Financial Reporting Regulation & IFRS Compliance by Listed Entities in Ireland implications for EduCoP

Transcription

1 Financial Reporting Regulation & IFRS Compliance by Listed Entities in Ireland implications for EduCoP Patrick Corrigan Accounting & Audit Reform Consultants (AARC Ltd) Accounting Education Community of Practice Workshop June 2011, Vienna, Austria 9 Upper Leeson St, Dublin 4, Ireland aarc@aarcconsultancy.com Phone: Fax: Website: 1

2 Presentation Objective Knowledge of Financial Reporting Regulation & IFRS Compliance in Ireland GENERAL REGULATORY ENVIRONMENT INTRODUCTION TO FINANCIAL REPORTING REGULATION IN IRELAND DETAILED ANALYSIS OF REGULATORY FRAMEWORK FOR FINANCIAL REPORTING SPECIFIC IFRS COMPLIANCE ISSUES INTRODUCTION 2

3 General Information on Ireland Population: 4.6 million (2010) EU member since 1973 (9 th Member to Join EU) Gross Domestic Product (2010): 160 billion Main Economic Sectors: Financial Crisis: EU/IMF Bailout 2010 Agriculture: 5% Industry: 46% Services: 49% Nationalisation of domestic banking sector (09/10) 3

4 Accounting Profession in Ireland Main Recognised Accounting Bodies (ACCA, ICAI, CPAI, CIMA) Accounting Qualifications and General Members Chartered (ICAI) (12700) - 44% Certified Chartered (ACCA) (7700) 27% Certified Public Accountant (CPAI) (3400) 12% Management Accountant (CIMA)- (3900) 13% Other (ICAEW, ICAS, CIPFA, AIA, IIPA) (800) 4% Deployment of Accountants in Ireland Practice: 7600 (26%) Industry / Business: (62%) Public Sector: 1700 (6%) Retired: 1000 (4%) Other: 400 (2%) Qualified Accountants (2009):

5 Audit Practitioners in Ireland Audit Practitioner Qualifications Main Bodies permitted to authorise its members and/or member firms to perform audits under the Companies Acts: ICAI, ACCA, CPAI Provided that those members and/or member firms satisfy certain additional conditions (practical experience and on going annual licencing aspects such as Professional Indemnity, CPD etc.) Licensed Auditors (Individual and Firms 2009): 4700 Chartered (ICAI) Certified Chartered (ACCA) Certified Public Accountant (CPAI) Other (ICAEW, ICAS, etc.) (650) 5

6 Financial Reporting Regulation in Ireland EU Legislative Driving Financial Reporting Regulation Transparency Directive (TD) came into operation in June 2007 in Ireland Article 24(4)(h) of the TD:..to examine that information referred to in this Directive is drawn up in accordance with the relevant reporting framework and take appropriate measures in case of discovered infringements. IAS Regulation Given effect in Ireland in 2005: Requires EU Member States to take appropriate measures to ensure compliance with IFRS (applies to listed entities consolidated a/c s only) 6

7 Enhanced Regulatory Environment European Directives drive regulatory enhancement in Ireland Companies (Auditing and Accounting) Act, 2003 (Amended) Establishes: Irish Auditing & Accounting Supervisory Authority (IAASA) in

8 Introduction to the Irish Auditing & Accounting Supervisory Authority (IAASA) Two primary responsibilities: Established 2005 Regulation & Monitoring (Professional Bodies) Financial Reporting Supervision Function Monitor compliance with Article 24 (h) of the Transparency Directive and IAS Regulation 12 full time staff 2.1m annual budget (2009) 8

9 IAASA Structure Board Executive Regulation & Monitoring Function (Professional Bodies) Financial Reporting Supervision Function Project Managers Project Managers External Technical Support Panel External Technical Support Panel 9

10 IAASA Budget & Funding Mechanisms IAASA 2.1m Budget (2009) Supervision of Prescribed Accounting Bodies 1.7m Transparency Directive (IFRS Compliance Review Work) 0.4m 40% - Government 60% - Levy on Accounting Bodies Direct Government Grant 10

