IRELAND
Sean Herrity. Yiling Xu, Qingnan Zeng
A look at its
culture,
accounting
systems and
interactions
with the world
Contents
Introduction .................................................................................................................................................. 3
History ....................................................................................................................................................... 3
Political System ......................................................................................................................................... 4
Legal System ............................................................................................................................................. 5
Culture ...................................................................................................................................................... 5
Economic System .................................................................................................................................... 10
Interactions with Marber’s Dimensions...................................................................................................... 11
Trade and Finance ................................................................................................................................... 11
Energy ..................................................................................................................................................... 14
Defense and Security .............................................................................................................................. 15
Immigration............................................................................................................................................. 16
Health ...................................................................................................................................................... 17
Poverty .................................................................................................................................................... 18
Environment ........................................................................................................................................... 19
Accounting System Comparison ................................................................................................................. 20
Comparison with US GAAP ..................................................................................................................... 20
Agencies .............................................................................................................................................. 20
Principles-based vs Rules-based Accounting ...................................................................................... 21
Assumptions and principles ................................................................................................................ 22
Financial Statements ........................................................................................................................... 22
Basis of Accounting ............................................................................................................................. 23
Disclosure requirements ..................................................................................................................... 23
Standards for SMEs ............................................................................................................................. 24
Prior Year Adjustments ....................................................................................................................... 24
Property Plant and Equipment ........................................................................................................... 25
Leases .................................................................................................................................................. 25
Comparison with IFRS ............................................................................................................................. 26
Irish policy of using IFRS ...................................................................................................................... 26
The issuer of Republic of Ireland ........................................................................................................ 27
IFRS Endorsement ............................................................................................................................... 29
Application of the IFRS for SMEs......................................................................................................... 29
1
Comparison with Culturally Expected Accounting System ..................................................................... 30
References ................................................................................................................................................... 32
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Introduction
Ireland is an island country located in Europe just west of the United Kingdom. It
occupies the majority of the island it shares with Northern Ireland. It is not a large country, only
about the size of the state of West Virginia (“CIA-Ireland”). Its capital is Dublin and is home to
over 4.8 million people (“CIA-Ireland”). The history, political system, legal system, economic
system and the culture of Ireland will be discussed. After the introduction, the interactions of
Ireland with Marber’s globalization dimensions and Ireland’s interactions with the United States
will be discussed. Finally, the accounting system of Ireland will be discussed and how it
compares to US GAAP (Generally Accepted Accounting Principles), IFRS (International
Financial Reporting standards) and what their culturally determined accounting system would be.
History
The history of Ireland is a long and glorious one. There are three main parts of history
that will be examined: early history, modern history, and today’s world. Early history is from
prehistoric times until 1550, modern history from 1550 until 2000 and today’s history from 2000
to present day.
There were many events that occurred in Ireland during early history. Ireland was settled
between 600 and 150 BC (“CIA-Ireland”). The island inhabitants lived in peace until about the
12th century. During the 12th century, the Norman invasion occurred (“CIA-Ireland”). The
invasion/ conquest lasted only 200 years, but the invasion had major impacts on the Ireland still
evident today (“Invasion of Anglo-Normans”). These are only a few of the major events that
occurred during the early history time period.
During the time period of modern history, many events happened in Ireland. The first
major event was the potato famine during the 19th century (“CIA-Ireland”). The cause of the
famine was a disease that attacked the edible parts of the potato (“Irish Potato Famine”). This
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caused turmoil because the potato was a staple in the diet of many Irishmen (Irish Potato
Famine). The next major event that took place during this time period was that Ireland declared
its independence from the UK on December 6, 1921 (“CIA-Ireland”). These major events
changed Ireland in many different areas.
The final time period is today’s world; there are two main events that occurred in this
time period. The first major event was the recession that occurred after the housing
bubble/financial bubble burst (“CIA-Ireland”). It seems like a multitude of countries were
affected by the bursting of the housing bubble. Ireland is recovering from the recession through
foreign direct investment (“CIA-Ireland”). Another major event that is occurring is that England
and Ireland have settled any differences from Ireland declaring independence and are now
cooperating with each other (“CIA-Ireland”). These events are helping Ireland succeed in
Today’s society.
Political System
The political system of Ireland is fairly similar to that of the United States of America.
Ireland has an executive branch, a legislative branch and a judicial branch. They have a republic
which is a parliamentary democracy (“CIA-Ireland”). The executive branch is made up of a
President and Prime Minister (“CIA-Ireland”). The President is elected for seven year terms, and
the Prime Minister is nominated by the House of Representatives and appointed by the President
(“CIA-Ireland”). The legislative branch is bicameral with a House of Representatives and Senate
(“CIA-Ireland”). The House of Representatives has 166 seats, and the Senate has 60 seats (“CIAIreland”). Senators are appointed by various boards to serve for five year terms; House members
are elected to serve five year terms (“CIA-Ireland”). The last branch is the judicial branch. The
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highest court in Ireland, like the United States, is the Supreme Court of Ireland. It consists of a
chief justice, nine judges and 2 ex-officio members (“CIA-Ireland”).
