESSINGThe research uses an empirical approach to test impact of the financial

performance on the local public administration e-governance.The research use a quantitative methodology, based on surveys and author's

observations.The data will be processed using E-views. The methods choose in this

paper are reliable for this empirical study that tries to identify at a national level theproblems that could improve the financial management, the management controland the governance in local public administration.

As in the studies by Hartung (1992) and Fisher et al. (2005), multivariablelinear regression was used to test the association between dependent andindependent variables, i.e. to analyze the association between: the budget level ofthe local public administrations as an element of financial performance and otherinformation that define elements that define e-governance in Romania, like: contactinformation, website, e-mail, information about LPA managers and departments,opening hours, audience hours; planned and approved budget, budgetary executionaccount, financial statements, internal audit report; public relation with citizens,public interest regulations and documents, e-tax, reports in doc, pdf, xls, htmlformat, video, audio recordings, online participations at council meetings,multilingual website. There was assigned the value of “one” to every itemdisclosed on the LPA’s website and value “zero” otherwise.


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Table 1: Model Summary

Model R R Square

Adjusted RSquare

Std. Error ofthe Estimate

1 .803(a) .645 .493 .310

a Predictors: (Constant), ct, so, sf, ls1, pr, pf, cc, ft, act, bc, ls, np

Table 2: CoefficientsCoefficientsa

.991 .318 3.114 .004-.005 .212 -.004 -.025 .980-.251 .195 -.191 -1.286 .209-.169 .403 -.061 -.419 .679.575 .148 .609 3.891 .001.135 .125 .154 1.079 .290-.188 .122 -.215 -1.542 .134-.108 .126 -.124 -.857 .399-.285 .217 -.275 -1.313 .200.449 .224 .369 2.001 .055.025 .192 .028 .133 .896.282 .224 .271 1.258 .219-.451 .147 -.478 -3.077 .005

(Constant)sfbcftsopfpractnpcclsls1ct

Model1

B Std. Error

UnstandardizedCoefficients

Beta

StandardizedCoefficients

t Sig.

Dependent Variable: bvc

a.

Table 2: VariablesExcluded Variablesb

.a . . . .000

.a . . . .000infedModel

1Beta In t Sig.

PartialCorrelation Tolerance

CollinearityStatistics

Predictors in the Model: (Constant), ct, so, sf, ls1, pr, pf, cc, ft, act, bc, ls, np

a.

Dependent Variable: bvc

b.

3. ConclusionsThe Romanian public sector is at the beginning of the implementation

process of the “new public management” reform. The results of the movementfrom the cash-based accounting to the accrual-based accounting system should bereflected especially in the improvement of the decision-making process, serving thefinancial needs for performance appraisal. This information could be published online in order to fulfill the utility of other external shareholders, especially the civilsociety.

The data processed in this research paper shows that the financial–accounting information disclosed by all the studied local public administrations


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could be clasiffied in two clusters as regards the information related toelectronically accounting information published.

The set of observations are subests in clusters so that observations in thesame cluster are similar in terms of dependent variables choosed. The paperconclude that there are formed two clustres between information related to thebudget level of the local public administrations as an element of financialperformance and other information, contact information, website, e-mail,information about LPA managers and departments; planned and approved budget,budgetary execution account, financial statements, internal audit report; publicrelation with citizens, public interest regulations and documents, e-tax, onlineparticipations at council meetings. The limits of the paper regards the small numberof local public administrations taking into account.

The key contribution of the paper was to identify a model based onperformance improvement in local public administration. This kind of model is nolonger developed in Romanian public sector.

The results of the paper reveal that there is not a strong connection betweenfinancial performance and e-governance indicators in all the 119 Local publicadministrations studied. The identification of the model that make a connectionbetween financial performance and the local public administration e-governancecould take into account other dependent and independent variables that couldidentify ways that could improve the local public administration performance.

The limits of this research are the extinction of the dependent variables. Infuture research it will be developed a more complex model taking into accountother qualitative variables that could improve the model.

The study will have implications for policy makers, management andpractitioners from local public administration and will identify a model that couldimprove the approach of performance in public sector.

The paper has implications for the development research in the specificpublic sector accounting, management control and administration field through theexposure of the main problems of the public sector: the performance measurementand its impact.

Acknowledgements: This paper received financial support through theproject, Post-Doctoral Studies in Economics: training program for elite researchers- SPODE" No. finance contract. POSDRU/89/1.5/S/61755, European Social Fundproject funded by Human Resources Development Operational Programme 2007-2013

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3. Hartung, R. (1992), An empirical analysis of theories on factorsinfluencing state government accounting disclosure, Journal of Accounting &Public Policy, Vol. 11 No.1, pp.1-42.

4. Fisher, R., Laswad, F., Oyelere, P. (2005), Determinants ofvoluntary internet financial reporting by local government authorities, Journal ofAccounting & Public Policy, Vol. 24 No.2, pp.101-21.

5. Berland N., Dreveton B. (2010), Management control system inpublic adminis-tration: beyond rational myth, Author manuscript, published in"Accounting Reform in the Public Sector: Mimicry, fad or Necessity (2006) p. 21-37"

6. Cooper, L.T. (2004). Big Questions in Administrative Ethics: ANeed for Focused, Collaborative Effort, Public Administration ReviewWashington D.C., 64(4), 395-407.

7. Savas, E. (2000), Privatization and Public-Private Partnership,New York, USA: Chatham House Publishers.

8. Tiron T A., Popa A, Blidisel R. (2009) - E-financial ReportingWithin the Romanian Public Sector Governance, Proceedings of the 9th EuropeanConference on E-government, Westminster Business School University, Publisher:Academic Publishing Limited, London, England, p. 628-637.

9. Tiron T A., Blidisel R., Popa A, Farcane N. (2010) – Historicallandmarks regarding management control in public sector, 2nd Balkans andMiddle East Countries Conference on Auditing and Accounting History, MUFAD,Istanbul Turkey.

10. Basu, S. (2004). E-Government and Developing Countries: AnOverview, International Review of Law Computers, 18(1), 109-132.Chadwick, A.(2003). Bringing e-Democracy back in: why it matters for future research on e-Governance, Social Science Computer Review, 21(4), 443-455.

11. Buzby, S.L. (1975), Company size, listed versus unlisted stocks,and the extent of financial disclosure, Journal of Accounting Research, 13(1), 16-37.

12. Chavent, M., Ding, Y., Fu, L., Stolowy, H., Wang, H. (2006),Disclosure and Determinants Studies: An Extension Using the Divisive ClusteringMethod (DIV), European Accounting Review, 15(2), 181-218..

13. Cooke, T. E. (1998) Regression Analysis in Accounting DisclosureStudies, Accounting and Business Research, 28(3), 209-224.

14. Cooke, T.E. (1989), Disclosure in the corporate annual reports ofSwedish companies, Accounting and Business Research, 19(74), 113-124.

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17. Pina, V., Torres, L., & Royo, S. (2007). Are ICT’s improvingtransparency and accountability in the EU regional and local governments? Anempirical study. Public Administration, 85(2), 449-472

18. Pollitt, C. & Boukaert, G. (1994). Public management reform. Acomparative analysis, Oxford, United Kingdom, Oxford University Press.

19. Popa, A., Blidisel, R., Pop, A. (2008). Investor relations on theinternet. An empirical study of Romanian listed companies, Fikusz 2008 (Ed.),2008 Business Sciences –Symposium for Young Researchers Proceedings,(pp.187-197), Budapest: Budapest Tech.

20. Raffournier, B. (1995), The Determinants of Voluntary FinancialDisclosure by Swiss Listed companies, The European Accounting Review, 4(2),261-280..

21. Serrano, C, Mar, R.T., Pilar, P.T.(2008), Factors influencing e-disclosure in local public administrations, Documento de Trabajo -03, Facultad deCiencias Económicas y Empresariales, Universidad de Zaragoza. RetrievedNovember, 20, 2009, from http://www.dteconz.unizar.es/DT2008-03.pdf

22. Stoica, V. & Ilas, A. (2009). Romanian Urban e-Government.Digital Services and Digital Democracy in 165 Cities. Electronic Journal of e-Government, 7 (2), 171-182.

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http://www.dteconz.unizar.es/DT2008-03.pdf


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ECONOMIC REVIVAL OF THE RURAL AREATHROUGH TOURISM

Gheorghe PribeanuUniversitatea de Vest „Vasile Goldis” din Arad

AbstractRomania’s entry on the european coordonates imposes a continue economical development.The achievement of this target implies the use of the existing methods and the capitalizationof all opportunities at best parameters. In this way, optimizing the economical results whichappeared as a result of the practice of a bio agriculture (the attainment of natural products inenviroments untouched by the destructive effects of pollution) and also the profesionalisticcapitalization of the turistic potential, in all its forms, will lead to a certain economicalefficiency.Turistic services extent and diversify according to the socio-economical changes and theirfavourable area of development. The the appearance of the „rural tourism” and„agrotourism” terms enriches the whole notion of „tourism” by diversifying it’s forms ofexpression.Key words: Sustainable development, agriculture, agrotourism, economic revival, ruralarea, tourism

Tourism has become one of the most important economic activities in theworld because people express more and more their intention to spend holidays innature, in a rural area, to discover the traditional world of the villages, to improveits cultural knowledge (cultural / monastic / religious tourism) etc. This intentionproved to be a good start to the economic revival of the rural area because: it’srequired accommodation with reduced comfort, additional sources of income forrural population, revival of the folk traditions, desire to perpetuate traditional skills,improving the living standard in areas equipped as a material base of tourism,decongest overcrowded tourist areas, capitalizing the rich rural potential.

Thus, we are more and more concerned by the sustainable development,defined as development that "meets the needs of the present without harming theability of future generations". Sustainable development concerns are the complexresult of matters that is the subject of all mankind: environmental degradation,uncontrolled expansion of urbanization, poverty etc.

This notion has two problems: how economic growth can be achievedwithout negative consequences for the life of the planet and environment. Theymust be resolved so as not to affect the lives of future generations, so tha appearedthe need to regulate this notion. Thus arosde the concept of "sustainable


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development", which is to be approached from three perspectives: temporaldimension, equity, environment.

Temporal perspective imposes some development limitations, causedmainly by environmental elements. The emphasis is on resource depletion, theirreversible degradation processes etc.

The notion of equity refers to the interest for future generations, withoutsacrificing the current generation. Based on this, economic development must beachieved without degrading the environment and deplete its resources.

The environment is the most fragile and independent of human power.Therefore, the conditions for sustainable development are based on the capacity toprotect the environment and its resources.

Starting from those five factors which have an influence on development(population, environment, food, industrial development and pollution), the strategyof sustanaible development must find a way to optimize the report resources-need.

The concept of sustainable development is based on the idea that nature isthe only source of living resources and should therefore be protected for bothpresent and future. Never before, a civilization destroyed so much its livingenvironment, no were threatened with destruction, like now, entire oceans, plantsand animal species, and the ozone was never so strongly affected as in present, northe pollution has been so threatening before.

When considering all these, mostly is the fault of powerfulindustrialization. This view is considered by experts to be a mistake: noty must bemade liable for the environmental disaster we are in, but the man, because of itsgreed, carelessness, ignorance, negligence, indifferenceand because he has notselected, nor correctly applied the discoveries of science and technics, and did notreact in order to lead to the development and protection of nature and not to itsdegradation.

Humans are required to show good judgment and sense of responsibilitywhen they act, to take account of natural laws and to ensure ecological balance. Ofall the actions which led to environmental destruction, pollution has the greatestimpact on nature and on man. Pollution of air, water, soil turned the friendly andgenerous nature into an increasingly hostile and dangerous one.

The most dangerous form of pollution is probably the one caused bypracticing an intensive agricultere and industrialization. This is because pollutionin agriculture means primarily affecting the soil and it can not be applied tovirtually any treatment process, as the soil can be practically depolluted only by theslow action of natural factors. Then, agriculture includes, unlike industry, verylarge areas, making the consequences more serious. Agriculture pollution reachesman directly, through food, and he can not defend as the action takes place directlyon the human body. It seems a paradox that as he develops and proudly assumesepochal discoveries, man becomes more and more destructive or self-destructive.Therefore, the problems of development and economic growth can not now beseparated from the environmental problems.


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Propel of ecological problem in terms of global concern in recent decadeshas resulted in unprecedented mobilization of public opinion in this matter. Itssensitivity demonstrated that the humanity was already aware of the negativeimpact of development on their lives and especially on the near future. Because ofthese concerns was imposed the concept of sustainable development, which wasrecommended by the UN General Assembly Resolution 42/187 as a guidingprinciple of national strategies in economic development and environmentalprotection.

