CPEffective Insolvency and Creditor Rights Systems
As of 2002, according to the European Commission's (EC) "Best Project on Restructuring, Bankruptcy and a Fresh Start: Final Report of the Expert Group," Ireland has fully adopted seven of the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. It has almost fully adopted 24 principles, and it has partially adopted ten principles. The underlying legislative framework for insolvency in Ireland is, primarily, the 1963 Companies Act with subsequent amendments, which the U.S. Department of Commerce's 2008 "Country Commercial Guide" for Ireland says are applied consistently by the Irish Courts. Ireland is among the top ten of the 181 countries that are evaluated by the International Bank for Reconstruction and Development and the World Bank for the ease of closing a business and providing a high return to creditors as well as a relatively swift and low-cost business-closing process.
Read More
IDInternational Financial Reporting Standards
In line with European Commission (EC) Regulation No. 1606/2002, listed companies in Ireland are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. The 2008 EC report on the implementation of this regulation points out that Ireland permits IFRSs in the annual accounts for listed companies and annual and consolidated accounts for all other companies, except for companies "not trading for gain." Companies which choose not to apply IFRSs are required to use accounting standards issued by the United Kingdom Accounting Standards Board (ASB) and its Urgent Issues Task Force, as promulgated by the Institute of Chartered Accountants in Ireland. According to a number of publications on the subject, UK standards differ from IFRSs. However, in March 2004, the ASB released its "Discussion Paper: UK Accounting Standards - A Strategy for Convergence with IFRS," in which it announced that it intends to bring national accounting standards in line with IFRSs so as to avoid the use of two different sets of accounting rules in the UK. After extensive public consultations with stakeholders, as explained by David Loweth of the ASB in his presentation at the Accountants' Forum 2008, the ASB gradually moved from the initial "phased approach" to convergence to a "big bang" model, which implies mandatory adoption of IFRS-based UK standards at a specified future date. As of 2009, some UK FRSs are already based on the corresponding international standards. The ASB's intent is to incorporate amendments to the existing IFRS-based UK standards concurrently with the International Accounting Standards Board. In line with this strategy, in 2008 the ASB issued improvements to UK FRSs, in order to incorporate the International Accounting Standards Board's Improvement Project. In sum, as indicated in the 2008-09 Financial Reporting Council Annual Report, the ASB remains committed to convergence; however, the strategy for achieving it remains under consideration.
Read More
ENPrinciples of Corporate Governance
In an April 2009 issue of Accountancy magazine published by the Institute of Chartered Accountants in Ireland, Cian Blackwell points out certain shortcomings in the Irish corporate governance regime that have been exposed by the financial crisis. For instance, Blackwell notes that Irish legislation offers little with regard to good corporate governance at the board level. Ireland's corporate governance practices have been closely aligned with the United Kingdom's. The legal framework is primarily governed by the Companies Law which is adopted from the United Kingdom. Also, Ireland and the UK share the Combined Code issued by the Financial Reporting Council (FRC) which is implemented on a comply-or-explain basis. In March 2009, the FRC initiated another review of the Combined Code to further update and strengthen its recommendations in light of recent developments. Overall, the Irish legal framework for corporate governance is considered robust. However, Blackwell expresses concerns about the low level of compliance with the Code. In a comprehensive review of Irish companies performed by Grant Thorton, fifty percent of Irish companies were found to be non-compliant with the Code. The author argues that while maintaining the principles-based approach, Ireland requires legislative backing for better enforcement of the Combined Code. The 2006 International Monetary Fund Financial System Stability Assessment Update also recommended that Ireland further improve its adherence to best practices in market conduct in order to enhance corporate governance.