Legal System
Like all countries, Ireland has implemented one of the two most common legal systems,
which is a common law system (“CIA-Ireland”). The common law system of Ireland is based off
the English model and has been modified by customary laws in the country (“CIA-Ireland”).
Another aspect of the legal system is the judicial review of all legislative acts by the Supreme
Court (“CIA-Ireland”).
Culture
Ireland, like all countries, has a culture that is unique to them. When evaluating and
studying the culture of Ireland, there are a variety of tools one can use. The tools include
Hofstede’s value dimensions, Kluckhohn’s and Strodtbeck’s value orientations, Hall’s value
dimensions, and by looking at the values and norms of a society.
The first tool that can be used when studying the culture of a country is Hofstede’s value
dimensions. There are six main value dimensions, they are: power distance, individualism,
masculinity, uncertainty avoidance, long term orientation and indulgence (Hofstede-Ireland). All
of the dimensions are ranked on a scale of 0-100 (Tegarden 110). The first dimension is power
distance. Power distance is how society accepts the fact that people are unequal (Tegarden 110).
This can usually be seen in the interactions between managers and subordinates in organizations.
Ireland’s score in this dimension is a 28 (“Hofstede-Ireland”). Since this is on the lower end of
the scale, Ireland has a more relaxed approach to the inequality of people (“Hofstede-Ireland”).
The next dimension that can be used to examine the culture of a country is individualism.
Individualism can be defined as the degree of interdependence a society has among its members
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(Tegarden 110). It can also be defined as what is more important: the success of an individual or
the group the individuals are associated with (Tegarden 110). Ireland has a score of 70 on the
individualism scale (“Hofstede-Ireland”). With a score this high, Ireland is very individualistic
and self-achievement and accomplishments are highly valued (“Hofstede-Ireland”). Hofstede’s
third dimension is masculinity. Masculinity can be defined as “What motivates people more:
being the best, or liking what you do” (“Hofstede-Ireland”). This dimension is about what drives
society (“Hofstede-Ireland”). Ireland scored a 68 in this dimension (“Hofstede-Ireland”). This
high score means that Ireland is a masculine culture; Competition and success drives an
individual in this society (“Hofstede-Ireland”). The fourth of Hofstede’s dimensions is
uncertainty avoidance. Uncertainty avoidance can be defined as how much a society accepts
ambiguous situations and tolerates uncertainty (Tegarden 110). This dimension deals with the
unknown and how a society interacts with it. Ireland scored a 35 in this dimension (HofstedeIreland). With a score this low, the people of Ireland are not afraid of uncertainty and ambiguous
situations (“Hofstede-Ireland”). Their businesses embrace creativity and new ways to solve
problems (“Hofstede-Ireland”). Hofstede’s fifth value dimension is the long term orientation
dimension. This dimension can be defined as, “How society has to maintain some links with its
own past while dealing with the challenges of the present and future” (“Hofstede-Ireland”).
Ireland has a score of 24, which is classified as low, meaning Ireland is a normative culture
(“Hofstede-Ireland”). This means that the Irish respect their tradition and do not like to change
views on norms (“Hofstede-Ireland”). The last of the Hofstede dimensions is indulgence.
Indulgence is defined as, “The extent to which people try to control their desires and impulses”
(“Hofstede-Ireland”). Ireland scored a 65 in this dimension categorizing it as high (“HofstedeIreland”). The Irish like to indulge in their impulses and like to have fun and enjoy the pleasures
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of life (“Hofstede-Ireland”). When analyzing a culture of a society, Hofstede’s value dimensions
are one of the tools that can be used.
Like Hofstede, Klukhohn and Strodtbeck also have a list of value orientations that can be
used to compare different cultures. Their list comprises five different orientations which include:
sense of time, human nature, humankind and nature, activity and social relationships. Kluckhohn
and Strodtbeck stated that each culture fell into one of three categories for each of their value
orientations (Samovar et all 151).
Kluckhohn’s and Strodtbeck’s first value orientation is sense of time. This orientation
answers the question: “What is the orientation towards time” (Samovar et all 151)? This
orientation states what time frame is most important to a culture. The three categories in this
orientation are: past, present and future (Samovar et all 151). If prior events play a significant
part in a culture, then a culture would be categorized as a past culture (Samovar et all 154-155).
If the present moment is the most important, then the culture is a present culture (Samovar et all
155-156). Finally, if a culture focuses on the future, then the culture is a future culture (Samovar
et all 156). In an interview with Meghan Herrity, a former resident of Ireland, she stated that the
people of Ireland would be categorized as a culture of the past (Herrity). An example she gave
was, “They preserve many original buildings and historical sites, and many of their traditions
remain the same and are untouched, with no need to evolve with the modern world” (Herrity).
Another orientation from Kluckhohn and Strodtbeck is the human nature orientation. This
orientation answers the question: “What is the character of human nature” (Samovar et all 151)?
The three categories are basically evil, mixture of good and evil and basically good (Samovar et
all 151). Basically evil cultures believe that human are intrinsically evil and can’t be good
(Samovar et all 152). “Mixture of good and evil” cultures believe that there is a balance of
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interactions of opposing elements (Samovar et all 152-153). Basically good cultures believe that
humans are intrinsically good or originally good (Samovar et all 153). Herrity states that the
Irish culture would be a mixture of good and evil (Herrity). She gave the example, “They are
people that live by principle, and in general religious principle, but give into temptation and
regard it as being human” (Herrity).