In subsequent years there were two world conferences on the topic ofeconomic development in terms of protecting the environment. The firstconference was held in Stockholm in 1992, and the second in Rio de Janeiro in1992. Both conferences had a strong echo in public opinion, favorable opinionsregarding environmental protection appeared, which ultimately resulted in theemergence of "parties of the Greens" which support development in terms ofprotecting the environment, including wildlife and flora, and in the last decade, indeveloped countries have been established administrative structures specialized inenvironmental protection. Simultaneously, public opinion forced the establishmentof governmental institutions, tracking those responsible how they perform theirduties, overseeing the development of this activity. Developed countries ofWestern Europe have adopted some conventions seeking to improvesimultaneously in some sensitive activity fields. Thus, it was adopted the'Framework - Convention - framework regarding climate change, which wants toreduce carbon dioxide in the atmosphere and also to improve the quality of theatmosphere above Europe and also the "Framework - Convention regardingbiodiversity" aimed to protect life on the European area, ensuring an ecologicalbalance and maintaining it in order to save the natural potential for the benefit ofboth current European civilization and also for the benefit of the future. Anotherdocument that was adopted is "Agenda 21" which includes an extensive program ofactions that must be applied for the conservation and environmental exploition inthe perspective of the XXI century. A final document adopted was "Declaration ofPrinciples on management, environmental conservation and sustainableexploitation of all types of forests".

Europe plans a series of actions designed to improve the ecologicalbalance, to impose the concept of sustainable development on the continent,actiones to which care to join other countries in Central and Eastern Europe:

- for environmental protection in cities and improvement of the livingconditions of humans, who are the first to bear the consequences of air pollutionand noise, it is envisaged that public transport in Europe must become predominantespecially over long distances. It is considered its organization, in order to fullyensure the growing needs in this area and its performance for the end of thetwentieth century. In short distances, there is extensive and frequent bicycleadvertising, which is considered the most environmentally friendly and efficienttransportation. Along with advertising, European Union provides conditions for


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practicing this form of transport, arranging streets bike lanes, dedicated space fortheir parking, rest facilities in areas of climbing, etc. Entire European system madecommun efforts to adapt the traffic to non-motorized means and public transportintense practice. First was prohibited to motorized traffic means in vulnerable areasof ecological (parks, reservations, mountains, resorts and other recreationfacilities). Those who still use vehicles are required to pay substantial fees ascompensation for environmental damage by practicing this action.

- regarding this issue, for people who want to adapt to this way of life,were made considerable efforts and propaganda starting with the inauguration of ahighway for bikes, in 1994, on the distance Zurich - Vienna. A second stretch ofhighway, following the previous, is to be completed soon, from Vienna toBudapest. Following the events and appropriating them, Bulgaria has expressed adesire to connect to such a European network that is aimed to be built.

- big cities interest for the improvement of green spaces, parks, gardens,lakes, reservations has increased in order to provide to residents areas oftranquility, relaxation and rest.

- industrial areas are supervised, investments made to prevent pollutionbeing quite expensive. There are pursued both aspects regarding air pollution andwater, legislation being particularly severe and effective.

- the interest in green tourism, rural tourism and agro-tourism increased,urban residents showing tendencies to spend time in nature. This interest in naturetriggered the notion of "sustainable tourism" which aims to preserve theenvironment, development of tourism without jeopardizing the touristic areas.

Among strategies to modernize the agricultural structure, agro-tourismoccupies leading places in Austria, Switzerland, France, Germany, and Spain.European rural area is located at the center of the European Union, which isconsidered a major force throughout the continental areas, its development beingbenefical for the whole union. This environment is even more in the attention ofspecialists, as the powerful campaign for environmental protection showed theunbreakable link between them, achieving harmony and balance for ruralenvironment, meaning also an adequate protection of the environment. Currently,rural areas are considered the most important reserve of human life and culture.

Opportunity to become active partners with the European Union can befound, among others, in the material and human potential of rural area, in largeuntapped reserves that are located in the Romanian countryside. Earlier this newmillennium, this space presents serious drawbacks to the urban environment, withdiscrepancies in the living standard of inhabitants of the two areas. A chance forrural development is the expansion of organized tourism, which is the mostefficient way of capitalizing material and human resources.

First, it ensures jobs and obtaining reasonable income for rural populationwhich is currently in a difficult situation financially due to the rebound recorded inthe economic activity.


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Then, it can allow the revival of complementary activities that can expandin proportion to agro-tourism development, becoming sources of income for othercategories of active population: guides, instructors, small artisans, merchants.

Agro-tourism provides the possibility of a higher surplus from the farms,which often degrades through disuse. This is especially important because naturalfoods are made without pesticides, so have the best quality. Taking into account thefact that Romania's western floristic composition of grasslands has great value, theonly one from the country which competes with Obcinile Bucovina (Wah), foodtaste very good, being well appreciated abroad, which increases product qualityand thus increase the demands for such products.

The ethnic composition of Banat formed from Swabians, Serbs,Hungarians, Czechs, Bulgarians, has allowed the development of a culture of foodand customs specific to their home areas.

Agro-tourism constitutes a beneficial practice for local people wishing tospend their holidays in areas other than daily, but to whom modest incomes do notallow expensive itineraries; prices in agro-tourism are more accessible than intraditional tourism, promoting the development of a mass tourism. Mutationsamong consumers of agro-touristic products are determined by former masstourism (union tourism) re-orientation to the more accessibil rural tourism

The development of this activity would allow the knowledge of thewestern area of the country, in this way agro-tourism becaming an invisibleambassador, facilitating the investor’s entrance on the tourism industry: integratedtourism, interethnic tourism, or in other areas of economy.

Extremely diverse rural landscape, mostly well preserved, village life withsignificant traditional components, agricultural and forestry potential of Romania,specific rural architecture are factors that promote rural tourism. Rural tourism,unlike other forms of tourism should be "diffuse", indistinguishable in terms ofhabitat components, and to rely on natural, folklore, architectural andgastronomical heritage, specific to agro-touristic areas.

At this time, although there are some positive signs to expand agro-tourism, however, there are several factors which block the rural tourism to extendat the capacity offered by the landscape and traditional culture, such asinfrastructure (roads, railways, rapid and safe banking, postal and telephoneservices), or poor housing conditions offered by most households, unacceptableeven for modest tourists, insufficient instruction of householders (minimumknowledge in tourism, lack of modern languages) and safety and personal securityof tourists.

Agro-tourism, with its specific national food consumption in householdswherethe food was produced, has the function of economic boosting of the capacityof the farm. For foreign tourists, agro-tourism constitutes a form of "internal"export of food products. The fact that most food consumed in tourism activitycome from own production determines, on the one hand, the profitability of thetourism and a price below to that of the organized tourism. Calculations of


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specialized tourist services show that the price of agro-touristic lunch is always 40-50% lower than a breakfast served in a restaurant in tourist hotels network. Theexplanation for this price difference is simple. The price of agricultural productconsumed in household agrotourist has no profit margin, VAT, excise,transportation, storage, storage, etc. Meat, eggs, cheese, milk, butter go directly toconsumers’ table. Also, tourist services (accommodation, services, etc) are notsubject to additional, indirect expenditures, commissions etc. which make agro-products price to be incomparably lower. In such conditions, agro-touristic policiesshould protect rural tourism benefits for the purposes of exemption from taxes,reducing the overall tax burden that would lead to price equalization and loss oftraditional customers (modest-income city dwellers, foreigners eager to learntraditions of rural area or people returning to their native lands reliving pleasantmoments in their lives - childhood, children from urban area etc.).

Evolution of services in developed countries has a strong rising andsteadily past. The so-called invisible activity conqueres more ground, the share ofservices in the total national economy in some countries exceeds more than 2/3 andis growing.

Analyzing the evolution of global dimensions of the tertiary sector, there iscontinuous and constant movement of labor to industries in these activities, leadingto its permanent development. So, economists examine the level of development ofa country according to the share in the services to GDP. Only in weak or poorlydeveloped economies and in developing and underdeveloped countries the share ofservices in GDP is lower. Need to increase the provision of services agrocomplementary tourism and ethnic tourism promotion can increase share ofservices in GDP. The need to increase the agro-touristic services, complementaryto tourism and the promotion of interethnic agro-tourism may lead to the increaseof the share of services in the GDP.

Of all activities that complete the service sector, tourism has a greatnumber, which increases as population increases leisure. There is opinion that acountry is more developed as it pays more attention to the individuals composingit, to their well-being and spiritual growth, thereby reducing working time (on thelabor productivity growth) became an electoral slogan of companies and leisure, anindicator reflecting rising of living standards of a population. In developingcountries, this sector development is also necessary.

Thus, development of the tertiary sector is required to counter thephenomena of underdevelopment, arises primarily the problem of survival andcompletion on the problem of malnutrition and the minimum needs of life, foodservice, providing jobs and income for subsistence. In this context, tourism hasgrown diversified and included both space and time around the world. Thisdevelopment was favored by its beneficial effects because it is a very profitableactivity, accounting for some regions or even countries an important source ofincome. Highlighting natural, social and especially the cultural features of a region,through a constant and sustained activity, tourism can contribute to its development


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and modernization, representing a highly attractive alternative to exploit existingresources. Thus the share of tourism in the last decade increased from 28.3% to31.3% with a special and particular emphasis on domestic tourism, where theaverage annual revenue growth is 7.4%. Tourism has registered increasing numbersboth worldwide and by region. Every country, with an adequate policy, is trying toincrease its turnover in tourism, this reaching for some countries as an importantsource of revenue for the balance of payments.

Agro-touristic and inter-ethnic areal activities lead to a balance of masstourism and therefore to an increase of the share of services.

The international tourism shows a steady increase both of the number oftourists and also of the revenue from tourism activity. Although growth ratesproved lower, they are constantly proving diversification and further developmentof this economic sector.

By region, the largest tourism activity is registered in Europe, followed byNorth America and Asia. Inter-ethnic Euro-agro-torurism leads to an increase ofthe share of tourism services worldwide.

In Europe, it appears that most of the tourists are also from the continent,so they prefer to travel to other bordering or close countries. Thus, during 1985-1991, the average annual growth of tourism in Europe was of 12.09% in Belgiumand 10.92% in Spain. Average annual growth of American tourists visiting Europeis 8.49%.

As for the number of foreign visitors from EU countries, the largest shareis held by German tourists whose numbers rose from 203,000 in 1994 to 380,000 in2003 with a share that continues to increase. We observe an increase in touristsfrom Europe, like those from Hungary and Moldova and a decrease in touristscoming to Romania from Russian Federation, which in 1994 was 43,000 and in2003 of 85,000.

Also, we can see that most tourists come from Europe, which means thatthey are limited to spend holidays in Romania as this is a close country or countryof origin.

With the development of tourism and its explosive expansion washighlighted its diversification, depending on the desires of tourists, landscapefeatures, complexity of services.

There are two generic categories of tourism: sun-tourism (motivated bynatural factors), called "sunlust" and acknowledge tourism called "wunderlust".

In the tourism knowledge, there are several characteristic types, namely:business tourism, scientific and cultural tourism, medical tourism, recoverytourism, opening or transit tourism, TIR type tourism, rural tourism, agro-tourism,inter – ethnic tourism.

A massive release of this complex branch of tourism that took place twodecades ago is the rural tourism. Special attention to political and administrativefactors for this area (rural), which aims to be both protected and modernized, hasemerged as a real possibility of development this activity of rural tourism. On the


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other hand, the urban population tends to spend time in nature, quietly, away fromall the term urban means, including pollution, is a guarantee for the possibility ofdeveloping the activities in the countryside. In this way appeared different forms oftourism activities: rural tourism, rural and green tourism and agro-inter-ethnictourism. It can often be traced a identification of these terms, among which is truethere are many common points, overlaps, but certainly there are also somedifferences which customize terms and activities.

Thus, the most common confusion is between rural tourism and greentourism. On closer analysis, it can be distinguished that green tourism involvesitineraries in nature, the geographical area being the most important in the touristdecision. For example, a trip to Niagara Falls, climbing a mountain etc; unlike thisone, the rural tourism requires a tourism activity in a rural area. It is true that oftenthe area belongs to an exceptional natural environment, which fulfills andcompletes tourists’ feelings. However, at least theoretically, it is possible to carryout such activities without the natural criteria (for example visiting a farm witheducational purposes, for preschool).

Analyzing the evolution of the phenomenon, any approach must answer aseries of problems such as: if agro-tourism could provide enough jobs, income andcapital flows to contribute to sustainable rural development, if all rural areas can beadjusted; if there are certain risks by developing to the countryside and whatdistinguish rural tourism from other forms of tourism. Today, more and more arethose who look agro-tourism as an important element of local/regionaldevelopment strategy starting from the economic benefits that it generates: thecreation of national income, balance of payments contribution rates, labor marketdevelopment, use local availability of labor, development of certain rural areas, etc.

Beyond the positive effects it generates, it must be remembered that ruraltourism is more than an economic activity; in essence is an interaction of masses ofpeople who require a wide range of services, facilities and inputs that aretransformed into opportunities and challenges for the host economic agents. RaduRey appreciate that "agro-tourism is not only a factor of economic balance manyfactors which engages a multitude of adjacent and reproducible resources but italso becomes a cultural-educational ambassador, a constant tool, and not a veryexpensive one – of social progress", paraphrasing briefly, here fits the notion ofethnic agro-tourism. The notion of ethnic agro-tourism is understood as acontinuous message of peace and understanding among ethnic groups, nations andpeoples.

