Conor Lenihan (Dublin South West, Fianna Fail)

I thank Senator Ryan for his contribution. He is anxious to learn more about the differences between United States and Irish GAAP or generally accepted accounting principles. I must put up my hands as I am not an accountant or lawyer. My officials will prepare a short note on the matter and communicate directly with the Senator. Accounting standards are difficult and complex and there are differences between them.

The reason for the urgency is that we like to be agile and respond quickly to the needs of industries and companies based in this country. We were approached by a number of substantial companies, one of which is one of the largest accountancy companies in the world. They need certainty on this issue because they need to know if they will have to produce two sets of very complex accounts in order to be compliant with their obligations in the United States under the Securities and Exchange Commission and those regarding their regulated presence in Ireland. The matter is urgent because we do not want to impose an additional cost on such companies because it can give them a bad feeling about the country, namely, that we are excessively bureaucratic. We want to facilitate them and the ease with which they can move to the US standard before they move their parent companies here. When a parent or holding company locates here, it is good news for Ireland Incorporated because moving a holding or parent company here involves extra work in Ireland, much of which concerns immediate servicing where a holding company which runs a series of global companies rather than a headquarters operation is established. At the very minimum, such a move involves extra work for accountants, solicitors and back office staff servicing the operations of a global holding company which might have operating companies elsewhere.

I understand Senator Boyle had particular concerns about our acceptance of a non-Irish standard but Senator Ryan dealt with that point when he outlined his own experience of the Sarbanes-Oxley legislation. The American standard is very high.

Senator Ryan raised another issue, on which I wish to respond, namely, the reason for the transitional nature of the provision. It is hoped that by 2015 we will converge to a world standard of accounting, a point to which Senator Donohoe referred. We have been debating this issue for years. If one reads financial newspapers such as the Financial Times or the The Wall Street Journal, the idea of converging to a world accounting standard has been discussed for 20, 30 or 40 years. Therefore, there are no financial or economic problems caused as a result of people reading different sets of accounts in different parts of the world or opportunistically availing of loose or weak accounting standards in order to avail of an opportunity not to be honest in their disclosures. As a result of the global crisis, there seems to be a will to move more rapidly towards convergence. Globalisation, not just in terms of the recession and difficult experiences of recent months and years, has also driven this process. When there is greater globalisation, there is a need to move to higher standards on a global scale, rather than applying regional or local standards.

Senator Ryan raised the possibility of allowing existing companies such as Intel to benefit from the Bill. It is not intended to extend the scope of the measure beyond those covered by the definition of "relevant parent undertaking". Measures are focused and tightly defined in terms of duration in order to accommodate companies which find themselves faced by the prospect of having to prepare their accounts in accordance with the IFRS or Irish GAAP standards within a very short timeframe. The circumstances of companies operating for a number of years are, therefore, not comparable and, consequently, there is no basis for providing for their inclusion.

The Tánaiste and Minister for Enterprise, Trade and Employment appreciates the comments made by Senators O'Toole and Boyle today and in the debate on the Companies Act earlier this year. I am speaking on her behalf and she is actively considering the appropriate response to the question on a director's compliance statement. She will bring this view and the resulting legislative proposal to the Government before the Bill is published. The House will consider and decide whether to adopt a final Bill in this regard.

Senator O'Toole raised the issue of the transposition of the eighth directive and quality assurance recommendations. The issue is being considered in the context of the transposition process, while the quality assurance proposal was considered in detail with all the relevant parties, including the IAASA. The Senator also raised the issue of the review of accountancy standards. We are examining the issue, as is the director of compliance. How we protect the term "accountant" is being discussed in the context of ongoing discussions in this regard.

I thank Senator McCarthy for his brief intervention, in which he asked if extra staffing would be required. Extra staff will not be required as a result of the Bill.

Senator O'Toole raised an interesting matter which I was encouraged by, that is, avoiding the pitfalls of the US system, in other words, moving towards a rigid rules based system in terms of how we deal with regulation. I am not making another argument for light touch regulation but some confuse robust regulation with rules based regulation. One of the great tragedies is that sometimes regulations encourage people to break the rules. For example, the Enron case revealed a multitude of mission statements, regulations and recommended best practice. If a highly intelligent workforce comprising 50 to 100 accountants is presented with ten or 20 tight rules on how they should behave, the first thing on all their minds in how they can find their way around them.

There is a profound issue in terms of regulation regarding trust and confidence, to which Senator O'Toole referred. Changing behaviour in companies is far more important than regulation. Leaders or those in senior management positions should act as exemplars of proper behaviour. Asking people to change their behaviour and behave in a moral fashion is preferable to having a mountain load of regulations. Regulation can often present a challenge rather than a restriction on their activities to highly intelligent people.

Senator Callely and a number of other Senators asked if the Bill would attract more inward investment. I inform Senator Ryan that we are not suggesting there is a pot of gold behind the Bill. Its essential purpose is to facilitate companies which have already located here in order that they will not be loaded with an additional burden. Our ability to be urgent in our response and nimble enough in responding to the concerns of large companies with a substantial presence here which have a particular issue is something we are proud to promote. There are not many other countries which offer such a service. We go the extra mile to facilitate inward investors because it is something from which we will greatly benefit. This is the foremost location of choice for US foreign direct investors in Europe. In my role in the Department of Enterprise, Trade and Employment I have found the ease with which people are able to meet decision makers in Ireland to be a distinct advantage. I met a gentlemen recently and when I asked the reason he was locating here, he said it was I was there, as Minister of State. He was not flattering me by saying I was a wonder kid in terms of business promotion but in the country he had come from one would have no chance of meeting somebody at my level in the political or administrative scene. It is a significant advantage; therefore, we should not be bureaucratic to the point where it is a competitive advantage we might lose.

Senator Callely asked how many companies the proposed measure would attract to Ireland. I have answered that question. The measure is not designed as a massive inducement for companies, rather it is designed to facilitate companies already located here. It is to be hope other companies may decide to move their operations here in the future.

Some Senators asked about the companies involved. I do not want to name the ones involved but they are well known and have a substantial presence here. One of them is one of the largest accounting companies in the world.

Senator Donohoe asked some very interesting questions on numbers. We do not want to put numbers on this measure. A handful of companies made representations and it is to be hoped others can be facilitated in the fullness of time. The Senator also asked if we had introduced the Bill because we anticipated a series of further section 7 investigations. That is not the motivation for the change in the legislation, rather it is simply a cost saving measure. We do not want the cost of investigations to go out of control. We have seen this happen with the tribunals of inquiry initiated by the Oireachtas. We want to reduce the exposure of the State or the Exchequer in relation to these substantial investigations. As I said in my opening remarks, these investigations are costing approximately €10 million.

Senator Donohoe also asked whether these companies can be said to be resident, or registered, in Ireland. Residency is related to tax. The companies in question have to be registered here. He also asked whether this legislation will facilitate brass plate operations, or allow companies to have a nominal presence here. We are very anxious not to facilitate that. The Senator is aware that Ireland has an enviable reputation as an overseas destination of choice for financial and other companies.