The third of Kluckhohn’s and Strodtbeck’s third value orientation is Humankind and
nature. This orientation answers the question, “What is the relation of humankind to nature”
(Samovar et all 151)? The three categories in this orientation are: subject to nature, cooperation
with nature, controlling nature (Samovar et all 151). A culture that is subject to nature sees
nature as the most powerful force that cannot be controlled or overcome and the people must
accept this fact (Samovar et all 153). A culture that cooperates with nature is a culture that lives
in harmony with it and respects nature (Samovar et all 153-154). A culture that controls nature
wants to conquer and direct the forces of nature (Samovar et all 154). Herrity stated that the Irish
culture was one that cooperated with nature. An example she gave was, “They live peacefully
with nature and accept that in order to continue to use its resources it needs to be respected”
(Herrity).
The next value orientation from Kluckhohn and Strodtbeck is the activity orientation.
This orientation answers the question, “What is the value placed on activity” (Samovar et all
151)? The three categories in this orientation are: being, being-in-becoming, and doing (Samovar
et all 151). A being culture is spontaneous of human personality while indulging and working
for the moment (Samovar et all 156). A being-in-becoming culture is a culture focused on
development and growth of the individual (Samovar et all 156). A doing culture is a culture that
focuses on activity with measureable accomplishments; activity and action is vital in a doing
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culture ((Samovar et all 156-157). Herrity states that the Irish culture is a doing culture. She
provides an example by stating, “For every action there is a product” (Herrity).
The final value orientation from Kluckhohn and Strodtbeck is the social relationship
orientation. This orientation answers the question, “What is the relationship of people to each
other” (Samovar et all 151)? The three categories in this orientation are: authoritarian, collective,
individualism (Samovar et all 151). An authoritarian culture is a culture that believes some
people are born to lead while others follow (Samovar et all 157). A collective culture believes
that the group is the most important social entity and it takes precedent over all other affiliations
(Samovar et all 158) An individualistic culture believes that all people have equal rights and
complete control over their own destiny (Samovar et all 158). Herrity stated that the Irish culture
is more individualistic (Herrity). She provided an example by explaining that, “They do not feel
the need to reach out and make relations with others. Everyone is on their own” (Herrity).
Hall has two value dimensions that can be used to analyze the culture of Ireland. The two
values are context and time. Context is defined as how people communicate if the meanings
come from actual words or the settings around them (Samovar et all 158). This is broken up into
high context and low context (Samovar et all 158). High context cultures communicate meaning
through their encounters with others and not necessarily through their words (Samovar et all
158). On the other hand, low context cultures communicate their messages mostly through the
words of their conversations (Samovar et all 158-159). Herrity stated that that the Irish culture is
a high context culture (Herrity). Hall’s other dimension is time. Time is defined as the
structuring of time by a culture (“Hofstede's Dimensions and Hall's Time”). This category is
broken up into monochronic and polychronic (“Hofstede's Dimensions and Hall's Time”).
Monochronic cultures see time as completing one task at a time, while valuing punctuality and
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keeping to schedules (Hofstede's Dimensions and Hall's Time). Polychronic cultures see time as
more flexible, complete multiple tasks at once and believe schedules should be second to
socializing (Hofstede's Dimensions and Hall's Time). Herrity stated that the Ireland was a
monochronic culture (Herrity). An example she gave was, “they are more rigid and stick to a
more linear time management schedule rather than balancing numerous tasks” (Herrity).
There are a multitude of other, less notable things that define a culture. They include the
demographics of a culture. The demographics include: ethnic groups, languages and religions.
The ethnic groups that inhabit the island of Ireland are: Irish, other white, Asian, black, mixed
and unspecified (“CIA-Ireland”). The Irish ethnic group is the largest out of all of them. There
are two official languages of Ireland: Irish/Gaelic and English (“CIA-Ireland”). There are many
religions practiced on the island of Ireland. The largest religion is Roman Catholic with 84.7% of
the population (“CIA-Ireland”). The other religions include: the church of Ireland, other
Christian, Muslim, and other (“CIA-Ireland”).
Economic System
The Irish also have an economic system in place to allow for businesses to operate. Their
system is a mixed economy with both public and private entities (Lynch 184). Irish public
enterprises do not usually enter an industry until private industry has been unsuccessful (Lynch
184).Even though this is the case, public authorities hold close to the majority of the country’s
capital assets (Lynch 182). It seems like many of Ireland’s business practices have failed. These
failures have been a result of lack of entrepreneurship and ideas (Lynch 184). Many foreign
investors create more ideas than Irish businessmen (Lynch 184). Like in many countries, Ireland
has multiple government agencies that regulate certain industries. The major industries are
financial, energy, health, communication, and employment (Brown, Scott 9-10). There is also
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economic planning being implemented in Ireland. The economic planning is focused on trade
unions (Lynch 185). Also the Ireland government has created a government agency to help with
economic planning entitled the Economic Development branch in the department of Finance
(Lynch 186). The primary purpose of this new branch is to help coordinate economic planning.
