On the 4th July 2012, the new Companies (Amendment) Act 2012 was enacted. This new Act will become our 16th Companies Act, and despite the new Companies Consolidation bill being on the horizon there still may be one more to come before the unveiling of the Consolidation Bill.
Accountants and business owners need to know:
- What is the Act about?
- Why is the Act necessary and who is affected by it?
- What are the benefits of the Act?
- What do accountants need to do now?
What is the Act about?
The purpose of the new Companies (Amendment) Act 2012 was to make two main changes to the current provisions of the Companies (Miscellaneous Provisions) Act 2009. At present the 2009 Act allows for the use of US Accounting Standards (“US GAAP”) when preparing accounts of a particular category of companies. The 2009 Act also permits the use of other internationally recognised accounting standards in the preparation of such accounts.
Under the existing 2009 Act, the use of the US GAAP by a relevant parent undertaking was restricted to four years. The new Companies (Amendment) Act 2012 extends the use of the US GAAP by such undertakings until financial years ending not later than the 31st December 2020. Previously under the Companies (Miscellaneous Provisions) Act 2009 the use of the US GAAP only extended to financial years ending on the 31st December 2015. The new Act also extends the provision of the prescription of other internationally recognised standards and in this case the timescale was also extended to financial years ending not later than the 31st December 2020.
Why is the Act necessary and who is affected by it?
The amendments outlined above are the result of a number of significantly large US Multi-National companies submitting requests and recommendations that changes be made to the 2009 Act and in particular to the provisions for the current use of the US GAAP.
If these amendments had not been made, this may have led to some serious consequences for these Multi Nationals. The companies affected may have been required to prepare two different sets of accounts, one set under the IFRS requirements and another set using the US GAAP. The preparation of these would have resulted in them incurring huge cost and duplication.
What are the benefits of the Act?
It is hoped that these amendments will not only ease the cost and burden of the preparation of accounts for the multi nationals currently in operation in Ireland and therefore encourage them to remain here for the foreseeable but also that these amendments may go some way in attracting new foreign investment into the country. The new Companies (Amendment) Act 2012 should have some significance to the growth and development of Ireland’s economy and employment opportunities in the coming years.
What do accountants need to do now?
The new Companies (Amendment) Act has taken effect from the 4th July and it should be noted that any references made to the Companies Acts from this date should now refer to “Companies Acts 1963 to 2012.” This affects the Company Act References in financial statements, letters of engagement, audit planning letters, letters of representation and all other documentation, correspondence and working papers that refer to the Companies Acts. To help keep you on the right track we have uploaded an updated letter of engagement and letter of representation into the Free Resources section of the Accountants Resource Centre. Sign up for free Accountants Resource Centre Account here.
Should you have any questions in relation to this article or should you have any Company Law or Company Secretarial queries please contact John Murphy on 053 910 0000, [email protected]