The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Ireland

Abstract

We examine the extent to which International Financial Reporting Standards (IFRSs) are used as a reference point and as a basis for the development of accounting standards in the Republic of Ireland (ROI). In particular, the focus is on accounting standards applicable to entities other than those listed on a regulated EU market. The objective is to provide a deeper understanding of the direct and indirect effect of IFRS on accounting standards applicable predominantly to private companies limited by shares in ROI. We illustrate how the historical links between the UK and ROI continue to influence accounting standards applicable in ROI. The enactment of the Companies (Accounting) Bill 2016 into ROI law will maintain the traditional alignment of UK and ROI accounting regulation, whilst simultaneously bringing into force the remaining aspects of the EU Accounting Directive 2013/34/EU, not currently applicable in ROI.

Keywords:

• IFRS
• EU accounting directive 2013/34/EU
• national accounting standards
• UK and Republic of Ireland accounting standards
• SMEs

Acknowledgements

The authors would like to acknowledge the following contributions: Aidan Lambe, Director of Chartered Accountants Regulatory Board (CARB), Chartered Accountants Ireland, for sharing his experience of the development of accounting regulation in ROI; Maurice Barrett, Assistant Head of Financial Reporting Supervision at IAASA, for insights into the development and operation of financial reporting regulation in Ireland; and Professor Niamh Brennan, University College Dublin for her helpful comments on an earlier draft of the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Schedule 4 cross-references to the accounting principles in Schedule 3.

2 The micro-entity category of company was introduced by Directive 2012/6/EU. Member States had the option of applying Directive 2012/6/EU. ROI did not apply it.

3 Due to the historical links between the UK and the ROI, accounting practices in both jurisdictions have been and continue to be closely linked. Brennan, O’Brien, and Pierce (1992) provide a review of the historical links between the UK and ROI and how such links influenced the development and application of accounting regulation in ROI.

4 IAASA is the independent body responsible for the (i) examination and enforcement of certain listed entities’ periodic financial reporting; (ii) supervision of the regulatory functions of the Prescribed Accountancy Bodies; and (iii) the inspection and promotion of improvements in the quality of auditing of Public Interest Entities (https://iaasa.ie/About-IAASA/Our-Role).

5 The ASB issues FREDs as part of the due process for setting new accounting standards. Respondents are invited to comment on FREDs. All comments are considered in detail and used in determining how, and if, proposed accounting standards should be developed (ASB, 2010).

6 ACCA (2012) issued a comment letter incorporating responses from UK and Ireland-based members of its Corporate Reporting Global Forum. No significant matters pertaining specifically to ROI were noted in the letter.

7 The mission of the ODCE is to improve the compliance environment for corporate activity by encouraging adherence to the requirements of the Companies Acts, and bringing to account those who disregard the law (http://www.odce.ie/en-gb/abouttheodce/ourrole.aspx).

8 Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.