The branch does this by finding projects for state investment (Lynch 186).
Interactions with Marber’s Dimensions
Trade and Finance
Ireland has a relative small, modern and trade-dependent economy. Ireland was one of
the initial group members of twelve European Union nations that began circulating the euro on
January 1st 2002 (“CIA-Ireland”). GDP growth averaged 6% between1995 and 2007, but
economic activity decreased suddenly when the world was facing a finance crisis, along with the
subsequent collapse of its domestic property market and construction industry (“CIA-Ireland”).
In 2014, the economy in Ireland rapidly return to normal and GDP grew by 3.6% (“CIAIreland”). The recovering economy assisted lowering the deficit to 4.2% of GDP (“CIAIreland”). In the wake of the collapse of the construction sector and the downturn in consumer
spending and business investment, the export sector, dominated by foreign multinationals, has
become an even more important component of Ireland's economy. Ireland’s low corporation tax
of 12.5% has been central to encouraging business investment (“CIA-Ireland”) Loose tax
residency requirements made Ireland a common destination for international firms seeking to
avoid taxation. Amid growing international pressure the government announced it would phase
in more stringent tax laws, effectively closing a loophole (“CIA-Ireland”).
Ireland’s main exports include: “machinery and equipment, computers, chemicals,
medical devices, pharmaceuticals, foodstuffs and animal products” (“CIA-Ireland”). It exports
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these products to the “United States, the United Kingdom, Switzerland, France, Belgium,
Germany and the Netherlands” (“CIA-Ireland”). Ireland’s main Imports include: “Data
processing equipment, other machinery and equipment, chemicals, petroleum and petroleum
products, textiles and clothing” (“CIA-Ireland”). Ireland’s main import partners include: “the
United Kingdom, the United States, Germany, the Netherlands, and China” (“CIA-Ireland”). The
United States is the largest export partner and second-largest import partner (after the United
Kingdom) of Ireland, accounting for 23.2% of exports and 14.1% of imports in 2010 (“CIAIreland”).
Ireland’s economic freedom score is 76.6, making its economy the 9th freest in the 2015
Index. (Ireland).Its score is up by 0.4 point from last year, with a notable combined improvement
in the management of government spending and monetary freedom outweighing declines in half
of the 10 economic freedoms including property rights, labor freedom, and freedom from
corruption (Ireland).The Irish economy is ranked third out of 43 countries in the Europe region,
and its score is far above the world and regional averages (“Ireland”).
Two years of gains in economic freedom have not totally reversed losses earlier in the past
half-decade. During that period, Ireland’s economic freedom has declined by over 2.0 points,
with ratings for freedom from corruption and business freedom recording the largest declines
(“Ireland”).
This erosion of economic freedom has undermined competitiveness and hindered economic
recovery in a difficult external environment. Nonetheless, by adhering to its commitment to
policies that sustain open markets and reducing the costs of a bloated public sector to restore
fiscal soundness, Ireland has been able to reemerge as one of the world’s 10 freest economies.
(“Ireland”).
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Subsidiaries of US multinationals are located in Ireland due to low taxation. Ireland is the
world's most profitable country for US corporations, according to analysis by US tax journal Tax
Notes. In 2013, Ireland was named the "best country for business" by Forbes (“Economic Ties”).
The United States is Ireland's largest trading partner outside of the European Union. (“Economic
Ties”)
Currently, there are more than 600 U.S. subsidiaries operating in Ireland, employing in
excess of 100,000 people and spanning activities from manufacturing of high-tech electronics,
computer products, medical supplies, and pharmaceuticals to retailing, banking and finance, and
other services (“Economic Ties”). Many U.S. businesses find Ireland an attractive location to
manufacture for the EU market, since as a member of the EU it has tariff free access to the
European Common Market. Government policies are generally formulated to facilitate trade and
inward direct investment. The availability of an educated, well-trained, English-speaking work
force and relatively moderate wage costs have been important factors. Ireland offers good longterm growth prospects for U.S. companies under an innovative financial incentive program,
including capital grants and favorable tax treatment, such as a low corporation income tax rate
for manufacturing firms and certain financial services firms (“Economic Ties”). Irish firms are
now beginning to provide a lot of employment in the U.S., for example indigenous Irish
companies, particularly in the high tech sector have provided in excess of 80,000 jobs to date for
American citizens (“Economic Ties”).
International economic integration generates a complex web of cross-border economic
linkages. Ireland acts as a production and financial intermediary that has enormous liabilities to
foreign investors and imports large volumes of goods and services but also holds very large
foreign asset positions and has a spectacular export record (Lane, 70-71).
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While Ireland has successfully embraced economic globalization, it is also vulnerable to
increased international competition for footloose capital, knowledge and skilled labor. For
instance, Ireland has benefited hugely from being a welcoming English-speaking and low-tax
destination for foreign direct investment into Europe (Lane, 70-71).
