Deirdre Clune (Fine Gael)

The provisions of this Bill will be welcomed by companies operating in Ireland. The Minister has outlined how they made known to him their opinion on the need for this Bill. It is highly pragmatic legislation to ensure that companies, most of which probably are American companies operating here, can continue to use both accounting standards and that both would be accepted. The proposed revisions and the extension to the time within which such companies will be allowed to prepare their accounts under the framework that applies in the United States rather than the Irish or United Kingdom standards, was to have expired by the end of 2015. However, as previous speakers have noted, this deadline is to be extended to 2020, within which timeframe such companies can avail of the facility.

The first advantage comes with the elimination of red tape and the necessary savings that will accrue to companies when preparing end-of-year accounts. I noted a media reference to the effect that an estimated €15 million per annum can be saved by companies and while that figure was subjective, it probably gives an idea of the ballpark. In addition to facilitating the reduction of red tape and saving time and money companies otherwise would be obliged to spend preparing end of year accounts, it also avoids confusion. It is important for companies to have a single set of accounts for investors, shareholders and the public. The case of a German company, Daimler-Benz, has been highlighted in this regard. It was first listed on the New York Stock Exchange in 1993 and while the company's end-of-year reports under German standards would have shown a profit of DM 615 million, under US standards it showed a loss of DM 1,800 million. In itself, this example makes the case for the need for a single set of accounting standards to avoid confusing the public and would-be shareholders as there is a significant difference between the two standards. In an ideal world and in a global sense, it would have been ideal to have in place a single set of accounting standards. This matter was exercising G20 leaders, who set a deadline of the end of June 2011 to ensure the establishment of a single global set of accounting standards. However, the deadline has passed and this has not happened.

I note that in general, reporting here is done under the IFRS system. While it will be important to achieve such certainty internationally, on reading the background material prior to making my contribution today, I learned some doubt exists as to whether such convergence can or will occur. I hope it will but as it is out of Ireland's control, it is important to introduce pragmatic legislation such as this Bill. I understand that financial instruments and insurable contracts are the challenge and are at the nub of the issue.

I refer to the differences between the US GAAP and the IFRS model that operates in Ireland and across Europe. An interesting summation is that the United Kingdom model, on which Ireland's model is largely based, is largely Victorian in origin and is based on absentee shareholders for whom the profits were important and who were far removed from the decisions made. However, the United States system derives from the period after the crash of 1929 and much legislation was introduced during the 1930s. For example, the Securities Exchange Act 1934 established the Securities and Exchange Commission. Regulation is geared towards decisions at a lower level of involvement of shareholders and a lower level of stewardship in the accounting world. It is geared mainly towards larger companies that are listed, rather than towards smaller companies. Constantly, there are significant differences between the US GAAP and the IFRS, which is the system under which Irish companies generally operate. There is divergence and broadly speaking, two international standards operate. Ensuring certainty through having a single system will require the bringing together international expertise. From a global perspective, this would be ideal, particularly as borders now are disappearing and there are so many international stock markets. In this context, it is important for companies, investors shareholders and the public to have certainty and a single system.

I welcome this Bill, although the number of sections is daunting and I am sure it will be challenging for Members. However, it is important for this country because of the difficulties we have experienced. A message must be sent out that Ireland is a place in which standards of the highest level are required on an international basis. Such a message must be sent out from the perspective of investment and to have certainty. The Financial Regulator, Matthew Elderfield, has gone a long way towards ensuring the sending out of a strong message to the effect that Ireland is a place in which one can do business and where standards of the highest possible level are required.

I welcome that the investigation by the Governor of the Central Bank, Professor Patrick Honohan, into the Irish banking crisis found in some cases auditors and accountants should have been much more alert to weaknesses. I welcome also that the Chartered Accountants Regulatory Board, under the chairmanship of Mr. John Purcell, former Comptroller and Auditor General, is also undertaking an investigation in this regard. Such investigations are important. As we move forward in consolidating and developing company law, it is important standards are clearly spelled out for all those involved, including directors who are not merely members of boards but who, because of their particular expertise, have been appointed to cast a watchful eye over accountants, company secretaries and so on. Standards are important for a country which aspires to being the best small country in the world in which to do business. We need to send a strong message in this regard.

The EU Commission directive in respect of auditing, on which consultation is currently taking place, refers to the need for auditors to be rotated, an issue highlighted in the many incidences which have occurred recently in this country. There are many areas in respect of which we need to take action. I look forward to publication of the companies Bill towards the end of the year and to our discussions around it. The Bill before us is pragmatic. It is a sensible piece of legislation in terms of the extension of the timeframe to 2020 in order to give certainty to foreign direct investors coming here. As the Minister stated, they are an important part of our economic recovery. Their interaction with our indigenous companies has been positive. I recently attended a breakfast meeting in Cork at which the chief executive of IBM Ireland spoke about the reasons that company is in Ireland. While our corporation tax rate is important to IBM Ireland, it is here because Ireland is a member of the European Union which has in place a strong regulatory regime and an excellent skilled workforce. In my view, this legislation is a no-brainer. It is hoped that we will, before we reach 2020, have in place internationally recognised regulatory standards world wide, thus there will be no need for this dual set of standards.