Companies that are part of multinational groups or large domestic groups falling within the scope of the global minimum tax may adopt IFRS as their accounting framework starting with the 2025 financial year.
Where, at least in the short term, a transition to IFRS is not considered appropriate, but the entity is subject to the specific rules governing the calculation of the domestic top‑up tax, it will nevertheless be required to calculate and disclose deferred taxes in the explanatory notes which are part of the financial statements prepared in accordance with Order of the Minister of Finance No. 1802/2014 (Local GAAP).
The option to apply IFRS is particularly relevant for groups that already use IFRS for consolidation purposes, as it allows alignment of the accounting rules applied across the group.
When can entities transition to IFRS?
The transition to IFRS is permitted starting with the annual financial statements for the year 2025, provided that entities assess themselves as having the capability to apply these standards. Entities that opt to transition to IFRS beginning in 2025 will organise and maintain their accounting records in accordance with IFRS starting with the 2026 financial year.
The option to apply IFRS remains available beyond January 1 2026, as long as the entity continues to fall within the scope of the global minimum tax.
What happens if an entity transitions to IFRS and subsequently exits the scope of the global minimum tax?
Entities that fall within the scope of the global minimum tax and elect to transition to IFRS are required to ensure continuity in the application of these standards.
If, subsequently, such entities no longer fall within the scope of the global minimum tax, they may continue to apply IFRS or may revert to Local GAAP starting with the financial year following the one in which they cease to be subject to the global minimum tax.
Which entities are required to disclose deferred taxes, and from when do these requirements apply?
Entities that fall within the scope of the specific rules governing the calculation of the domestic top‑up tax and that apply Local GAAP are required to disclose deferred taxes in the notes attached to the financial statements, without recognising the amounts in the accounting records.
This disclosure requirement applies starting with the financial statements for the year 2025.
What are the key benefits and challenges of transitioning to IFRS?
The option to adopt IFRS is particularly relevant for groups that already apply IFRS for consolidation purposes.
Aligning accounting frameworks across the group:
Ensures a high level of consistency at group level, facilitating a coherent and comparable view of the financial performance;
Enhances the efficiency of reporting processes by reducing recurring adjustments and reconciliation efforts;
Lowers the cost of implementing group‑wide business processes by eliminating differences in accounting treatments;
Reduces audit costs at group level; and
Supports a more efficient approach to compliance with global minimum tax requirements.
At the same time, in the context of increasing transparency requirements and deeper integration into international markets, the differences between Local GAAP and IFRS are becoming increasingly significant for the Romanian business environment.
IFRS is widely perceived by investors, lenders, and business partners as a benchmark reporting framework, aligned with international best practices, in contrast with Local GAAP. In this context, adopting IFRS may support enhanced access to financing, increased commercial activity, and broader business development opportunities.
Local GAAP represents a predominantly rules‑based accounting framework, focused on compliance with local statutory requirements. By contrast, IFRS is principles‑based and relies on professional judgement, with the primary objective of providing relevant and decision‑useful information to investors, creditors, and other stakeholders.
These differences are also reflected in the scope and depth of disclosures. IFRS‑compliant notes are significantly more extensive and technical, including detailed descriptions of accounting policies, significant judgements, key estimates, and risk exposures. In comparison, disclosure requirements under Local GAAP are more concise and standardised.
From a challenges perspective, the transition to IFRS involves initial costs related to the conversion process, the adaptation of accounting and tax reporting systems, and the development of technical expertise within finance teams. Given the limited time remaining until the closing of the 2025 financial year, adopting IFRS for the 2025 financial statements may prove challenging for entities that do not yet have appropriate reporting systems in place. Nevertheless, the option remains available for subsequent financial years for entities that continue to fall within the scope of the global minimum tax.
Key takeaways
In conclusion, the transition to IFRS should not be viewed merely as an accounting exercise, but as a strategic decision with implications for financial reporting, internal processes, external stakeholder perception, and the overall positioning of the group.
EY recommends that entities eligible for this option undertake a careful and comprehensive assessment of the strategic implications, balancing the long‑term benefits against the implementation effort and associated costs.