The successful development of an internationally traded Irish-owned services sector will be
crucial to Ireland maintaining high growth rates, as manufacturing production at the lower end of
the value-added spectrum slows down. This underlines the importance of the growth of R&Dbased activities, which can be expected to be competitive in the medium term (Lane, 70-71). At a
European level, increasing trade in services and migration flows within the EU may be the most
prominent dimensions of the integration process in the near term (Lane, 70-71).
Energy
Energy in Ireland is described by energy and electricity production, consumption and
imports in the Republic of Ireland (“Fossil Fuel Energy”). The energy policy of Ireland describes
the politics of the Republic of Ireland related to energy in more detail. The electricity sector in
Ireland is the main creator of electricity in Ireland (“Fossil Fuel Energy”).
Fossil fuel energy consumption (% of total) in Ireland was 84.73 as of 2012. Its highest
value over the past 52 years was 94.43 in 2004, while its lowest value was 67.24 in 1960 (Fossil
Fuel Energy).Renewable energy accounted for 6.8% of total primary energy requirement in 2013. Total
renewable energy amounted to 911 ktoe in 2013 (Howley 25-27). Electricity from renewable energy
sources (RES-E) represented 20.9% (normalized) of gross electricity consumption in 2013 or 482 ktoe
(5,601 GWh) in absolute terms (Howley, 25-27). 5.7% of energy used for thermal purposes came from
renewable energy in 2013. This was 255 ktoe in absolute terms (Howley, 25-27). 2.8% of petrol and
diesel use in transport came from renewable energy sources or 102 ktoe in absolute terms in 2013. When
weightings are applied to biofuels from waste and second-generation biofuels the renewable transport is
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4.9% (Howley, 25-27). Gross final consumption (Directive 2009/28/EC) of renewables in 2013 amounted
to 858 ktoe (wind and hydro normalized) and represented 7.8% of gross final consumption (Howley, 2527).
Defense and Security
The EU’s Common Security and Defense Policy (CSDP) provides the EU with an
operational capacity to undertake missions outside the EU for peace-keeping, conflict prevention
and strengthening international security in accordance with the principles of the United Nations
Charter. The Common Security and Defense Policy (CSDP) is a fundamental part of the EU’s
Common Foreign and Security Policy (CFSP).
The Irish Defense Forces have participated in many EU military operations. The value the
EU places on the type of capacity and experience, which we bring to peacekeeping operations,
was reflected in the appointment of a senior Irish officer as Operational Commander of EUFOR
Chad (“Common Security”). The Department of Foreign Affairs and Trade also second Irish
experts to various EU civilian missions; Irish civilians are currently serving in Iraq, Afghanistan,
Kosovo, Georgia and the Palestinian Territories (“Common Security”). Members of An Garda
Síochána are also serving in the EU Rule of Law Mission in Kosovo (“Common Security”).
During the course of the evolution of the EU’s common security and defense policy, EU
partners have always fully respected Ireland’s sovereignty, independence and neutrality. The
legal guarantees given by the European Council in June 2009 confirmed that the EU’s security
and defense policy does not affect or prejudice Ireland’s traditional policy of military neutrality
(“Common Security”). Irish troops will not be deployed to any conflict zone or CSDP mission,
without what we call the triple lock of, UN authorization, and Government and Dáil approval
(“Common Security”). The involvement in CSDP missions allows us greater opportunities to
contribute to the strengthening of international peace and security, the protection of human rights
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and fundamental freedoms, and supporting conditions for sustainable development (“Common
Security”).
Immigration
Ireland's economic boom during the 1990s brought unprecedented levels of prosperity and
helped transform it into a "country of net immigration" by the early 2000s (Ruhs). For the first
time in its history, Ireland experienced a significant inflow of migrants — both workers and
asylum seekers — from outside the European Union (Ruhs). Consequently, Ireland had to
develop policies in a very short period of time. Three policy areas stand out. First, to slow a
rising number of asylum applications, the government created a list of safe countries of origin
and began prioritizing applications accordingly (Ruhs). Second, over the period 2003 to 2005,
Ireland's citizenship laws were fundamentally changed to eliminate an Irish-born child's
automatic right to citizenship when the parents are not Irish nationals (Ruhs). Third, with regard
to labor immigration, Ireland moved away from its more liberal work permit system as it sought
to meet most of its low-skilled labor needs from within the enlarged European Union (Ruhs).
Ireland, along with the United Kingdom and Sweden, agreed to allow citizens from the 10
countries that joined the European Union in May 2004 to work in the country immediately. This
contributed to the acceleration of EU immigration flows, a large proportion of which came from
Poland (Ruhs). Many nationals from new EU Member States have filled lower-skilled jobs than
appropriate for their level of education (Ruhs). More recently, Ireland instituted stricter policies
that favor highly skilled immigrants from outside the European Union.
Now, in the context of an economic recession, Ireland is facing a new set of policy issues
with reduced but still high immigration rates and a substantial population of legal foreign
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residents (Ruhs). These issues include rising unemployment rates among immigrants and Irish
nationals, and stress on the social welfare system.