Versatility of tourism in general and agro-tourism in particular, does notallow it to be described as an" industry in a technical sense because this sectordoesn’t have a single characteristic production or well defined operationalparameters. Its economic dimension can not be known without the aid ofexogenous / endogenous factors of economic, social, cultural and environmentalnature. So, we are dealing with a large, varied and complex character of the


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tourism phenomenon that requires careful consideration. Of tourism issues thatstand by the negative impact we remind:

- the threat for the environment, tourist traffic density in some cases maybe an environmental and social problem for countryside;;

- the socio-cultural threat, disrupting the natural world destabilizes thesmall socio-cultural universe of the rural community;

- the planning, local control, public participation and possible partnershipsissues.

Ad hoc individual responses given to agro-touristic problems are not apolicy for this sector; such responses can only provide short term solutions forlong-term problems.

The success of agro-tourism depends largely on the capacity of the regionto be a suitable host for rural tourism, of the ability to plan and implementdevelopment projects of all exchanges that are brought by this form of tourism forthe region, generally and for farms, in particular, on providing a framework forcompetition between different agro-touristic units of ethnic representation inetnogeografice going to a European spirit of cooperation and interethnicunderstanding.

Economics is concerned with achieving optimum use of limited resources,many of them rare or unique. This principle works in an individual case aimed atpsychological benefits from a trip or a business that is proposing the tax collectionpurpose - providing substantial goods and services to tourists, or even if the hostcommunity sees tourism in terms of economic gain and prosperity of the area theyrepresent.

Viewed through the prism of its content and the correlation with the overallnational economy, tourism acts as a stimulator factor of the global economicsystem. Carrying out the touristic travel implies a request and a specificconsumption of goods and services, resulting in a rise in their production area.However, tourism demand results in an adaptation of the offer which determines adevelopment of the material and technical basis of this sector and, indirectly, theboost of production in construction and equipment industries for accommodationand food, modernization of roads, development of transport, facilities forrecreation.

By tourism development is obtained, therefore, a significant productionincrease. However, tourism contribution to GDP varies significantly amongcountries according to development and economic structure of each country.

Tourism is not only creator of GDP, but has an important contribution tothe value added. Given its specific - service activity, manpower, intelligence andcreativity consumption - tourism takes part in creating added value in a highproportion of branches close in terms of development level.

Tourism has also an important training effect, stimulating production inother areas, as a result of its character of synthesis and interference branch. Studies


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showed that the activities of certain branches are largely determined by the needsof tourism.

In connection with development and modernization of the economy of acountry, tourism is manifested as a means of diversifying its structure. Thus, theneed to adapt to the requirements of tourists favors, on the one hand, the emergenceof specific sectors (activities): entertainment industry, cable transport, travelagencies, handycraft production and, on the other hand, gives some newdimensions to the existing industries: agriculture, food industry, construction,transport, cultural services.

Tourism is also a way for a superior valorification of all categories ofresources and, particularly, of the natural ones - other than the traditional - and / orsmaller ones. Elements such as beauty of landscape, healing qualities of mineral orthermal water, climatic conditions, cultural events - art, monuments of art,historical artifacts, folk tradition, find the best return, in some cases even onlythrough tourism .

Natural consequence of these effects, tourism is able to cause mutations interritorial development, from this angle, it is considered as a lever to redressimbalances between regions seen at national or global scale, "a solution forprosperity of the disadvantaged areas, a cure for areas that lack industrialization."

Economic effects of tourism also take other forms, of which it must bementioned its contribution to ensuring a balanced cash movement, performed bothon account of domestic or international tourism.

Tourism has become one of the major socio-economic sectors. It hasregistered a steady expansion over time, with an annual growth rate of about 4-5percent during the last half of the 20th century. Putting together the domestic andthe international tourism is now understood as constituting the most completeglobal industry. International tourism is one of the main components ofinternational economic activities.

According to World Tourism Organization (WTO) the number of touristsworldwide will double in 2010 compared to 1990. Their main tourist destination isEurope, which is recorded with the lowest growth rate.

Tourism doesn’t represent only an increase in tourists’ number. It showedthat it turns into a diverse and complex economic activity. Although mass tourismis still the predominant form of tourism, other activities related to culture,environment, business, education, health, religion, etc have come out. These formsof tourism reflect, among other, preferences for environmental quality and moreenergetic forms of recreation and participation. Skiing, hiking, biking, etc ; aremore pleasant attractions than ever, satisfying the need to be closer to nature,exploring and learning. These new activities are also a great responsibility toenvironmental degradation because the practitioners of these activities are oftendispersed in areas without adequate infrastructure or without capacity to managetourism activities.gementul proiectelor S.I.rse umane


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References1. Florina Bran (1997) – Turismul rural. Modelul european, Editura

Economică, Bucureşti.2. E. Buciuman (1999) – Economia turismului rural şi a

agroturismului, Alba Iulia.3. V. Glăvan, (2002) – Turism rural şi agroturism, Sibiu.4. Fl. Mărăcineanu, M. Nistoreanu, E. Constantin (2003) –

Dezvoltarea rurală. Politici şi strategii, Editura Ceres, Bucureşti.5. Rodica Minciu (2002) – Economia turismului, Editura Uranus,

Bucureşti.6. P. Nistoreanu, (1999) – Turismul rural – o afacere mică cu

perspective mari, Editura Didactică şi Pedagogică, Bucureşti.


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THE CONTROL AND EVALUATION OFPROMOTIONAL ACTIVITIES

Felicia SabouVasile Goldis Western University, Faculty of Economic Science

E-mail: [email protected]

AbstractThe paper focused on importance and benefits of control and evaluation of marketingactivities. The control of efficiency review the assessment of the resources for marketingactivity, checking also the efficiency of the human resources, advertising, promotionactivities and distribution activities. In the analyse of human resources the most importantratio are: the average of costumers visits on a day, the number of custom order receivedfrom 100 visits, the number of new customers from a period, the number of lost customersfrom a period, the marketing human expenditures from all the sales.The strategic control is made to check if the objectives and the company strategy areadapted to the marketing environment.Keywords: the control of marketing activities, the evaluation of marketing activities, theefficiency of marketing activities.

1. THE PLANNING OF MARKETING ACTIVITIESMarketing Strategy defines the market segments that the company will act,

how to differentiate and market positioning and mode of action on the marketingmix elements, to achieve the objectives.

On the marketing strategy is based on a plan allowing the optimal use ofresources to achieve objectives.

The marketing strategy has the following components:• Market Strategy;• Product Strategy;• Pricing strategy;• Distribution Strategy;• Promotion strategy.An important part of the business plan, marketing plan is a tool for

coordinating all marketing activities.The marketing plan is a document specifying all marketing activities which

will achieve, and how to implement and control them.A marketing plan can be made for a company to a product, brand or a

particular market.Characteristics of the marketing plan:- Quantify the expected results;- To specify the resources necessary for substantiation of the budget;



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- To characterize the activity to achieve and to clarify responsibilities;- Specify how to control the plan is implemented;- To ensure implementation of marketing strategy;

Marketing budget estimates of revenue and marketing expensesIn the control and evaluation action, is necessary to check how monitoring

and evaluation to achieve its objectives, employment in the budget.Summary contains a summary of the overall marketing plan, outlining the

main objectives and measures to be taken.Marketing objectives specify performance indicators that are to be

achieved, their level and the time they are to be meet. Marketing objectives relatingto: sales volume, market share, launch a new product market, profitability, marketcoverage, consumer attitudes, consumer loyalty.

Marketing Strategy identifies attractive market segments, productpositioning and brand segments and guided the company in relations withcustomers and competitors. Also in this section shall nominate the strategies usedto achieve objectives.

Action Program highlights actions that need to be made, the time at whichthey are made, people involved and their related costs.

The marketing budget is projected expenses, revenues and profits expectedalso specifies the necessary resources and financial implications of implementingthe marketing plan.

Monitoring and evaluation of marketing plan shows how to record andmeasure the results, verification and monitoring achievement levels of all activities.

Marketing opportunity occurs under certain conditions, when the companytake action toward a group of consumers, an action that generates sales and profits.Analysis of these opportunities requires identifying, analyzing and selecting them.

Selection of marketing opportunities is in terms of a number of factors:- Organization (company's objectives, financial resources, strengths and

weaknesses, cost structure, management skills);- The environment (demographic, economic, technological, political,

social, environmental, competitive.To achieve the objectives, the companies can use competitive strategies

based on successful imply the existence of certain conditions but at the same time,entail risks.


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Table 1. Conditions for success and competitive strategies based on risk

Strategies Success conditions RisksDifferentiation Differentiation Marketing

Skills highProduct InnovationFundamental and appliedresearch capacityQuality and technologicalskills recognizedExperience in the sectorA very good cooperationwith distribution channels

High price sensitivity ofcustomers

Consumer indifference to theelements of the productThe ability to imitatecompetitors

The cost leader Domination by theinvestment costs andaccess to financialresourcesInnovationsSupervision ofimplementation activitiesDesigning to facilitate theproduction processLow cost distributiontechnological changes thatundo the benefits of earlier

Technological changes thatundo the benefits of earlierLower costs for newcompetitors to imitate highcapacity and knowledgeexploitationThe impossibility of applyingthe product or marketinginnovations because thenegative effect on costs

The focus Focus Combining thesepolicies and theirorientation towards aclearly defined marketsegment

A lot of differences in costsfor companies that operate ina broad market and those on asegment. Market not wellindividualized requirements

Source: F.Foltean, L.Lădar, C.Dobre, Gh.Ionescu, C.Negruţ, ”Marketing”, Ed. Brumar,2000, p. 117.

The Differentiation Marketing strategy means: differentiation skills high,product Innovation, fundamental and applied research capacity, quality andtechnological skills recognized, experience in the sector, a very good cooperationwith distribution channels and also means risk like the high price of a differencebetween competing products, high price sensitivity of customers, consumerindifference to the elements of the product and the ability to imitate competitors.

The cost leader strategy means: domination by the investment costs andaccess to financial resources, innovations, supervision of implementation activities,designing to facilitate the production process, low cost distribution of technologicalchanges that undo the benefits of earlier, lower costs for new competitors to imitate


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high capacity and knowledge exploitation, the impossibility of applying theproduct or marketing innovations because the negative effect on costs.

The focus strategy combining these policies and their orientation towards aclearly defined market segment large differences in costs for companies thatoperate in a broad market and those on a segment.

Develop and implement marketing strategy is directly influenced by theorganization of marketing activities, concerning the achievement of objectives andto improve the use of resources.

Where there has been completion of a structure of marketing activity isnecessary to take into account several factors, such as business expansion strategy,the number of markets where the company intends to operate, the nature ofcompany products, company size and potential Experience Company, the firm'sinternal environment, etc.

Organization of marketing activities can be done in practice, in the formof:

- Conduct marketing activities in traditional departments: sales, production.Such an organization is its early marketing and can be found in small firms;

- Grouping of most marketing activities in a single compartment(traditional), usually in the sales;

- Conduct marketing activities in a general compartment;- The focus of all marketing activities in a specialized direction, to

coordinate all marketing activity;The most important requirements to be met by an efficient organizational

structure of marketing are: setting clear responsibilities, ensuring a rapid andefficient communication, coordination of all subunits of the organizationalstructure, implementation of appropriate management of human resourcesdepartment Marketing.

In recent years the trend was found for the subordination of the seniormanagement of direct marketing department and not of intermediate links, as in thepast.

The multitude and diversity marketing department functions aredetermined by the extent of work undertaken by the firm, the profile of activity,geographical area in which it operates, the staff included in marketing activities.

The main tasks of the marketing department are:• Duties of the role of coordination and synthesis (marketing research

document, and develop marketing programs, to base decisions);• Tasks related to operational implementation process (executive tasks

located in the area of product policy, price, promotion and distribution);• Additional Tasks, activities aimed at research, product development, the

use of information systems, marketing, services marketing, etc.;Relationship marketing department may be:• authority relations: hierarchical, functional staff;• cooperative relationships;• relations of supervision;


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Hierarchical relations appear in their relationships with senior staff, and aresubordinate.

Functional relationship is manifested in their relationships with otherdepartments and is carried in the transmission of these provisions, information,tasks, etc.

Staff relations appear in their relationships with senior staff and expressedby the delegation of certain powers by it, which are solved problems that affectother departments.

When dealing with other departments of the company appear a series ofcooperative relations, expressing the collaboration with them, both in thefoundation of decisions and in the performance of measures in order to achieve theoverall strategy materializes through firmei.Aceste relations a permanent contact ofthe marketing department with operational departments of the company'sorganizational structure.

Relations of control are not typical marketing compartment where they aremanifest, whether in relation to bodies at the higher hierarchical levels or withother departments, marketing section acts on behalf of management.

Internal organization of marketing department is in the following forms:-Functional organization, is based on criterion functions and is up in the

marketing department of some sectors of collective whose duties are defined byspecific marketing activity. In this form of organizing all sectors are subordinateddirectly to the Head of Department (Expl. research, promotion, new products, etc.);

-Organization of the products, is used when the company's business coversa wide range of products. In this case, it is in the marketing department, specializedsectors in developing and deploying all marketing activities specific to eachproduct or product categories;

-Organizing the criterion markets, is mainly intended for an adequategeographical areas and segments of consumers as large;

-Multi-organization, combined use of several forms of organization,thereby eliminating the disadvantages of a single criterion. May be used as thecriterion of the product to market, achieving a better understanding and meeting theneeds of each market segment for a particular product;

2.MARKETING AUDITMarketing audit is a systematic and impartial evaluation of all marketing

operations, including the objectives, strategies and their underlying assumptionsand methods, procedures, personnel and organization, used for the implementationthereof.

