In many countries, accounting regulation is based on a system of detailed rules prescribed in standards and the law. However, rule-based systems can rarely be water-tight. There may be gaps in the rules and places where the rules are vague or even incomplete. Of equal, if not greater significance is the fact that regulatees may develop schemes which fulfill the letter of the rules, but undermine their spirit. Regulators may find themselves constantly lagging behind the avoidance activities of the regulatees (McBarnet, 1988). In such circumstances, effective regulation breaks down. For the past ten years, the financial instruments issued by companies have become more and more complex. While it is impossible to predict the future, there are some trends and indicators which offer a window through which a glimpse of the possibilities can be seen. The non-stop tries of some companies to trick the state by arranging their financial statements has forced the FASB, SEC and other government authorities to improve and change some GAAP regulations. In the last 12 to 24 months, there has been a tremendous change in the financial reporting infrastructure within the European Union and in Romania as well so she can get accepted in the European Union, as evidenced by the many interesting and important developments that have occurred. On the regulatory side, the European Commission (EC) issued a draft regulation that will require the use of IAS by 2005, or 2007, for 7,000 companies. That draft regulation was endorsed by the European Parliament less than 2 months ago. The European Financial Reporting Advisory Group, or EFRAG, was established to coordinate the development of input to the IASB; and securities regulators in Europe have come together to agree on a more unified structure via the Committee of European Securities Regulators, otherwise known as CESR. For the standard-setters, in April 2001, the IASC, the predecessor to the IASB, was reorganized into a full-time, independent standard-setter; and the IASB agreed on its initial agenda, which included an "improvements" project, a project on the first-time application of IAS and a project on the Preface of the standards that dealt with the so-call black/gray lettering issue. And lastly from the accounting profession, the International Federation of Accountants or IFAC has drafted documents for an international oversight mechanism.