Health
Ireland has a comprehensive, government funded public healthcare system. Ireland's
health care system is modern and reasonably efficient. It is also free, if you don't count the taxes
that pay for it all. Everyone resident in Ireland is entitled to free public health coverage. The
level of free coverage depends on your economic health - the poorer it is, the higher your level of
coverage. Globalization has a great impact on medical system; medical resources can be shared
with different countries. The advanced health system in Ireland has helped those undeveloped
countries boost their economy. Although there are some arguments saying that social and ethical
issues arise and could have negative effects on those undeveloped countries. The pros of
globalization outweigh the cons in this regard. For instance, developing countries can adopt
processes, standards and languages from developed countries via trade and outsourcing. These
outsourced services can provide some economic benefits for these developing countries.
Recently those outsourcing companies continue to grow in Ireland.
Healthcare globalization has brought competitive education to developing countries as
well. For example, globalization has led to the lesser developed countries coming up with
internationally recognized medical curricula. As a result international students can enjoy a higher
level of financially competitive education (“The Pros and Cons of the Globalization of Health
Care”).
Globalization of healthcare has led to medical personnel moving to more developed
countries, leaving the poorer countries starved of qualified doctors to treat locals. Young
professionals tend to settle down in the country where they got their degree and refusing to
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return home. Developed countries that lack medical personnel also tend to recruit professionals
from poorer countries; thereby leaving the latter’s healthcare system in tatters. As more and more
patients and doctors cross national boundaries, insurance companies would tend to offer cheaper
premiums for the facilities in those countries that are considered as competitive medical tourism
destinations, and are accredited by international organizations. This would make these
destinations more popular among tourists, while others remain in the background (Lunt et all).
Poverty
Ireland is a pretty wealthy country and its poor only consists 5.5% of the whole
population, according to a recent survey (“How many people are poor”). As a colony of the
British Empire,Ireand gained new trade links as part of the Empaire’s worldwide networks.Tax
barriers arise in the 1930 and were reduced in the 1950s.Tax barriers prevented Ireland’s trade
with other countries.There are some impacts about globalization on Ireland’s economy.First of
all,globalization changes products.The Irish government has promoted the pharmaceutical and
technology sectors and service industries such as finance and software services.As a
result,traditional activities such as agriculture and clothing have been changed.Secondly,new
markets have been developed under the impacts of globalization.Before globalization, Ireland
traded mostly with the United Kingdom. Today, Ireland has more trading partners such as the
US,Asia and other European countries. The United States is Ireland's largest export partner and
second-largest import partner (after the United Kingdom), accounting for 23.2% of exports and
14.1% of imports in 2010 (“Ireland-US Relations”).
]
Globalization brings both opportunities and threats at the same time. On the one hand, it
brings more trading partners and provides chances to sell goods and services to other countries
but on the other hand the domestic industries would be effected if imported goods are better
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quality and lower prices.Thirdly,there is an increased dependence on other economy.Any
reduction in US investment would have a serious impact on Irish economy.Similarly, a global
slowdown in high-tech or financial services sectors would also affect Irelandsince a large amount
of Irish trade is concentrated in these sectors.Lastly,globalization makes Ireland focus more on
knowledge industries rather than laobour-intensive manufacturing.Ireland need to emphasis more
on business that supply knowledge and ideas for companies rather than those labour-intensive
industries.(“Capturing the Value”)
Environment
Ireland’s environement in general is good and stands up well compared to any other country in
Europea and the rest of the world.Geography gives Ireland mid-latitue,not too close to the heat of
the equator or to the cold arctic and its position of the north-western edge of the continent
ensures a constant supply of clean unpolluted air and plenty of rain from the Atlantic Ocean.
Also, Ireland missed the industrial revolution in the 19th century so missed the pollution from
that peroid as well.Much has been changed in the past 50 years and pressures have been grown
from the nature,location, economic growth underdeveloped environmental infrastructure and
unevenly environmental controls. Progress has been made but pressure has been increased in key
areas (“Wiki-Irealnd”).
The 5 main challenges Ireland has faced are: reducing eutrophication in inland waters, better
management of waters, protecting the urban environemnt(particularly from transport-related
pressures), controlling greenhouse gas emissions, protecting biodiversity and resources.These
problems are a product of the increased economic activity of the last 30years(Larkin). Among
those environemental issues, eutrophication remains Ireland’s most serious environmental
pollution problem.Water quality has decreased.Aquactic species were killed due to depletion of
19
water course.Also native species has faced a big threat as being replaced by non-native
species,which might change the food web and spread diseases(“Pollution in Ireland”). A range of
policies and measures is made improve the quality of water to achieve at least “good status”
by2015.
Accounting System Comparison
Comparison with US GAAP
Like all countries, Ireland has an accounting system that is unique to the country. Even
though its accounting system is unique, there are similarities and differences to the United
States’ Generally Accepted Accounting Principles (US GAAP). The similarities and differences
include: the agencies in the countries, the application of the standards, the assumptions and
principles of the standards, the financial statements, the basis of accounting, the disclosure
requirements, the standards for SMEs, prior year adjustments, Property/plant and equipment and
leases.