Marketing audit requires detailed analysis of objectives, strategies, tacticalaction plans and procedures, performance evaluation, control and improve futureprograms.

Establish a marketing audit can be made having regard to the followingmodel:

a).The analyse of external environment company


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•microenvironment: market, customers, suppliers, competition, publicbodies, etc.

•economic, technological, legal, demographic, social, culturalmacroenvironment;

b).The analyse of applied strategies•company objectives (are clear, realistic performances allow

quantification);•business strategies (strategies applied to meet environmental conditions

and competition, the company is or is not positioned well on the market, marketingstrategy applied is clear and consistent with business objectives, how thedistribution of resources between components company marketing mix);

c).Organnizing the business and marketing compartment (check thatmarketing activity is coordinated by a director, if the company's activities areclearly defined functions, products and markets, etc.).

d).Planning and control of marketing activities (marketing planning, salesforecasting mode, the information system of the company, achieving control ofmarketing).

e).The eficiency of marketing activities (product profitability, costreduction measures, etc.)

f).Marketing mix• Product;• Price;• Promotion;• Distribution;

3. THE CONTROL AND EVALUATION OF PROMOTIONALACTIVITIES

The analyse of promotional activities involves two different aspects:• Promotional budget;• Control and evaluation of marketing activities;The literature mentions several methods for determinate the promotional

budget, such us (Gh. M. Pistol):• Percentage of turnover method;• Method based on available resources;• Alignment method to competition;• Method based on promotional objectives;• Method use marketing experiments;The most important control methods in marketing activities are : the

control on yearly budget, the control of profitability, the control of efficiency andthe strategic control;

The purpose of control on yearly budget is to identify if the objectives arerealised, using the folowing tools:

• The sales analyse;


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• The analyse of marketing quotation;• The ratio between sales and marketing expenditures;• Financial analyse (profitableness ratio);• The consumer’s satisfaction;The control of profitability is realised for screening the profit or the lost of

the activities, products or services. It is necessary to made a profitapleness analyseof product, service, costumer, market segment, distribution level and zone.

The control of eficiency review the assessment of the resources formarketing activity, checking also the eficiency of the human resources, advertising,promotion activities and distribution activities. In the analyse of human resourcesthe most important ratio are: the average of costumers visits on a day, the numberof custom order received from 100 visits, the number of new customers from aperiod, the number of lost customers from a period, the marketing humanexpenditures from all the sales (%).

The strategic control is made to check if the objectives and the companystrategy are adapted to the marketing environment. This control means : assessmentof marketing activities efficiency, marketing analyze, marketing performanceanalyze and the analyze of social and ethical responsibilities of the companies.

References1. Kotler Ph., (2002) Managementul marketingului, Teora Publishing,

Bucuresti.2. Foltean F., (2000) Cercetari de marketing, Mirton Publishing,

Timisoara.3. Ion, A.R.(2005) Marketing. Studii de caz şi lucrări aplicative, ASE

Bucureşti Publishing.4. Manolescu, Gh. (1999) Buget – abordare economica si financiara,

Economical Publishing, Bucuresti.5. Niculescu E., (2000) Marketing modern, Polirom Publishing, Bucuresti.6. Olteanu, V. (2003) Management-marketing , Ecomar Publishing,

Bucureşti.7. Pop N.Al. (coordonator) (2000) –Marketing strategic, Economica

Publishing, Bucureşti.8. Sabou, F. (2007) Marketing, Risoprint Publishing, Cluj-Napoca.


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AUTOMATION AND TECHNOLOGIZATION OF THEPOSTAL SERVICES

Caius LăzărescuVasile Goldis Western University Arad, Faculty for Economics

AbstractThe development of the means of communication, the loss of monopoly over the

postal services, liberalization of the services, creation of postal markets, appearance of newoperators of postal services and implicitly of the competition, as well as the change of thestatus of the universal service providers in trading companies, impose modern technologicalequipping that would ensure the provision of postal services at new standards. For a propertechnologization a constant study of the market is imposed in order to trace the strongpoints and an organization of the network that would allow a fluidity of the operations sothat all malfunctions are eliminated. If the postal services arose from the need tocommunicate, their evolution and the current status of trading company confirm the factthat their maintenance and development also meet the economic need. The postal servicesprovider is obliged to uniformly secure the universal service as well as the other servicesand the duty to perform economic activities in two different social-economic environments,the rural environment and the urban environment. The means of communication, at first,provided a simple communication service; later their evolution had a whole new purpose,i.e. to provide more complex communication services, and currently, in the internet era andmodern technology a possibility to provide service packages arises.Key words: postal services, technology, providers, market

The postal services providers must offer the clients the possibility to decidewhere to receive their personal mail (at the residence, at the work place, at thepostal headquarters or at the package meters).

The main objective of the postal services providers is the growth of thecirculation speed of the deliveries that can no longer be met by manual laborbecause on the one hand the processing time between the presentation time and thedistribution time is compressed and on the other hand the volume of the proprietaryand commercial deliveries is constantly growing. The providers of utilities andpostal trading raise a new issue for the postal services providers who must handleboth the provision of postal services and meeting the customers’ needs.

The postal services and the communicational services were born from theneed to communicate, remotely, which constantly implies finding fast solutions forthe delivery or sending of the messages. At first sight, the post andtelecommunications field seems to be developing separately but from an overallapproach the two fields have evolved together, determining one another. Thedifference between them is that the telecommunications sector that secures thesending of the messages is developing on its own infrastructure respectively: air or


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underground lines (cables), emission-reception stations and currently the satellitesand the mail sector is developing on the national communication infrastructuresrespectively: terrestrial (road and railway), air and naval. The biggest obstacle ofthis domain was the distance that the postal deliveries must travel. At present,telecommunications managed to eliminate this obstacle, deliveries being madeinstantaneously, no matter the distance, and the post, in addition to the transport ofdeliveries also handles the processing operations that require time, therefore onemust constantly consider in addition to the equipping with fast means of transportalso the development of postal technologies for all work phases.

The need of a new postal technology is an imperative towards which auniversal service provider or another great provider can no longer function. Thenew economic policies at a global level are based on technology and on theautomation of the postal services.

The objective factors that determine the technologization towards theindustrialization of the postal services are:

- The growth of the population number and implicitly of the postaldeliveries number

- The growth of the number of the needs of the population andimplicitly of the services that satisfy the needs

- The growth of the number of economic agents- Development of the tertiary factor- Disappearance of the monopoly over the postal services- Liberalization of the postal services- Creation of postal markets and apparition of competition in this

field- Preservation of confidentiality of the mail- Securing the non-stop presentation operations of some postal

services- Human errors in processing the growing deliveries- The decreasing processing speed due to the great quantity of mail

and compression of the processing time at the ends of the network- Elimination of manual operations- Informatized processing upon mail submission can eliminate

subsequent operations (example the franking machines perform the franking,sealing and editing of the operative and accounting records operations)

- Ensuring of postal services providers especially the ones ofuniversal service with mobile postal offices especially for the rural network orconjectural situations.

In the provision of services as well as in the production of goods,technology as a technical solution and answer to the economic and operativeproblems must constantly catch the eye of the specialists in the field.

The development of the communicational ways by rails, roads, air andnaval ways as well as the improvement and upgrading of the transport meansfacilitated the increase of the circulation speed of the postal dispatches transported.


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The reduction of the circulation times alone during the transport cannotsignificantly increase the circulation speed of the postal deliveries if the processingtime for the deliveries is not also reduced. For the efficiency of the postal servicesthe reduction of the circulation time is imposed and also the processing ofdeliveries and reduction of the waiting time for the customer at the access pointsfor the submission of deliveries and respectively of the distribution time.

The main operations imposed at the submission of deliveries at the accesspoints:

The universal service providers of the developed countries secure the 24hour/day provision of services through the new technologies, with which the accesspoints are equipped:

- modern mail boxes perform several operations: selling stamps,giving information about the tariff of the letter submitted about the value of thefranking and offers a number of recommendations, provides 24 hours/day services.

- postal offices through postal counters are another access point andthe most important in which presentation and processing operations are perform inorder to send the postal deliveries registered for all categories of postal deliveries.

Their endowment is specific for the provided services:- for the mail, printing stations that perform several operations:

printing, franking (impressed stamp), mapping up to the level of distribution sector- for the messengers, machines for weighing and measuring of the

postal packages- for the mandates and other financial operations electronic

equipment connected to the internet- The Postal Transit Centers are the most important sub-units

specialized in processing – transport, following the presentation operations. Thesesub-units secure the operations of collecting, processing and transport of the postaldeliveries to the distribution sub-units. The new postal strategies provide acollection as late as possible in order to make the postal services accessible to abigger number of users during a day and a distribution as early as possible; thesestrategies lead to the reduction of the processing time of the Regional TransitCenters.

The installation of the franking and mapping machines must be performedonly based on some real studies with a history and future forecasts.

The two means of communication: oral and written message created thefundaments of the two communication channels respectivelyTELECOMMUNICATIONS AND POST.

Telecommunications (explained as remote communication) aimed at thedevelopment of the means of sending written messages (telegraph, Gentex, Fax,Internet) and the Post Office aims the development of the means of presentation,processing and transport.

The new economic context created through the apparition of the postalmarkets, of provision of postal services implies that the provider is familiar with


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the needs in order to adapt his postal instructions, the regulations and technologytherefore creating new provision conditions. The new postal technologies aim tomeet the needs of the users and the need of computing the operations so that theysecure a permanent connection between the users and the new technologies, to beable to combine the physical service with the virtual one: (Example: electronictrade that includes the individual and the economic agent, the producer or trader,the order of the desired product is performed virtually to the shop and the deliveryis performed physically through the postal network), or to allow the replacement ofthe physical service with the virtual one (example the physical mail box of therecipient with the virtual mail box).

The marketing of postal services can be sustained in front of the clients(individuals or legal entities) only by being familiar with the new provisionconditions.

The new postal technologies can perform several operations that can offerboth singular services and service packages. Example: the printing stations next tothe technical operative operations of preparation of the mail and financialoperations of invoice collection.

The management of the postal services can be conceived only based ongood familiarization with the technology and automation of the operations. In thebeginning the postal operations were performed manually, the organization of theproduction process was conceived on manual operations. The evolution of themeans of communication, the apparition of the postal industry respectively of thenew technologies allow the automation of the operations of presentation,processing and distribution, imposes conceptions of organizing of the productionprocesses and of the postal network.

The new postal strategies aim to execute the service packages offer that thegreat utilities providers are so interested in, providers who use invoices for thepopulation such as: Romtelecom, gas providers, electricity providers…

Bibliography1. Lăzărescu Caius – Automations and Postal Technology, Eurostampa

Publishing House, Timişoara 20102. Lăzărescu Caius – Economy of Postal Services, Eurostampa Publishing

House, Timişoara 20103. Lăzărescu Caiu - Economy of Postal Services, Eurostampa Publishing

House, Timişoara 20084. Şchiopârlan Vergiliu – Management of the Postal Activity pages 175-

177, Tribuna Economica Publishing House, Bucharest 20005. Universal Postal Convention – Convention6.bInternational Postal Technology – March 2006


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THE NEW EDGE IN KNOWLEDGE: HOWKNOWLEDGE MANAGEMENT IS CHANGING THE

WAY WE DO BUSINESS

Ştibli FlorinUniversitatea Tehnică Cluj Napoca

[email protected]

AbstractKnowledge management refers to the critical issues of organizational adaptation, survivaland competence against discontinuous environmental change. Essentially it embodiesorganizational processes that seek synergistic combination of data and informationprocessing capacity of information technologies, and the creative and innovative capacityof human beings. Knowledge management is more about the pragmatic and thoughtfulapplication of any concept or definition, as it is not in the definition but in real worldexecution where opportunities and challenges lie. Knowledge Management is a new branchof management for achieving breakthrough business performance through the synergy ofpeople, processes, and technology. Its focus is on the management of change, uncertainty,and complexity.Keywords: knowledge, knowledge management, information, organization.

Knowledge is in the information society as an increasingly important factorfor business success. The management of knowledge and uses this to try to increaseorganizational design, technology deployment and staff development Knowledgeprocesses to support it. Knowledge is described in what forms it occurs in thecompany. Davenport and Prusak (1998), for example, describe knowledge as amixture of experiences, values, contextualized information, and understandingfrom the experts.

Companies with a market share of more than 40% "knowledge workers" tomake its total workforce in the United States is already 28% of all enterprises -with a growth rate of 43% in the last five years. Estimated that the turn of thecentury in the U.S. only 41% of conventional employees (" poor knowledge ")activities in the industry and the (simple) service sector practice, whereas 59% ofinformation-related (and thus most knowledge-intensive) work to be performed(Stewart 1997). These figures are evidence of a fundamental reorientation ofproduction in developed countries, the consequences for the effectiveness andefficiency-oriented management of organizations are to be drawn. It is likely thatcurrent management practices, principles and systems, and organizationalstructures and management philosophies to this new orientation are not optimallytuned.



