As previously signalled by the Government, new legislation is now being introduced to provide for the extension of the exemption for the use of US GAAP by US entities migrating to Ireland.
The Companies (Amendment) Bill 2012 (the 2012 Bill) has now been published. The new company law will amend the provisions of the Companies (Miscellaneous Provisions) Act 2009 (the 2009 Act), which first introduced the exemption, in two ways: The 2012 Bill provides that the exemption may continue to be used for financial years up to and ending at the latest on 31 December 2020. It also removes completely the restriction on the use of US GAAP to the first four years following migration only.
The exemption, which came into effect on 23 December 2009, allows for US Generally Accepted Accounting Principles (US GAAP) to be used in Ireland by certain US companies in the preparation of their accounts to give a true and fair view of the state of affairs and profit and loss of the relevant company, to the extent that such use does not contravene any of the provisions of the Irish Companies Acts or related regulations. The arrangement applies only to "relevant parent undertakings", which are defined in the 2009 Act as parent undertakings:
- which do not have securities admitted to trading on a regulated market in the EEA;
- whose securities are registered with or subject to reporting to the US Securities and Exchange Commission; and
- which have not already incurred an obligation to file their accounts with the Registrar of Companies in Ireland.
This limited category of entities includes for example a US holding company which is a public company and which is incorporating in Ireland for the first time.
The exemption was introduced in order to facilitate the migration to Ireland of US enterprises, the number of corporate migrations to Ireland in recent times having increased significantly due primarily to Ireland's favourable tax regime for holding companies. The exemption means that relevant undertakings are no longer required to incur the considerable expense and time required to prepare two sets of accounts, one in accordance with US GAAP for the US authorities and one in accordance with IFRS for the Irish authorities, and may instead prepare one set only in accordance with US GAAP. Initially, the 2009 Act provided that the accounting arrangement applied for a maximum of four financial years after the undertaking's incorporation in Ireland and that the arrangement was to expire on 31 December 2015 at the latest. This time period is likely to have been framed in light of international negotiations to try to effectively harmonise US GAAP and IFRS. However this process of harmonisation is still ongoing and is unlikely to be completed by 2015, which state of affairs would appear to be driving the Government's intention to now extend the timeframe for the exemption.
For a link to the 2012 Bill, please click here.
For a link to the 2009 Act, please click here.