Agencies
The Consultative Committee of Accountancy Bodies and the Consultative Committee of
Accountancy Bodies- Ireland (CCAB-I) are the two main authoritative accounting bodies in
Ireland. The CCAB-I was founded in 1988 to facilitate the necessary functions to assist
accountants in the country (“CCAB-I”). There are other subordinate groups to these
organizations in Ireland. For example there is The Association of Chartered Certified
Accountants and the Institute of Certified Public Accountants (“CCAB/CCAB-I”). Three new
standards were passed by the Financial Reporting Council in late 2012/early 2013 that were
implemented starting January 1, 2015 (PWC). The previous standards would no longer be
relevant. The users of FRS 102, the financial reporting standards in the Republic of Ireland, are
20
those who cannot use or decide not to use International Financial Reporting Standards (IFRS),
FRS 101 or FRSSE (PWC).
In the United States there are also two main accounting bodies, the American Institute of
Certified Public Accountants (AICPA) and the Public Company Accounting Oversights Board
(PCAOB). The PCAOB was created in 2002 through the Sarbanes-Oxley act by Congress
(“About the PCAOB”). The main goal of the PCAOB is to oversee public company audits and to
protect the investors of the companies (About the PCAOB). “The AICPA was founded in 1887
and represents the CPA profession nationally regarding rule-making and standard-setting, and
serves as an advocate before legislative bodies, public interest groups and other professional
organizations” (AICPA). The AICPA sets the standards used for audits of private companies and
other accounting services (AICPA).
Principles-based vs Rules-based Accounting
A major difference between the accounting systems in Ireland and the United States is
how the standards are created and applied. United States GAAP is a rules-based accounting
system. On the other hand, Ireland GAAP is a principles-based accounting system (Nisbett,
Sheikh 11). Rules-based accounting systems are defined as, “Specific accounting rules are set
forth and must be followed in order to comply with GAAP” (“RULES-BASED
ACCOUNTING”). If a company leases a piece of equipment, it must look at the rules about
leases and record the leased asset correctly in order to be GAAP compliant. Principles-based
accounting systems are defined as, “provides for few exact rules and little implementation
guidance. Instead, general principles are put forward and companies must ensure that their
financial statements fairly and accurately represent these principles” (“PRINCIPLES-BASED
ACCOUNTING”). Only having general principles lead to multiple interpretations of the same
principle. Multiple companies can apply the principle different ways and still be compliant.
21
Assumptions and principles
In every country’s accounting standards there are underlying assumptions and principles
that must be followed. Some of the assumptions in Irish GAAP include going concern,
consistency of presentation, comparability, materiality (Gillard et all 10). Irish GAAP also
included principles on how to recognize and value certain items (Gillard et all 9). US GAAP
includes many of the same items as Irish GAAP. The US GAAP principles include the
measurement principle, revenue recognition principle, the matching principle and the full
disclosure principle (Wild 10-11). The assumptions made by US GAAP include: the going
concern assumption, monetary unit assumption, time period assumption, and the business entity
assumption (Wild 11).
Inventory is an important asset to some companies, and every company uses a different
system to value inventory. Inventory is the items a company is in the business of selling (Wild
157). An example would be the cars on the lot of Carmax. There are four main ways to value
inventory including: Last in- First out, First in-first out, weighted (moving) average, and specific
identification (Wild 206). In the United States, all inventory valuation systems are allowed (Wild
217). In Ireland this is not the case. Last in-First out is not allowed under Irish GAAP, also
specific identification is only allowed for non-interchangeable parts in projects (Gillard et all 3940).
Financial Statements
Irish GAAP and US GAAP differ in the presentation of the financial statements and the
primary statements of the accounting system. In Ireland, the fixed (non-current) assets are listed
before current assets (Ernst & Young 43). In the United States, the current assets are listed before
non-current assets (Kieso et all 216). Ireland requires an income statement, cash flow statement
and statement of change in equity (BDO 7). United States GAAP requires a balance sheet,
22
income statement, statement of cash flows, statement of retained earnings (Wild 19) Also in
Ireland, there are exemptions for having consolidated financial statements based on the
Companies Act of 1963-2013 rules (BDO 8). In the United States, all companies with foreign or
domestic subsidiaries must report consolidated financial statements, unless there is concern that
the parent will retain control over the subsidiary (“CONSOLIDATED FINANCIAL
STATEMENTS”).
Basis of Accounting
Another important area to look at when comparing US GAAP to Irish GAAP is the basis
of accounting that is used in each country. There are two main types of cash basis and accrual
basis. Cash basis is defined as, “A major accounting method that recognizes revenues and
expenses at the time physical cash is actually received or paid out” (“Cash Basis”). A revenue or
expense is only recorded when cash is received or paid. On the other hand, accrual basis of
accounting is defined as, “A system used by companies to record their financial transactions,
regardless of whether a cash transfer has been made” (“Accrual Accounting”). This means a
company records revenue or expenses when occurred regardless if cash has been received or
paid. In the United States, GAAP requires that accrual accounting be used for all nongovernment and for profit entities (Freedman). Ireland GAAP requires that the accrual basis of
accounting be used (Gillard et all 9).