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The practical relevance of the theme is clear that many knowledge-intensive businesses - including Anderson Consulting, Booz Allen & Hamilton,Canon, CIBC, Dow Chemical, Ernst & Young, KPMG, Polaroid, PriceWaterhouse, Hewlett-Packard and Skandia (Steward 1997) - concentrate. From atheoretical point of view, the large number of articles in scientific journals in thelast two years should be mentioned (in Organization Science, International Journalof Technology Management, Harvard Business Review, Long Range Planning andEuropean Management Journal).

Based on the presentation technology, S-shaped curves is similar to Foster(1968) argues that the current transition from a - outline the economic development- S-curve to the next is possible only discontinuously, giving considerableturbulence in the company's practice resulted. Were observed in particular:

• changing roles in the commercial system (depth of productionreduction / outsourcing),

• more intensive interaction between the actors (partnerships,networks),

• more flexible, versatile knowledge and offers to customers (theversatile are interested in solving problems and not looking for standard productsand often consume more than one product simultaneously)

• orientation to the processes of the customer (not their ownproducts and manufacturing),

• support the customer in its tasks and its value.Furthermore Wikstrom and Normann (Wikstrom; Normann 1994) pointed

out that, besides technological impulses - in particular by the information out - thesocial impetus for the changing conditions are responsible. Regarding the lastaspect to be mentioned: higher educational attainment of the population; "worldexperience" of the individual; open articulation of criticism, questions and ideas,self-desire (rather than purely material aspirations) of the individual. These areconnected with changes in consumption habits (see also "patchwork Client:sneakers bearing the Porsche driver, manager of the Rich and the rock-lovingMozart fan). From the observations suggests that the altered environmentalconditions, the economic way of thinking and acting to influence - and in thedirection of a higher knowledge intensity.

Drucker (1999a) sees knowledge as the only meaningful resource that eventhe capital which may change. One of the main causes of this sees print (2004) inthe demographic development, a decrease of population in highly developedcountries and a concomitant ageing systems. Productivity gains and economicgrowth in these countries were influenced by knowledge-related activities to beexpected.

Already for some time over the post and the post-industrial society(Drucker, 1999b) is spoken. The knowledge society (Drucker 1968, 1999a, 1999b;Toffler 1993) is considered the largest group within the future structure of entiresocial group seen, moreover, is highly influential work. Basis of this society is


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education, although this is primarily the ability to learn in the course of a "lifelong"learning means. This society is also highly competitive, because all individualsalmost unrestricted access to information will have. The work will be performedprimarily in teams, and individuals belong to one or more organizations or withinthe framework of a temporary employee or service relationship at. Winslow andBramer (1994) speak of the "hunter-gatherer economy", which they want toexpress that in a global information network, or "cosmos" valuable informationhunt and these will be collected. Small organizations or individuals will developknowledge and to combine and to always try new ways, this market, whilecontinuously monitoring new services offered.

Drucker (1999a) notes that companies strongly related to past-orientedfinancial variables are controlled, and calls for the consideration of other aspects,including resources and skills. Knowledge to be productive, see Drucker (1999a) asthe essence of management. Most significant challenge was (Drucker, 1999b), theself-transformation systematically to "manage", which targeted "unlearn" no longerneeded for knowledge and learning to be creative, it contains. The latter means thatany permanent improvement activity, development of new applications from pastsuccesses, and constant innovation as an organized process. This requires that theproductivity of knowledge workers steadily increased (Drucker, 2006).

Handy (1995) sees the 3-I-economics - information, ideas, intelligence - asa way out of the dilemma of physical growth and environmental problems. Thesethree words could be replaced by the notion of knowledge, without limit to thecontent. The importance of the information sector can be expressed in concretefigures: for example, invested in 1991 U.S. companies U.S. $ 112 billion ininformation technology. This compares to only U.S. $ 107 billion in investments inproduction technologies (Stewart, 1993), whose value ultimately turn largely basedon intellectual performance, and often with information technology facilities.

Nonaka (Nonaka, 1991), the strong and rapid change in markets,technologies, competition and products offered as causes for the increasinguncertainty of today's companies face. It derives from the statement that the onlyreliable source of sustained competitive advantage, the ongoing development ofnew knowledge, its distribution in the organization and its subsequent transfer tonew technologies and products is offered. Nonaka (Nonaka, 1994) calls forchanges in thinking with regard to: - technical, product-oriented, strategic andorganizational - innovation in large organizations towards a greater respect for theknowledge creation and use. Ford and Thomas (Ford, Thomas, 1997) emphasizethe problem that the companies they use and / or technologies developed are notsufficiently codified and can conceptualize, particularly descriptive and analyticalapproaches are not sufficient to offset the existing complexity of expression. As amajor business functions, the authors see the acquisition and management ofknowledge, which in turn is the essential foundation for the development ofcompetitive products made.

Thurow (Thurow, 1997) claims that unique - not viable competitors -equipment not operating (more) existent, so that knowledge - the date after raw


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materials and capital as its importance in tertiary oil supplies - to maintain in thelong term sole source of competitive advantage has become. Demarest (Demarest,1997) notes that knowledge is the key to effective competition, highlighted themarket position and profitability in the global post-industrial economy. Hecriticizes at the same time that companies have no single model of knowledgecreation and dissemination, that does not support these processes and systems exist,no rating scales are available and no effective authority structure is implemented.This knowledge is, however, also on theses or statements leads to the developmenttrends in the practice part are diametrically opposed. For example, Chesbrough andTeece (Chesbrough, Teece, 1996) pointed out that companies which put emphasison alliances, rather than their own abilities to develop their own future jeopardized.Similarly, it can be argued that disclosure of one's own strengths and skills andknowledge in the context of a benchmarking strategic contest vision can beextremely dangerous.

Finally, it should be noted (Winslow, Bramer, 1994) that the service sector,which in its major sectors (for example, software development, consulting, bankingand insurance, health and others) know very intense, a growing importance in theeconomies of highly developed countries takes. For example in the U.S. servicesector 79% of all employed people, and this area contributes 74% of the valueadded to gross domestic product. For the manufacturing sector, it is noted that theretook place significant value-added knowledge-are also processes.

Despite the great relevance of the knowledge in today's companies isattached, may not be assumed that the generation of knowledge is alreadyextensive enough to serve as a company to be successful. Rather, the existingknowledge permanently implement effectively and efficiently to complete tasks tosolve, and ultimately to satisfy customer needs. What kind of knowledge should bein the future strategic competitive advantages allowed, is a question which isclosely linked to corporate strategy and its associated answer with uncertainty isdefined as the strategy may fail. Similarly, the knowledge-oriented view of thecompany was not the only perspective, the economic action is considered. Rather,these other approaches to combine and contrast these critically.

We have gone through various stages of economic development, fromagricultural economy to industry economy and recently, to new economy. Manyorganizations are paying attention to managing knowledge because of thecomplexity of business and the convergence of technology. Knowledgemanagement is about creating an exciting environment within the organization thatwill promote the creation and transfer of knowledge. It is about changing theorganizational culture and about visionary leadership, motivated staff, loyalcustomers and the systems and processes that facilitate these things.

Knowledge is an appreciated asset. The more it is used, the more effectiveits application. In a modern context, organizations have to come up with innovativestructures and thinking in order to gain superior performance. Technologyrepresents an enabler, but the winning organizations are those who learn to useknowledge and become best practice leaders.


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The new economy is starting to change the dynamics of all organizations.This new reconfiguration of the economy mostly depends on the ability oforganizations to develop new skills or use previously acquired skills in completelynew ways. It has been concluded that those organizations working in such amanner are innovative create on a continuous basis and reshape those teams whosemembers possess very well developed skills. Their knowledge is employed todifferent purposes such as multitasking and used in new situations in a context inwhich new technologies are rapidly assimilated and developed.

Among the structural changes from a traditional economy to a knowledge-based economy, several elements could be mentioned:

• the development of knowledge-intensive and design-intensivesectors (especially those based on information and communication technologies);

• investment in intangibles (R&D, information and communicationtechnologies, organizational restructuring and organizational systems, design,brand, human capital); investment in intangibles strengthens the firms’ capacity tocreate, manage and exploit knowledge;

• upskilling;• the increase in exports of highly-technological products.Knowledge is increasing at such a rate that no one can learn all there is to

know about a particular area. Organizations focus themselves on lifelong learningin an entrepreneurial sense, updating their knowledge on a continuous basis as andwhen they need to. Their portfolio of knowledge allows them to take advantage ofopportunities and thus, they want to control what they learn and how they learn. Inorder to reach a high-level performance, an organization has to use the knowledgeto compete effectively and, in order to do this the old classic management styleshould be replaced by a new knowledge management.

Referencess

1 Bell, D. (1973): The Coming of Post-industrial Society: A Venture inSocial Forecasting, Basic Books, New York.

2 Chesbrough, H.W./Teece, D.J. (1996): When Is Virtual Virtuous in:Harvard Business Review, Jan.-Feb., pp. 65-73.

3 Davenport, Thomas H.; Prusak, Laurence (1998): Working Knowledge.McGraw-Hill.

4 Demarest, M. (1997): Understanding Knowledge Management, in: LongRange Planning, Vol. 30, No. 3, pp. 374-384.

5 Drucker P.F. (2006): Despre profesia de manager, Editura Meteor Press,Bucureşti,

6 Drucker P.F. (1999a): Realităţile lumii de mâine, Editura Teora,Bucureşti.

7 Drucker P.F. (2004): Managementul viitorului, Editura Asab, Bucureşti.8 Drucker P. F. (1999b): Societatea postcapitalistă, Editura Image,

Bucureşti.


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9 Drucker, P.F. (1968): The Age of Discontinuity: Guidelines to OurChanging Society, Harper & Row, New York.

10 Ford, D./Thomas, R. (1997): Technology Strategy in Networks, in:International Journal of Technology Management, Vol. 14, Nos. 6/7/8, pp. 596-612.

11 Foster, R.N. (1968).: Innovation, McKinsey Summit Books, New York.12 Handy, C. (1995): Trust and the Virtual Organization, in: Harvard

Business Review, May-June, pp. 40-50.13 Nonaka, I. (1991): The Knowledge-creating Company, in: Harvard

Business Review, Nov.-Dec., pp. 96-104.14 Nonaka, I. (1994): A Dynamic Theory of Organizational Knowledge

Creation, in: Organization Science, Vol. 5, pp. 14-37.15 Nonaka, I. et al. ( 1992): Hypertext Organization for Accelerating

Organizational Knowledge Creation, in: Diamond Harvard Business, Aug.-Sept.(in japanisch).

16 Nonaka, I., Takeuchi, H. (1995): The Knowledge Creating Company,Oxford University Press, Oxford.

17 Porat, M.U. (1977): The Information Economy: Definition andManagement, U.S. Department of Commerce, Office of Telecommunications, OTSpecial Publications 77-12.

18 Stewart, T.A. (1997): Intellectual Capital: The New Wealth ofOrganizations, Nicholas Brealey Publishing, London.

19 Thurow, L.C. (1997) : Needed: A New System of Intellectual PropertyRights, in: Harvard Business Review, Sept.-Oct., pp. 95-103.

20 Toffler, A. (1990): Powershift: Knowledge, Wealth, and Violence at theEdge of the 21st Century, Bantam Books, New York.

21 Wikström, S., Normann, R. (1994): Knowledge and Value: a NewPerspective on Corporate Transformation, Routledge, London.

22 Winslow, C.D., Bramer, W.L. (1994): FutureWork: Putting Knowledgeto Work in the Knowledge Economy, The Free Press, New York.


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AN ANALYSIS OF ROMANIAN MANAGEMENTDURING THE CRISIS IN 2008 – 2011

Ursu Vasile DorelUniversitatea de Vest Vasile Goldiş Arad, Iuliu Maniu street, no. 5, Alba Iulia,

Romania, [email protected]

AbstractDuring the crysis, and not only, romanian managers, of some large companies, have abehaviour that caracterise in the next features: competivity, open minded, they assumecalculated risks, and are stubborn and hardly accept failure. Also they are very concernedwith their social status. They exercise pressure on their employees, and aply an excesivecontrol. It seems that the financial results are the main preocupation of the managerialteams. They are less willing to delegation. They talk much, and don`t have the patience tolisten to their collaborators and they consider they are allways right. Managers are veryinterested in salary packages and bonuses. Most of the times they forget to motivate thiriemployees.Keywords: manager, crysis, leadership, objectives, motivation

1. Romanian manager typology

The Romanian manager is competitive, energetic and charismatic, evenwhen he`s angry. At least so says a recent study that aims traits of Romanianleaders.

"Managers in Romania have many specifics to managers from othercountries and it shows in their daily behavior and the evolution of business theyrun," says Rostislav Benaki, managing director and partner Czech AssessmentSystems in Central and Eastern European region Hogan Assessment SystemsCompany, the Strategic HR Conference, the Hart HR Consulting. According to astudy traits of Romanian leaders, recently conducted by Hart HR Consulting, incollaboration with Asebuss & Exec Edu, The Romanian manager is primarilycompetitive. This feature is especially pronounced for men and the executives ofmultinational companies, while business leaders and women managers are morewithdrawn and cope harder with stressful situations.

Beyond the competition, another feature is that Romanian managers arealways open to new, obey the rules and take only calculated risks. They have ahigh degree of confidence, which often causes them to become stubborn anddifficult to accept failure or a contradictory opinion. "Research has shown ussomething that we find so strongly to managers in other countries - a growinginterest in social status, to the way they are seen. A Romanian manager, for



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example, will always want to have the most expensive car and largest house, "saysBenaki.

