Paschal Donohoe (Fine Gael)

I welcome the Minister of State to the House and the Bill he has introduced. The impression can sometimes be given in this House during discussions on competitiveness and the action that needs to be taken to increase job security and number of jobs in our economy that what is needed is a grand sweeping strategy focused on one particular element. However, the opposite is often the case. What is required is a bundle of many different initiatives, each of which may be small but when taken together can create a more favourable environment for job creation and retention. This Bill appears to be a measure of that nature. It is about creating a more favourable accounting environment in Ireland for a period that will increase, to an extent, our competitive advantage. For that reason, the Bill and the provisions in regard to company inspectors, on which I will comment shortly, are to be welcomed.

The issue of accounting standards, the changes that are taking place and the differences they can have on a company are a pretty dry subject. When preparing for the debate on this legislation, I came across an example that brought home to me the importance of this legislation for companies and the importance of accounting standards. I read an article that compared the effect that two different accounting regimes would have on the annual reports of BAA at the time. It offered as an example the annual report it filed for 2006. If the GAAP, generally accepted accounting principles, standards had been applied during that period, the annual net income of that company would have been £148 million sterling. However, if the IFRS, international financial reporting standards, had been applied, its annual net income would have been in excess of £450 million sterling. That is a significant difference based on the two accounting standards in place. There is nothing devious or underhand about it because it is all about how the financial standards account for assets and liabilities and how they are measured. It appears to be very sensible for the economy to recognise this and try to create a more agile environment, given the pressures on our competitiveness.

I will refer to several specific points related to the Bill and put several questions to the Minister of State. Before doing so, I wish to comment on the general environment in relation to accounting standards because, as the Minister of State indicated, it provides an important background to the Bill. For many years there has been consensus on the need to move to global accounting standards. However, what is unique is that the consensus appears to be moving into action, as moves are afoot to put in place the global accounting standards to which the Minister of State referred. We are all aware of the collapse of such companies as Enron and the role played by financial reporting standards. More recent examples include the experiences of multinational banks with different reporting standards and how they can create ambiguity in the way assets and liabilities are reported. This environment has created a once in a lifetime dynamic to move to a common platform throughout the world for the way in which accounting should be done. This must be welcomed because the quicker we move to common standards for the way in which economic activity is reported, the more likely it is that we will avoid some of the great difficulties we have encountered recently and confer fair standards for how such matters are accounted for and measured. I welcome the creation of the global environment within which the Bill is placed.

That leads me to one of the first questions I have for the Minister of State and I would appreciate his response. I understand the Securities Exchange Commission, SEC, in the USA, the body responsible for accounting standards, has recently given guidance to American companies to the effect that it wants them to begin the migration to international reporting standards. Given that it appears accounting bodies in the USA are being given guidance on the need to migrate to a more common accounting platform, how many companies does the Minister of State expect this legislation will affect in Ireland? Will it deliver the competitive advantage we might have believed initially, given that the American accounting bodies now want American companies to move to what, in effect, will be accounting standards that resemble those in Europe, including Ireland? To make the point more clearly, given that it appears American companies will migrate to an international accounting framework, how many companies will benefit from the concession the Bill offers?

Section 1 clarifies the companies for which the concession will apply. I note the legislation does not refer to companies resident in Ireland. It makes the point that they should have securities registered with the SEC in the USA and makes reference to the fact that these companies were not compelled to provide accounts for the registrar of companies in the jurisdiction. However, it does not indicate they should be registered in Ireland in the first place. This may be an oversight on my part, as it may be inferred in the legislation or made explicit elsewhere. However, should it not be explicitly spelled out in the legislation that these companies must be resident in Ireland to take advantage of the concession the legislation will create?

I refer to a point made by the Minister of State. He indicated that on Committee Stage he would introduce a concession to allow companies to defray or receive assistance in defraying enforcement costs that might arise in the implementation of US accounting standards. Given that the Bill already provides for a concession in this regard, is it necessary to offer a further financial advantage to companies? Must we do even more to make matters advantageous for such companies, given that the legislation will create an advantage in the first place?

The Minister for Finance referred to the fact that we must avoid a jurisdiction within which so-called brass plate operations are set up, that is, operations with a nominal presence in Ireland to allow them to take advantage of our tax regime and corporation tax rate. Is there any way in which this legislation could be taken advantage of by companies which might wish to have a nominal presence in Ireland to take advantage of the accounting standards in place? It is unlikely but I recall reading an appalling article in which Ireland was referred to as the Wild West of financial services and in which reference was made to the environment that had been created. It was an appalling and inaccurate article and I recognise the Government went to great lengths to repel and rebut it. Nonetheless, we have no wish to do anything that could create the impression that there is such an environment in Ireland such that further opportunities could be created.

I refer to the welcome provision in the Bill related to company inspectors. It is the right thing to do for the taxpayer. Does the Minister of State expect an increase in the number of such applications before the courts and his Department? Does he believe any of these inspection requests will come from the banking industry?

Those are my five questions and I would appreciate answers to them from the Minister of State. I welcome the Bill. It is a minor measure but it will assist us. It must be seen in the context of change in global accounting standards, which I support. It will create an environment within which the country will be able to flourish.