Deloitte Welcomes Irish Accounting Standard Proposals

by Robert Lee, Tax-News.com, London

21 August 2009

The Accounting Standards Board's (ASB) "Policy Proposal: The Future of UK GAAP" proposes that from 2012 almost everyone preparing statutory accounts in Ireland and the UK use International Financial Reporting Standards (IFRS) of one sort or another. To date, only listed companies in Ireland have had to use IFRS and, while others have a choice of using IFRS, few have taken up this option. The majority of companies and organizations currently use Irish Generally Accepted Accounting Principals (GAAP), which are identical to UK GAAP.

Commenting on the measures proposed, Glenn Gillard, Accounting Technical Partner at Deloitte, commented: “Irish accountants and the users of Irish accounts ought to sit up and take notice. These proposals, if implemented, will fundamentally change accounting in Ireland. [Ireland is] a small open economy with up to 80% of what it produces exported. It is in the national interest that the accounts of even the smallest of our exporters or importers are internationally comparable and this will certainly be an advantage of the new proposals.”

“However, while the ASB’s document acknowledges that it has worked with the UK Department for Business Innovation & Skills in developing these proposals, it is not clear whether there has been collaboration with Ireland’s Department of Enterprise, Trade and Employment. The proposals have been developed in the UK, which is a much more closed economy with a greater internal focus on its big domestic market. Debate is needed to ensure the proposals are fit for purpose and best suited to our needs in Ireland before such a significant change comes into law.”

A wholesale move to international accounting standards would be consistent with the educational policy of the Institute of Chartered Accountants in Ireland. Gillard commented: “The current mixed system of having two different sets of accounting frameworks in practice is not terribly efficient. We have seen a lot of change to UK and Irish GAAP as it partly converged to IFRS. This can cause confusion and delay. In contrast, the new rules could bring a lot of stability.”

Under the new proposals, there would be three versions of standards used by Irish companies. Publicly accountable entities such as listed companies and banks would use the current full suite of IFRS without any amendment. Everyone else, other than very small companies, will use a scaled-down version of IFRS known as IFRS for SMEs, which was published on July 9, 2009. Small companies will have a concession, for a few years at least, which will allow them to use a standard known as Financial Reporting Standards for Smaller Entities (FRSSE).

“Notwithstanding its title, IFRS for SMEs offers appealing simplification and reduced disclosures for all non-publicly accountable entities regardless of size,” said Gillard. “While transitioning from current rules to IFRS for SMEs will require some thought, preliminary analysis indicates that the move should not be unduly burdensome for most entities. That said, if the ASB’s proposals are implemented as currently drafted, Irish entities will be reporting under the new regime for accounting periods starting on or after January 1, 2012. While that might seem far away, once time is factored in for training and system changes, the debate needs to start now if we are to get this right for Ireland.”

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