Values that are important for heads of companies in Romania are alsorevealing. For example, if women managers tend to be altruistic, more conservativeand in many cases their business decisions are based on intuition, men are morepragmatic. The immediate results are concerned about most, discussed only interms of money and almost always put business before personal life - "this willmake shareholders to love, but must ensure that employees will quickly come tohate "believes Rostislav Benaki.

Interestingly, how the organizational culture of multinational companieshas had an impact on how Romanian managers think and act. Unlike entrepreneurs,they are more willing to delegate tasks and create a coherent strategy. The fact thattheir money is at stake makes them more prone to taking risks and have greaterresistance to stress. Also are used to socializing in business, while entrepreneursare withdrawn and prefer to solve their own problems and take away from thepublic, often emotional decisions.

As expected, that motivates entrepreneurs actual business growth, theheads of multinationals idea of career advancement and financial reward is whatmakes them work really hard every day.

Differences between the two categories of managers are observed in thevalues that bring the highest price. Multinational managers want power andrecognition first, and contractors are safe and are often conservative, choosing tofollow the path already trodden. Of them come from middle managers but patter,which are more ambitious than their hierarchical superiors and the desire topromote the earliest, show a high degree of adaptability. I know that climbing thehierarchy may be slowed or stopped by any mistake, they are usually, and quitecautious.

The study was conducted on a sample of 378 respondents, of which 214were women and 164 men. They included 52 business executives from companies,34 presidents of multinational companies, top 125 managers and 158 middlemanagers.

2. Difference between management and leadership in RomaniaFinancial results are the main concern of management teams of companies,

pressed by the head office profits and pressing themselves employees to workharder. Management consultants warn that the model is old and may have aboomerang effect on business.

Most bosses Romania believe that the constant pressure exerted onemployees, control, big bonuses or setting sales targets business or very high arethe best ways to motivate people and get results. "The Romanian boss -generalizing, obviously, because there are positive counterexamples - looks likethis: is expensive car, talking long and hard, is always right and has no patience tolisten to employees.


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If you want to be listened to and respected as a leader, you must come infront of people and to prove you deserve it, "said Alain Cardon, president of theboard of the French company customized business consulting and managementtraining Metasysteme, operating and local market. Cardon believes that such aleader will not only create a negative climate in the organization, but falls into atypology of management that is easy to "seduced" and, in the end, to handle. "Donot argue, answer [Yes] and [Right] to anything he says. This does not mean thatthe organization works well. It means that people indulge in a state of affairs toavoid conflicts, but not do their job properly, not for acting out of conviction, "saidthe Frenchman, who came to Romania for the first time in 1998 and began hisconsultant work on the local market five years ago.

Half of the employees will say "Yes" to flatter the pride of the superior,hoping that this is the book for a promotion or better pay, and half will say "Yes" toavoid conflicts or because they were convinced that anyway their voice is heard.Employees in the latter category are those who will leave the organization at theearliest opportunity. Moreover, the Romanian Management tends to create anddevelop individual relationships privileged preferential treating certain employees,which destroys teamwork. Example from above and transferred throughout theorganization. "Romanians do not know how to work together, each trying to shineindividually. This is the first thing I noticed working with teams of Romanian andthe situation has not changed now," said Cardon.

Another critic said the management of the local market - whether it isRomanian and foreign executives - is Radu Furnica, one of the oldest and mostexpensive headhunter in Romania. Ant said in 2009 in an interview with BusinessMagazine that only about 3% of top managers in Romania are really good, the restbeing "more or less imposters". President of Leadership Development Solutions(LDS) has spoken several times in harsh terms about the disproportionateremuneration packages expat first term on the local market.

His opinion is shared by Cardon, who says that power was not always thecriterion upon which were transferred expats in Romania, "In the few cases wherethis has happened, foreign executives quickly learned behaviors of Romaniangoods. The top executives of multinational before the crisis salaries reached the20,000 to 25,000 euros a month, without taking into account bonuses, in somecases, doubling the net salary, according to information from the market. However,Ant said that multinationals are among the only true professional training centers inRomania, while the education system fails to produce the workforce needed by thebusiness.

Difficult economic climate is not very helpful in changing behaviormanagement in Romania. Cardboard - which spends about 50% of the time inRomania (the rest of its customers are companies from Western Europe), whichworks with companies and top managers - said that the main concern of executivescurrently working with the results, regardless of how as obtained, and largelybecause they link end of year bonuses of top teams' front-line executives are afraid


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of losing their job, working under enormous pressure and in turn puts pressure onemployees. This is the working model in most companies today: managers believedthat the pressure and the extra money - the happy few cases - automatically meanthat employees will work harder and more efficiently, and targets will be achieved.It is an archaic speech, and the example starts up and is mirrored throughout theorganization, "says Chard, who advises annually between 20 and 30 companies inthe local market, most of the telecommunications industry, banking, distribution,insurance and pharmacy.

Major companies in the market began a process of replacing executives,says Frenchman - a long time trend reported by recruitment companies. If before2009, the businesses advanced inertial Romanian managers, accustomed to double-digit increases were found in recent years a new reality and not very pleasant: youmust be struggling to be creative to differentiate yourself in the market and ensuresustainable business growth. Unlike the period before the crisis, executive teamsfrom corporate headquarters looks more closely to Romania today, including"millions of euros spent on training before the crisis in the Prahova Valley, fromwhich not see measurable results ".

The Romanian market is in a very fragile situation in terms of futuremanagement. "The training sessions before the crisis have made managers. Theexperts have been waiting for companies, managers have been appointed, and werethen sent to several courses." The main lesson of the crisis would be just that:nothing grows forever, says Cardon, "Sustainable growth and sustainabledevelopment should be the focus of management teams, not short-term results."The Romanian management environment, the watchword is now "leadership,leadership, leadership". "All Romanian managers have read and know concepts ofCovey, Porter's (Stephen Covey and Michael Porter - No), but their behavior hasnothing to do with leadership. Executives should look for internships or moderatelyleadership courses and focus more on the operational area, which is to know, towork and talk to people subordinate "said Cardon.

In fact, Michael Porter - number one in global business strategy - was oneof the first voices that have destabilized the myth that is credited for the positivemanagement of the businesses in the years preceding the crisis in Romania. InNovember 2007, Porter captured an audience of over 400 top managers who cameto listen at the Parliament House, at a conference organized by Ziarul Financiar andInteract by highlighting the economic boom is about to end.

They were surprised by another defect of Romanian managers, saysCardon: "Management in Romania is strongly impregnated by ego, but Romanianmanagers should understand that many of the solutions come from the hierarchicalpyramid, from employees, customers know best. " The starting point to changethings for the better would be that executives admit that they can do more things"together" than "individualy" and that disobeying and teams, losing valuableexpertise. He adds that it is a strong need for courses and practical training focusedon specific situations.


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Chard gives the example of a situation which puts the working executives.One comes to managing employees with a business problem faced by himpersonally or his business. Manager must obey his employee exposure for fiveminutes without pause: "It is a simple exercise that many managers fail to pass,because they have no patience to listen. Thus begins an exercise in sterileargumentative on both sides: the manager feels that he already knows what thesituation before he listened to the end, the employee is defending. MBA do notneed top executives, but should learn to shut up from time to time, and listen. "

Cardon says that he is more optimistic about the situation of Romanianmanagement when it comes to young team leaders, the second and third echelonmanagement, "Middle managers are closer to their teams and have developed acollective intelligence more grounded in reality". Also, he points out, womenmanagers often fail to do their job better than men because they are more inclinedto listen and are empathetic. His advice is that the Romanian top executives lookmore closely to Western management practices and, if given the opportunity, to gowork abroad for a while, and , especially, should show signs that they learnedsomething from the lesson of the crisis: "The crisis was too short. Managersalready see that the market is starting to move, the economy is recovering and theyforget about how easily things can skid. I wanted to see more humility from theexecutive team in recent years, in the sense of willingness to listen, to consult andwork more with employees ".

3. Common mistakes of Romanian managersThe responsibility is greater in a company, so any mistake managers make

is worse. Like any other employee, managers to are subject to error and there arefew who manage to be heads and leaders impeccable.

They come in every day at the office and thinking strategies, havemeetings, talk on the phone, listen or make presentations, setting targets andbudgets, hire or dismiss, and, besides, coordinating teams of dozens, hundreds oreven thousands. Under the burden of a program that often comes to be hellish,some managers are lost in details, omit important things you should do or simplylose the overview necessary for any team leader. Against this background, errorsoccur quickly and can have disastrous effects if not notified in a timely and correct.

"The most serious and most common errors we make in businessmanagement are poor delegation and can take even as total lack of delegation,"said Dorin Bodea, senior consultant at human resources consulting firm ConsultingResult. Most times, poor delegation is associated with excessive control ormicromanagement, as experts call it."Unfortunately, many managers have troubledelegating because they are afraid of losing control, so get practicing excessivecontrol," says Mr. Bodea. More specifically, a consultant to Result Consultingstates that Romanian managers have problems especially at the top of thedelegations, that is empowerment. "You make many errors. Many Romanianmanagers master the lower part of the delegation, and explanatory style associated


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with excessive control. This is appropriate subordinates are not mature on the job.Staff and senior adults need to appeal to empowerment. And to get there is need forcoaching, "said consultant. In particular, entrepreneurs are those who fear toempower. They prefer instead to pass that every decision or action on to her firstand often confused with loss of authority delegation.

To support this, Mr.. Bodea gives the example of an operational managerwith over 10 years experience, who understood that by delegating certain tasks toemployees setting a deadline for their performance. In this case, the intellectualwork of the employee is reduced to a minimum. He should rather be encouraged tothink for himself what to do and by when in order to achieve these targets. It is aform of empowerment of people, leading inevitably to their professionaldevelopment. "The same thing happens for newly promoted managers who, in aneffort to control excessively and know what is going on, refusing to delegateresponsibilities," says Madalina Balan, managing director of Hart HR Consultingcompany.

Another major mistake they make is that the heads of companies looking tomotivate employees, while they themselves negotiate pay packages even before thejob containing an important component of motivational bonuses. The problem isthat managers ignore the close connection between the degree of motivation andsatisfaction of an employee and his level of involvement. Moreover, managers donot even believe in incentives corporations, such as assessments and feedback.Human resource managers know that employee motivation is a key element in acompany and then put in place various instruments that apply to this.

I saw several sales managers of national companies who motivate peopleby showing them what needs to improve. Others, sales managers from amultinational motivated his subordinates by appealing to what they wanted toachieve. Madalina Balan said that some managers go even further than that - "theonly response they offer are the negative and evil to do so publicly, thusdemotivating employees".

Another glitch that the economy state pointed out in the last two to threeyears is that managers do not always think medium and long term. A major effectwas a mistake because as soon as the crisis came, companies had to go throughpainful restructuring that could have been avoided if managers would have beenmore cautious. "We know that Romanian managers are short term oriented. I haveseen managers who think only in terms of three months. On the other hand, Ibelieve that in recent years, increasingly more heads of companies have developeda strategic thinking and vision of business for at least three years, "said Mr. Bodea,who added that many companies out there have explicit requirement onmanagement to come up with long term goals and plans.

Medium-term thinking, between one and three years, one that emphasizesthe strategic objectives, is missing. Strictly related to this failure of many managershave mentioned a certain "inconsistency and lack of consistency in thinking resultsand finding the right place for each subordinate." A good manager is one who has


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good technical skills or who worked in the largest companies in the industry, but toable to harness a team and to create a style of thinking independently.

4. Variants of the Romanian management payRomanian managers have experienced times of glory when the economy

grew hand inhand with their income. Meanwhile, they came to settle for a lower salary,

but in absolute form, continue to be attractive. In 2008, managers of multinationalcompanies present in Romania ranks eighth in the ranking compiled by globalpurchasing power by the consulting firm Hay Group. He then surpassed theircounterparts from Austria, France, Germany, UK and USA. Although neverconfirmed, the talk at that time about top managers who arrived a year to earnwages of almost one million euros. This was because, in addition to actual salary,they had a package of benefits that were always part of the premium events orresults. Performance bonuses, for example, could easily double the basic salary andeconomic conditions made that any manager should be able to boast businessincreases.

"In essence, important managers earned the right, and even big companieshave made investments in times of crisis key people, so not too dramatic wagedifferences between the two periods", says Oana Datki, Country Managerconsulted the local representative of the consulting company Mercer. Specifically,we talk about salaries leaving from 1500-2000 euros for mid-level managers ofcompanies with tens or even hundreds of employees and which may exceed $10,000 per month for top managers of large companies. CFOs, for example, can themajor bones of the management structure of companies in the past two years,currently earns between 3,000 and 6,000 euros, according to head-hunter.

Butunoiu George, managing partner at executive search firm GeorgeButunoiu Ltd., says that if CFO turnover of the company is one of the mostimportant variable in calculating salary. Thus, he explains, a chairman of the boardis paid 1,000 euros for each of the 10 million turnover company. For example, aCFO of a company with annual turnover of 50 million earn on average 5,000 eurosper month. Naturally, the growth caps at a level up, because it is hard to believethat a company with annual turnover of one billion euros, and Metro, for example,the CFO pays $ 100,000 per month. In these cases, a maximum of 7000-8000 eurosis the most common.

