Confusion over Accounting Standards

THE Institute of Certified Public Accountants in Ireland (CPA) says the Government must clarify its position on the introduction of new International Accounting Standards.

The CPA says the lack of direction from the Government is causing additional confusion in an already complex situation.

The introduction of International Accounting Standards is a momentous change, CPA president Allen Farrelly said yesterday, and will have a significant effect on Irish businesses.

“The essential training of accountants and auditors is a huge task, and it is virtually impossible without a government decision on the implementation strategy.”

From 2005 all Irish and European public companies will be required to prepare their group accounts in accordance with International Accounting Standards, known as IASs/IFRSs. Currently financial accounts in Ireland are prepared on the basis of standards issued by Britain’s Accounting Standards Board (ASB).

The British government has said it will permit all non-listed companies to choose which set of standards they wish to use in the preparation of accounts. This means there will be two sets of accounting standards in use from 2005.

However, under the current legislation all Irish listed companies are required to adopt IFRS from January 2005, but non-listed subsidiaries of Irish quoted companies will still have to apply the ASB standards to their own accounts.

Mr Farrelly said CPA members felt that having two sets of accounting standards in use simultaneously would create unnecessary difficulties for Irish businesses.

“In the interests of establishing a transparent global accounting regime, our members are in favour of a complete move for all companies to the new IAS/IFRS standards from 2005. One set of international accounting standards would help restore credibility to financial reporting.

"Publicly quoted companies are required to adopt the new IAS standards on their introduction in 2005. But to ensure a smooth changeover for smaller, private companies, a two year transition period until 2007 should be allowed.”

He added that the Irish Government has not yet specified how it is going to deal with the introduction of the new International Accounting Standards in relation to the acceptance of dual standards or transitional arrangements.

“We need clarity now so that we can ensure all accountants receive the necessary training on the new standards. As professional advisors we need to work with Irish businesses to ensure a smooth changeover in reporting procedures so that their financial reports meet the new standards where necessary.”

The CPA has also called for the establishment of an Irish body responsible for the adoption and harmonisation of IAS in line with company law.