11 Principal Functions of Financial Reporting Supervision Unit (FRSU) Review of listed entity financial statements International liaising with other countries financial reporting monitoring bodies Co-operating in the development of accounting standards and practice notes Advisor to the Minister 11

12 Structure of Financial Reporting Supervision Unit (FRSU) Technical Manager Full Time Project Manager Full Time Project Manager Full Time Project Manager External Panel of Review Experts 12

13 What companies (issuers) are reviewed? Applies to all issuers with securities (debt and equity) admitted to trading on the regulated market of the Irish Stock Exchange: Shares Bonds or other forms of securitised debt Derivative securities Units issued by closed-ended investment funds 13

14 Total No. issuers and Statements for Review (as of 2009) 14

15 How are issuers selected for review? Criteria for selection for review includes: Risk of material misstatement in the financial statements Potential impact on users of financial statements in the event of material misstatement Supplemented with random selection of F/S for review Complaint from public may also trigger a review 15

16 What documents are part of the review process? 16

17 Review Methodology / Process Initial Review Checking compliance with accounting framework (IFRS) Scan of Regulatory News Services announcements Checking for (for example): responsibility statements, risks and uncertainties, primary statements and comparatives Drafting Writing exception report setting out main matters raised and indicating where minor or immaterial. Completing a detailed IFRS compliance checklist Output Summary report of key compliance issues Detailed IFRS compliance checklist 17

18 Specific IFRS compliance issues identified by the FRSU in the review of Irish Listed Entities (1) IAS 1 Presentation of Financial Statements: Balance Sheet Some issues arising during the first cycle of reviews ( ) Financial Instruments Recognition Fair Value Risk Disclosure IAS 24 Related Party Disclosures IAS 36 Impairments IFRS 7 Banking Covenant IAS 19 Pension Accounting & Discount Rates 18

19 Specific IFRS compliance issues identified by the FRSU in the review of Irish Listed Entities (2) IAS 1 Presentation of Financial Statements: Restatement Some issues arising during the first cycle of reviews ( ) IFRS 8 Operating Segments IAS 37 Provisions, Contingent Liabilities & Contingent Assets IAS 34 Interim Financial Reporting IAS 36 Impairments 19

20 Action taken by FSRU as a result of the review of an issuers statements Review issues addressed, in the first instance, through correspond ence with issuers with request to respond Additional correspond ence where further clarification or further elaboration is required Where relevant/ applicable, further action determined having regard to significance of issues arising and directors responses to matters arising Issues being posted to EECS database will also inform IAASA s review activity/ focus and IAASA decision may be posted to EECS database. Has not, yet, been necessary to invoke powers 20

21 What sanctions are available to the IAASA? IAASA can, where not satisfied that a company s, or other undertaking s, financial statements are in compliance with the Companies Acts, to apply to the High Court for a declaration of noncompliance and for an Order for one or more of the following: the revision of the financial statements; directions regarding the auditing of the revised financial statements; the revision of any Directors Report; the steps to be taken by the directors to bring the Court Order to the notice of persons likely to rely on the annual financial statements that were the subject of the declaration of noncompliance. 21

22 No. of Reviews undertaken each year by the FRSU Year Equity (incl. Funds Debt Total Banks) Reviews completed Reviews completed

23 What effect have the reviews and correspondence had on issuers Responses to matters arising from reviews completed during 2009 (2008) Issuer category Number reviews completed Undertakings regarding future reporting Publication of amended financial report Equity 18 (15) 13 (10) 0 (1) Fund 13 (17) 10 (11) 3 (9) Debt 17 (19) 10 (18) 5 (18) Total 48 (51) 33 (39) 8 (28) 23

24 Thank You 9 Upper Leeson St, Dublin 4, Ireland aarc@aarcconsultancy.com Phone: Fax: Website: 24