At a similar level of remuneration are human resource managers. Foryears, they have complained that top management are not given due importanceand that does not rise to the rank of "strategic partners". Restructuring, had to makethe staff, meaning not only layoffs, but a rebalancing of power at lower costs, havekept the grip on human resource managers and most have come to earn role andimportance have long clip. According to Ulrik Rasmussen, a partner in executivesearch firm Pedersen & Partners, an HR manager in a company with at least 1,000employees earn between 3,500 and 5,000 euros per month. George Butunoiu noted


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that human resource managers are coming out of the ceiling and can earn 7000-8000 euros per month. Some marketing managers earn less, their starting salaries to2,500 euros and up to 5,000 euros more than in the best cases.

Discussion will be completely different terms when it comes to generalmanagers of the companies revenues. If their salary cap is volatile and in mostcases is established after lengthy negotiations, in which factors such as firm size,market position and previous professional experience of the manager are final. Atthe same time, is known and that foreign managers coming to lead a company inRomania wage claims than Romanians usually are accepted. So, if top managerssalaries alone leaving from 5000-6000 euros and can go up to 10,000-15,000 eurosper month. "Differences in salary for the posts of president and chief marketingwere positive and significant in 2008 than in 2007, with about 30% higher fromyear to year," said Oana Datki. In 2009, however, the basic salary has seen adecrease in average market value, the percentages are small, up to 5%. In 2010,salaries have increased again, but are percentages by more than 3% across markets."In terms of total package consisting of base salary, bonuses and benefits, adecrease in 2010, because the value of bonuses and benefits in kind of low key,"adds Datki.

Head-hunters are talking that for salaries, candidates for managementpositions in companies, must fight harder than before. Negotiations are now spreadover longer periods, which can reach up to two months, and this is becauseemployers do not feel market pressure to hire someone as soon as you find in themarket, but only after he tested skills. However, managers have resumedrecruitment, head-hunters say they have had a busy year ending, and 2011 includesa number of projects far exceeds the activity in 2010."In the last two months of theyear we signed projects have brought us more money than all the rest of theprojects together," announced George Butunoiu.

These project managers have made a recruitment company that runs morethan 300,000 euros, and most were recruiting replacement. "The area of financialservices was the most important for us - we had four positions of banks and fivevice presidents of management positions in insurance ', specific head-hunter. Thegood news is that almost 40% of private companies have budgeted salary increasesfor 2011, an average increase of 6.8%, while in 2010 private sector wagesincreased by 4.3%, according to Pay Well 2010 salary survey conducted byPricewaterhouse Coopers. However, if it continued the trend in the last year,managers will receive the lowest salary increases, specialists with the mostsignificant budgeted increases.

The wage differences that occur between women and men occupy the samepositions are interesting. According to a consult at the level of president, womenearn generally 4% less than their male counterparts, but there have better paidpositions such as manager with legal activities (plus 12%), director of humanresources (plus 12%) and marketing director (plus 16%).


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Disadvantages are, however, with women in middle management positions- most of the finance department earns on average 18% less women managers in IThave 12% lower wages than men, while male managers from logistics are generally10% higher earnings than women. The biggest difference for women is the positionof senior lawyer, vary between 25% and 44%, says Oana Datki, while the largestdifferences for men are for the position of manager of compensation and benefits,where they can earn up to 35% more than women.

Juliana Stan, Managing Partner of Human Synergistics, nuanced idea andsays that one of the most common mistakes that she noticed in the Romanianmanagers is to require certain behaviors from subordinates without also understandthat their role is to create the organizational framework in which these behaviorsoccur. "They talk about behaviors such as initiative, responsibility, creativity,cooperation, integrity, enthusiasm, commitment and the list goes on. All thesebehaviors are actually some people's reactions and as a manager it is vital to gethim to understand the first causal relationship in which they can be produced.There are behaviors that are obtained directly asking them. "In other words, amanager doesn`t need trace the tasks and deadlines, but so that each team membercan conceive an action plan to achieve certain objectives."Philosophy is theessence of thought management results. Nothing is sustained long term withoutresults. Similarly, for each of us is important to have a manager who does not makeus waste time," said Representative Result Consulting.

According to him, first among serious errors committed by managers is thelack or deficiency of a rigorous recruitment and selection process. In this chapter,most managers would blame the head-hunters to go to when they want to committo a key position. However, recruiters recommend checking so that an investmentin a person will not lead to losing. "The greatest evil that current management isresponsible with - the wrong selection of individuals to join a company or a team,causing gaps at all organizational levels. I mean the whole range of dirty aspectsfrom underperforming to conflicts and malicious intentions, "said Dorin Bodea.

When these mistakes still frequently occur, and affect other employeesand, ultimately, come to be reflected in company results. When they feel they arelosing control, many turn to management consultants. "There is a growing concernin this direction, especially from multinational companies that take everything to bedone under the rules," says Madalina Balan. The problem arises when managersare too proud to admit mistakes or accept instructions from outside. In those casesit is difficult to say whether there are other solutions than the actual replacement ofthe manager.

5. ConclusionsThe crisis has shown that incomplete tactical thinking is a common failure

of many managers in Romania. Stimuli acting on immediate and short term plansare only, without taking into account possible changes or twists. Some of


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Romanian managers are used to set a specific objective, but fail to schedule tgesteps that will precede and analyze the actual effects of its fulfillment.

Although at employment, they receive salary packages to stimulate theirperformance, there are managers who do not feel the need to apply the same kindof motivation and for employees, which has the effect of lowering theirinvolvement. In addition to the help they receive from the head-hunter, managersmust turn to find information about the experience and skills to be employed,especially when it comes to key positions in the organization.

Romanian managers have the qualities and defects. Qualities such asperseverance, competitiveness, openness to new, etc. should be highlighted.Defects such as stubbornness, excessive control, limited patience, concern forsocial status, etc. can be removed by exercise courses, training, sharing bestpractices, and so the road is set to high performance.

References1. Bosrock Murray Mary, 2009, Maniere şi obiceiuri europene de

business, Bucuresti, Ed. Meteor Press2. Cooper L. C., Avram E., 2008, Psihologie organizaţional

managerială. Tendinţe actuale, Bucureşti, Ed. Polirom3. Covey R. S., Whytman B., 2010, Rezultate previzibile în vremuri

imprevizibile, Bucureşti, Ed. All4. Ursu D., 2005, Managementul resurselor umane, Cluj Napoca, Ed.

Dacia5.*****, colecţia Business Magazin 2011 – 2012


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ROMANIA’S POPULATION BETWEEN 2005 AND 2009:A QUANTITATIVE STUDY ON THE EVOLUTION OF

POPULATION AND MORTALITY

Emanuela-Alisa NicaIași, Bulevardul Dacia nr 35, bl DC4, ET 4,

[email protected]

Abstract:Information on the population of Romania contributes to ensuring a legislative frameworkfavorable to laying the ground for certain options for developing and ensuring a decentstandard of living through economic and social protection measures.We cannot design correct measures, from an economic and administrative point of view,without enlarging upon some issues regarding the population distribution by age, genderand place of residence.Keywords: population, death, mortality.

Introduction:Over the last years, the structure of Romania’s population underwent a

series of modifications due to certain economic, social, political and demographicfactors.

The demographic transition has become a more and more complex processas an integral part of the socio-economic development and the modernizationprocess, as a consequence of the increasingly visible interdependence between thedemographic and the socio-economic variables.

The changes in the political system, in the economy, in the social life, aswell as in the population’s mentality that took place after 1989 have affected thedemographic behavior of the latter.

Data source:The data were collected at national level. We used population censuses

data, statistics regarding the population of Romania between 2005 and 2009, datafrom the updated civil status records regarding the population and the number ofdeaths. The statistical data is available online, on the National Statistics Institutewebsite, as well as in the Yearbook of Statistics 2010. The tables and graphics werecreated in Excel.

Methodology:The population number was computed based on the Census of Population

and Housing data. The population of Romani is distributed according to the placeof residence, in the urban or rural area. The age of the population analyzed is



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expressed in entire years. A deceased person is defined as that person whose vitalfunctions have ceased permanently at any time after birth, and the mortality raterefers to the number of deceased persons per year against the average population ofthe same year, and it is expressed as the number of deaths per 1000 inhabitants.(Yearbook of Statistics 2010)

Method and calculus formulae:The population per calendar year is calculated at the end of the year, noted

by , and it represents the sum of: the population at the beginning of the year

, the difference between the number of births and the number of deaths over the

year ; and the difference between the number of immigrants and the number of

emigrants over the year .To compute the total population in a calendar year, we have used the

following formula:

Where:

- the population at the beginning of the year n;

- the number of deaths over the year n;

- the number of births over the year n;

- the number of immigrants over the year n;

- the number of emigrants over the year n;- the population at the end of the year n;

Mortality is calculated as a ratio between the number of deaths and thenumber of population over a year, multiplied by 1000.

The general formula for computing the mortality index is the following:

Where:

- mortality specific to the year n;- the population at the end of year n;- the number of deaths at the end of year n;

Results:After applying the quantitative analysis methods, the following results,

significant for Romania, were obtained.


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The evolution of Romania’s population between 2005 and 2009 shows aconstant trend. There is only one difference of 0.1 % between 2005 and 2006. As itcan be observed in Table 1, there is a difference of about 2.6 % between thenumber of women and the number of men, the number of women being higher. In2005, the number of men was equal to 10552438, with 2.4% more than the numberof women.

Table 1. Evolution of Romania’s population per genderbetween 2005 and 2009

Data source: Yearbook of Statistics 2010, http://www.insse.ro

The demographic evolution in Romania between 2005 and 2009 was alsoinfluenced by economic, social, political, cultural, medico-sanitary factors withrepercussions on population figures, number of deaths, mortality, and rate ofmortality caused by illness.

Data source: Yearbook of Statistics 2010, http://www.insse.roFigure 1. Evolution of Romania’s population per age groups

and place of residence

Total Male(%)

Female(%)

2005 21623849 48,8 51,22006 21584365 48,7 51,32007 21537563 48,7 51,32008 21504442 48,7 51,32009 21469959 48,7 51,3

http://www.insse.ro

http://www.insse.ro


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As far as the territorial distribution of Romania’s population by place ofresidence is concerned, we can easily observe in Figure 1 that the majority of thepopulation ranging from 30 to 34 years old (1040432 persons) live in urban areas,whereas 734828 (41,40%) live in rural areas. 124578 (57,25 %) persons aged 85 orover live in rural areas. We can conclude that, due to retirement, economic factorsor the emergence of certain diseases, as they age, the inhabitants of Romania retireto the countryside.

Data source: Yearbook of Statistics 2010, http://www.insse.roFigure 2. Evolution of deaths by age groups in Romania

between 2005 and 2009

The highest mortality rate, 45218, was registered in 2005 for thepopulation aged 75 – 79, of which 21680 were men, and 23538 women.

According to the date published in the Yearbook of Statistics 2010, thecause of death can be attributed to different reasons, most people dying because ofrespiratory diseases: 8311 (78,8 %) men in 2005.

http://www.insse.ro


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Data source: Yearbook of Statistics 2010, http://www.insse.roFigure 3. Evolution of deaths by age groups and gender in Romania


Data source: Yearbook of Statistics 2010, http://www.insse.roFigure 4. Specific mortality rate by cause of disease and gender in Romania


If most middle-aged persons suffer from acute diseases and the emphasisfalls on prophylactic assistance, elderly and longevous people are more prone to

http://www.insse.ro

http://www.insse.ro


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chronic and invalidating diseases, requiring frequent hospitalizations, sometimes oflong duration.

Conclusions:The population of Romania registers a constant evolution, the number of

births being almost equal to the number of deaths. Young population generallylives in urban areas because of the easy access to medical services and theopportunities for economic, social and cultural development.

The medico-sanitary factors, the population ageing, the reduced economicresources, pollution, less healthy nutrition, loneliness and daily stress have resultedin a higher mortality rate in rural areas and among the persons aged 75-79, mostlywomen.