Read More
IDInternational Standards on Auditing
The regulations of the Institute of Chartered Accountants in Ireland require auditors to follow auditing standards issued by the United Kingdom Auditing Practices Board (APB). In December 2004, the APB - the auditing standard-setter in the United Kingdom and Ireland - issued International Standards on Auditing (ISAs) (UK and Ireland) effective for periods commencing on or after December 15, 2004. According to the APB, these national standards are based on ISAs as then issued by the International Auditing and Assurance Standards Board (IAASB). Since 2004, however, the IAASB has revised some of the ISAs. In addition, in 2005 the IAASB, in order to improve the clarity of the international standards, introduced the 'Clarity Project' which entailed revising or redrafting existing ISAs. The Project was finalized at the end of 2008. In October 2008, the APB published a consultation paper seeking stakeholders' opinions on whether to adopt the revised and clarified ISAs. After extensive consultations, the APB in a March 2009 Press Notice announced its intention to update its auditing standards to incorporate the changes introduced by the Clarity Project. As a consequence, the APB issued for public comment exposure drafts of 33 Clarified ISAs (UK and Ireland) with the period for comment ending on July 22, 2009. When finalized, the new standards will replace the existing ISAs (UK and Ireland) and International Standards on Quality Control (UK and Ireland) 1 with effect for audits of financial statements for periods ending on or after December 15, 2010. One of the areas where the APB believes further improvements in international standards are needed is ISA 700 on audit report, the clarified version of which is not expected to be adopted in the UK.
Read More
ENAnti-Money Laundering/Combating Terrorist Financing Standard
The Financial Action Task Force (FATF), in a 2006 report, summarizes the findings of its 2006 Mutual Evaluation on Ireland's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. In this report the FATF notes that the Irish legal structure and international cooperation framework meet high standards. The report, however, observes that statistics regarding AML/CFT investigations, prosecutions, and convictions are not comprehensive and, therefore, the actual implementation of Ireland's AML/CFT laws and regulations could not be properly evaluated. Nonetheless, some of the weaknesses pointed out include lax customer due diligence requirements, poor oversight of the non-profit sector, and the fact that a full range of designated non-financial business and professions are not covered by the scope of the AML/CFT laws. More recently, a 2009 U.S. Department of State (DoS) reports adds that as of November 2008, the European Commission had referred Ireland to the European Court of Justice for not implementing the Third EU Money Laundering Directive. However, the report points out that the Government of Ireland is likely to implement new legislation to address current weaknesses in customer due diligence, the identification of beneficial owners, politically exposed persons, and the designation of trusts. In its 2006 report, the FATF also indicates that Ireland's terrorist financing legislation is not comprehensive. The Irish Financial Intelligence Unit (FIU) lacks resources to carry out its responsibilities, as also a full range of sanctioning powers. Some of these shortcomings still persist and the 2009 U.S. DoS report notes that Irish authorities should increase the technical and human resources provided to the FIU to manage and evaluate suspicious transaction reports effectively. Furthermore, legislation needs to be tightened with regard to terrorist financing and Ireland must fully implement UNSCR 1373. The Government of Ireland also needs to ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption, the U.S. DoS report adds.
Read More
FCCore Principles for Systemically Important Payment Systems
An assessment by the European Central Bank (ECB) in 2004 found Ireland's systemically important payment system, the Irish Real-time Interbank Settlement (IRIS), to be largely compliant with the Core Principles for Systemically Important Payment Systems (CPSIPS) developed by the Committee on Payment and Settlement Systems. The IRIS fully observed seven of the ten Core Principles (CPs), broadly observed two, and CP V was not applicable, given that IRIS was a Real Time Gross Settlement system. IRIS was a participant in the Euro area's Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system. TARGET was replaced by TARGET2 in November 2007. The migration of TARGET member countries took place in four phases. Ireland was part of the second group of countries that migrated to TARGET2 on February 18, 2008. While with TARGET, the large value interbank payment systems of member countries were interlinked, TARGET2 provides harmonized payment services under a single shared platform across its member countries. In May 2009, the ECB came out with an assessment of TARGET2's design against the CPSIPS. The report concludes that TARGET2 fully observes all relevant CPSIPS, although it does make certain recommendations pertaining to Principles III and VIII. It is generally believed that the system is an improvement over its predecessor and its component systems. TARGET2 oversight function intends to ensure continued compliance of the system with the CPSIPS, and will continually monitor the implementation of its recommendations by the system.
Read More