References:1. Florin Paşa , Alina Matei, Olguţa Ersilia Mihart, Îmbătrânirea populaţiei

în context european şi în România (Population ageing in Europe and in Romania)2.Yearbook of Statistics 20103. http://www.insse.ro

Nica Emanuela-Alisa, beneficiary of a postdoctoral research scholarship,project co-financed from the European Social Fund through the SectoralOperational Program for Human Resources Development 2007 – 2013

Priority axis 1 “Education and training in support of economic growth anddevelopment of a knowledge-based society”

Major area of intervention:1.5 “Doctoral and Postdoctoral Programs insupport of research”

Title of the project: “Postdoctoral Studies in health ethics policy”Contract Code: POSDRU/89/1.5/S/61879Beneficiary: “Gr. T. Popa” University of Medicine and Pharmacy, IaşiThe content of this material does not necessarily represent the official

position of the European Union or the Romanian Government

http://www.insse.ro


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DEMOGRAPHIC CHALLENGES AND SUSTAINABILITYOF PUBLIC PENSIONS EXPENDITURES

Miloş Marius CristianUniversity “Eftimie Murgu” of Resita, Faculty of Economics, [email protected]

AbstractThe demographic changes that are likely to be experienced in the European Union in thecoming decades determine governments to find solutions in order to provide thesustainability of social public expendituresThe literature usually focuses on elements whichunderline the effects of macroeconomic parameters on the size of public pensionexpenditure: Samuelson (1958), Cass and Yaari (1966), Blanchard (1985), and Gertler(1999). However demographic effects, notably fertility rate and old-age dependency ratio,are also key elemets which affect the sustainability of social security expendituresaccording to Miroslav Verbic and Rok Spruk (2011). Our econometric testing confirms thehigh relevance of old age dependency ratio and of the fertility rate upon public pensionexpenditures, both demographic variables proving to influence the size of public pensionexpenditure. Considering these results we propose some measures which governmentsshould include in future public policies.Key words: demography, pensions, public expenditures, sustainability, governments,JEL classification: H00, H55

1. IntroductionWithin the current paper we are revealing the main issues regarding the

ageing of the EU-27 population by focusing mainly on the facts offered by theEuropean Commission, Eurostat (2012) through a very interesting statisticalportrait, entitled ’’Active ageing and solidarity between generations A statisticalportrait of the European Union’’. The European Union’s (EU’s) populationstructure is changing and statistical data proves that population is becoming olderand older – there were slightly more than 87 million persons aged 65 and over on 1January 2010 in the EU 27, some 17.4 % of the total population. These latestfigures can be compared with data from 1 January 1985, when there were 59.3million persons aged 65 and over in the EU 27 (12.8 % of the total population)(Eurostat, 2012).

An increase in life expectancy across the EU during the last century led toincreased longevity, while in more recent decades – from the 1970s onwards – theEU has experienced falling fertility rates. Those demographic changes had verystrong effects regarding ageing in the last 30 or 40 years and it is expected, bymany, that the ageing process will further affect society during the next halfcentury, as the absolute number of older people and the percentage in totalpopulation of older persons are still growing. This process should be mainly



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considered by governments as the ageing of the population could determineimplications for public policies and budgets. At present, there are severeconstraints on fiscal policies and a strong need for fiscal consolidation over anumber of years in the EU, all this happening also because social securityexpenditures are influencing policies and the pressure regarding the sustainabilityof pension expenditures is steadly growing.

2. Literature reviewUsually focusing on the main literature regarding the challenges with

which governments are being confrunted we could see mainly those elementswhich underline the effects of macroeconomic parameters on the size of publicpension expenditure: Samuelson (1958), Cass and Yaari (1966), Diamond (1965),Blanchard (1985), and Gertler (1999). Demographic effects, notably fertility rateand old-age dependency ratio, are also key elemets which affect the sustainabilityof social security expenditures. Consequently we underline the paper of MiroslavVerbic and Rok Spruk (2011) who reveal that demographic processes play asignificant role, much more important than the role of macroeconomic parameters,explaining the long-run pressure of ageing.

The changes in the demographic profile of the EU will also affect thelabour and product markets, families and individuals. In order to defeat theobstacles occured by population ageing, a long-term view seems necessary, wellbeyond the horizon of electoral cycles. Many of the challenges that arise frompopulation ageing are universal and include (Eurostat, 2012):

• pressure on public budgets and fiscal systems;• strains on pension and social security systems;• adjusting the economy and in particular workplaces to an ageing labour

force;• possible labour market shortages as the number of working age persons

decreases;• the likely need for increased numbers of trained healthcare professionals;• higher demand for healthcare services and long-term (institutionalised)

care;• potential conflict between generations over the distribution of resources.Romania’s population is rapidly decreasing and ageing, which, unless

adopting the necessary reforms, will lead to the explosion of the demographicbomb in a few decades.

- Romania’s population has decreased by 1.8 million inhabitantsduring 1990-2008, from 23.2 to 21,4 million inhabitants

- Until 2050, Romania’s population is set to decrease by a further 4-5 million inhabitants, to reach 16-17 million inhabitants

- The fertility rates in Romania decreased from 2.3 new born babiesper woman in 1989 to 1.4 new born babies per woman in 2008;

- The average age of mothers at their first birth giving increased 22.3years in 1990 to almost 26 years in 2008;


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- Life expectancy in Romania increased from 70 years in 1990 to 74years in 2008 and continues to grow

These figures show that the population is rapidly decreasing and ageing,the trend looking quite irreversible. And all these trends took place in the last 18-20years alone. The decreasing and ageing population puts a heavy burden on thepublic pensions budget, which has to rely on less contributors (active employees)to support more beneficiaries (pensioners). Romania’s demographic problemsshow that its public pension budget is no longer sustainable in its current form andneeds a major reform, to avoid collapsing sometimes during the next decades. Thatis why, in 2007, Romania introduced the private pensions system, based n themodel tested and recommended by the World Bank. The multi-pillar privatepensions system includes the 2nd pillar – mandatory schemes and the 3rd pillar –voluntary schemes. Nowadays, over 30 countries throughout the world have such asystem put in place – most of them are in Central and Southern America and inCentral and Eastern Europe. In the CEE, no less than 11 countries run such asystem.

In the public pensions system (PAYG = pay as you go), the state collectscontributions from employees and redistributes the money among existingpensioners. Demographics show that this redistribution logic is no longer viable, ascontributor's numbers will fall and the number of pensioners is already going up.All over the world, countries reformed or are in the process of reforming thePAYG public systems, introducing private pensions schemes.

Social security sustainability and also the public pensions sustainabilityseem to become real problems of nowadays economy. This frightening challenge isdue to ageing of population but also due to migration from Eastern Europeancountries towards more developed countries. All this is definitely being stimulatedalso by the unsuitable allocation of public expenditures as revealed in the linesabove and by less efficient governments.

,,In Romania, before 1989, there were two migration mechanisms:permanent migration which had as main motivations than the political and ethnicones. On a smaller scale there also existed temporary migration for study orworking abroad which was based only on inter-governmental agreements betweenRomania and other countries. After 1990, migration becomes a social phenomenonthat gains momentum and the main motivations of migration have transformedfrom the ethnic and political ones to economic reasons. Migration in this periodtook on many forms. We are dealing with migration for family reunification, ethnicmigration (Hungarians migrating to Hungary, Germans migrating to Germany,etc.), business migration, educational migration due to international mobility ofstudents and concluding with migration for employment” (Panzaru and Milos,2011).

Figure 1 illustrates that the population of European Union is ageing,without any exception (old and new member states). This is due to an increase ofthe population over 65 years old and a shrinking of the segment of populationbetween 0-14 years old (Milos and Corduneanu). The highest increase in the


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segment of 65 over years population is noticed especially in the EU-15 countries,while the most significant decrease in the 0-14 years population is noticed in theEU-12 countries.

Figure 1. Rate of growth/decrease by age EU (2001-2007) (%)

-14

-10

-6

-2

2

6

10

14

0-1415-6

4

over 6

5

EU-27

EU-15

EU-12

Source: (Milos & Panzaru, 2011)

,,The international financial crisis had a negative impact on the pensionsystems, both on the first and the second pillar. It is true that, given the volatilenature of the investments made by private pension funds, the second pillar wasmore affected. While the second pillar was introduced for avoiding some specificrisks for the future of pensions, given the negative demographic trends (i.e theirsustainability and adequacy), this pillar is more affected by the financial risk atwhich financial markets are exposed when a financial crisis occurs. Although lessaffected, the first pillar is also negatively influenced by the financial crisis, oncewith the reduction of the aggregate national income” (Milos and Panzaru, 2011) .

As discussed earlier, the impact of fertility on public pension expenditure isunambiguous (Barro and Becker 1989; Meier and Wrede 2010). The empiricalevidence suggests a negative relationship between age-related governmentspending and equilibrium fertility rates. The literature suggests (Stensnes andStølen 2007) that public pensions should respond strongly to the increases in old-age dependency ratio.

3. Methodology and ResultsThe econometrical model we have chosen in order to prove the existing

relation between total pension expenditure and demographic elements is amultifactorial regression and focuses on the following variables:

- Dependent variable: Total pension expenditure (mill. Euro): old agepension, anticipated old age pension, partial pension, disability pension


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- Independent variables: old-age dependency ratio (population aged 65 andover/population between 15 and 64), fertility rate, migration (net migration).

The source of the data is Eurostat, the time period 2000-2009 and thesample of countries is EU-27.

The results of our model can be seen in the table below (Table 1):

Table 1 – Results of the econometric model

EXPLANATORYVARIABLES

Pooled EGLSFixed effects

(cross-section)OADR3030.302*

(1300.896)FERT-17124.57**

(9020.553)ObservationsNumber of countriesR-quaredAdjusted R-squaredF-testp-valueDurbin-Watson

140270.99710.99641332.36800.00001.66

Notes: Public pension expenditure is the endogenous variable of the model.Standard errors are given in parantheses. Asterisks * and ** denote significance at

5 percent and 10 percent level, respectively.Source: Author’s calculation

The results seem to confirm the fact that aging is positively associated withthe level of pension expenditures while the rate of fertility has a negative effect.Migration seems not to be a key variable for the pension expenditure dynamics asthe results were not statistically significant. Positive implications of our empiricalfindings suggest that aging population and diminishing fertility rates shall imposeconsiderable pressure on longterm sustainability of public pension expenditure.We consider that the main aims of future policies should be creating better jobopportunities and working conditions for the growing number of older people inEurope. Retirement should happen at an older age but only if appropriate jobs areavailable for older generations.

Future research will consider:- more control variables


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- a delimitation of the whole sample of countries (ex. EU-12, EU-15)- more tests in order to establish the right estimation method.

4. Concluding remarksConsidering all the aspects mentioned above, we think that urgent and

useful measures are necessary in order to keep social expenditures sustainable andto hinder the potential suffering of ageing people. It is important to promote theactive participation of older persons and to increase pension ages according to lifeexpectancy, while early retirement schemes should be reduced.

Migration flows have increased steadily which determines that Romania isloosing work force and also contributions towards public pensions. It should alsobe considered that Romania holds the second smallest position among the EU 27states in terms of gross domestic product per capita, thus it is clear that migrationinvolved a transition from a level of lower income to a higher one.

The development of new products and services which are constructed inorder to serve older people may allow older people to stay autonomous and livelonger in their own homes, avoid the delivery of assistance from other employeesand save public or private money. As stated, longer active lives and a good controlof the old age dependency ratio are key elements in determining the sustainabilityof public pensions expenditures.

References

1. Barro, R. J., Becker, G. S. “Fertility Choice in a Model of EconomicGrowth.” Econometrica 57(2): 480-501, 1989

2. Blanchard, O.J. “Debt, Deficits and Finite Horizons”. Journal ofPolitical Economy 93(2): 223-247, 1985

3. Cass, D., Yaari, M. “A Re-examination of Pure Consumption LoansModels.” Journal of Political Economy 74(4): 353-367, 1966

4. Diamond, P.A. “Social Security, Government Budget and NationalSavings.” MIT Department of Economics Working Paper 05-09. Cambridge:Massachusetts Institute of Technology, Department of Economics, 2005

5. Gertler, M. “Government Debt and Social Security in a Life-CycleEconomy.” Carneige-Rochester Conference Series on Public Policy 50(1): 61-110,1999

6. Meier, V., Wrede. M. “Pensions, Fertility and Education.” Journal ofPension Economics and Finance 9(1): 75-93, 2010

7. Miloş, L.R., Corduneanu, C. „Diversity of the pension systems in theEuropean Union countries”, Scientific Annals of the Alexandru Ioan CuzaUniversity of Iasi, Economic sciences section, tom LVIII:145-155, ISSN 0379-7864, Ed. Universităţii Al. I. Cuza Iaşi, 2011

8. Milos M.C., Panzaru, C. „Considerations on social security withinEuropean Union member states”, 3rd International Conference “Economies ofCentral and Eastern Europe: Convergence, Opportunities and Challenges”


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Conference Proceedings, Tallinn, Estonia, 12-14 June, 2011, ISBN 978-9949-430-50-5

9. Panzaru C., Milos L.R. “The Influence of the Economic Factor on theRomanian Labor Migration”, 3rd International Conference “Economies of Centraland Eastern Europe: Convergence, Opportunities and Challenges” ConferenceProceedings, Tallinn, Estonia, 12-14 June, 2011, ISBN 978-9949-430-50-5

10. Samuelson, P.A.“An Exact Consumption-Loan Model of Interest Withor Without Social Contrivance of Money.” Journal of Political Economy 66, 1958

11. Stensnes, K., Stølen, N.M. “Pension Reform in Norway:Microsimulating Effects on Government Expenditure, Labor Supply Incentives andBenefit Distribution.” Working Paper 524. Oslo: Statistics Norway, ResearchDepartment, 2007

12. Verbik M., Spruk R., Aging population and public pensions: Theoryand evidence, Institute for Economic Research, Ljubljana, Working Paper 58, 2011

13. ***Eurostat (2012), Active ageing and solidarity between generationsA statistical portrait of the European Union 2012, European Commission

AcknowledgementThis work was cofinanced from the European Social Fund through

Sectorial Operational Programme Human Resources Development 2007-2013,project number POSDRU/1.5/S/59184 „Performance and excellence inpostdoctoral research in Romanian economics science domain”.

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