Disclosure requirements
Along with financial statements, the discosures required in the financial statements are
different. In Ireland, not many disclosures are required in the notes of the financial statements
(BDO 8). The new Ireland standards require the fewest out of US GAAP and the old standards of
Ireland (BDO 8). On the other hand, the United States requires a multitude of disclosures
23
(Forgeas). Ireland GAAP does not require the disclosure of related parties, only the nature of the
relationship (BDO 5).
Standards for SMEs
In all countries, there are huge multinational companies, and then there are small
corporations that may not be able to comply fully with GAAP, or may not need to. To help with
this many countries implement accounting standards for these small businesses. Ireland allows
small businesses within a certain size may elect to use Financial Reporting Standard for Smaller
Entities (FRSSE) (Gillard et all 1). In the United States the AICPA has created a framework for
small business enterprises entitled: Financial Reporting Framework for Small and Medium
Entities (“Financial Reporting Framework for SMEs”).
Prior Year Adjustments
The topic of Prior year adjustments is another area where there are similarities and
differences between Ireland GAAP and US GAAP. In Ireland, prior year adjustments are only
required for errors that are material (BDO 8). All immaterial errors are not required to be
corrected. This is different than their previous standards, when fundamental errors must be
corrected (BDO 8). A fundamental error under the old Irish GAAP was defined as a higher
threshold than a material error (BDO 8). Under US GAAP there are four types of changes:
Accounting principle, accounting estimate, reporting entity and errors (“Accounting for Changes
and Errors”). A change in principle means that the entity changes from one accepted principle to
another more favorable one (“Accounting for Changes and Errors”). An example would be
switching valuating inventory from last in-first out (LIFO) to first in-first out (FIFO). A change
in estimate means the adjusting of an estimate after new information is obtained (“Accounting
for Changes and Errors”). An example would be changing the salvage value or useful life of a
piece of equipment. A change in reporting entity is defined as, “A change in the entity being
24
reported, such as a change in the subsidiaries included in a company’s consolidated financial
statements” (“Accounting for Changes and Errors”). A correction for errors means that if a
company erred in the presentation of the financial statements, the errors should be corrected.
There are two types of methods for reporting a change including: retrospective and prospectively
(“Accounting for Changes and Errors”). Retrospective adjustment means restating prior year
financial statements with the adjustment (“Accounting for Changes and Errors”). Prospective
adjustment means applying the prospectively, or in the future years (“Accounting for Changes
and Errors”). Retrospective adjustments include changes in accounting principle, reporting
entity, and errors (“Accounting for Changes and Errors”). Prospective adjustments are changes in
accounting estimates (“Accounting for Changes and Errors”).
Property Plant and Equipment
Property, Plant, and Equipment is another vital area where there are similarities and
differences in the accounting systems of Ireland and the United States. In Ireland, Property, Plant
and Equipment (PPE) can be revalued at fair value (BDO 11). In the Unites States, PPE cannot
be appreciated to fair value (Wild 351). In Ireland, if the residual value of an asset has changed,
it can be revised based on current prices (BDO 11). Just like Ireland, United States GAAP will
allow the residual value of an asset to be changed if new information has been obtained (Wild
314).
Leases
A final area that includes similarities and differences in US GAAP and Irish GAAP is in
the recording of leases. In Ireland, leases have incentives spread over the term of the lease, and
the required disclosures include the total future minimum lease commitment (BDO 12). In the
United States there are two types of leases, capital and operating (Kieso et all 1295) A capital
lease is a lease that meets one of four requirements, and is recorded on the balance sheet as an
25
asset and liability (Kieso et all 1298). These requirements are: is there a transfer of ownership,
bargain-purchase option, is the lease term greater than 75% of its economic life and are the
present payments greater than 90% of the assets fair value (Kieso et all 1295). An operating lease
is not recorded on the balance sheet, and rent payments are expensed (Kieso et all 1301).
Comparison with IFRS
The International Accounting Standards Board (IASB) publishes the International
Financial Reporting Standards (IFRS) (Pacter 8). “The IASB is the independent standard-setting
body of the IFRS Foundation” (Pacter 8). Its members are responsible for the development and
publication of IFRS, including the IFRS for SMEs (small and medium entities) and for
approving interpretations of IFRSs as developed by the IFRS Interpretations Committee
(formerly called the IFRIC). The overall aim is to establish IASB standards as commonly used
and high quality standards for financial statement preparation replacing the national GAAP
(Pacter)
In June 2002, the European Union adopted an IAS regulation and required European
companies to prepare their consolidated financial statements in accordance with IFRS after 2005.
IFRS, as adopted by the EU, is required for the consolidated financial statements of Irish
companies with securities listed on a regulated market in the EU. IFRS is permitted for
consolidated financial statements and for stand-alone or separate financial statements (Bonham
et all).
Irish policy of using IFRS
In Ireland, parent companies can choose to apply IFRS or Irish GAAP in their separate
financial statements. When a parent company chooses to apply IFRS, its Irish subsidiary may
apply IFRS or Irish GAAP, however, if IFRS is adopted by one Irish subsidiary it should be
generally adopted by all Irish subsidiaries unless circumstances suggest otherwise. Once IFRS is
26
adopted, companies can revert to applying Irish GAAP provided they have not previously
switched in the prior five years (or if there is a change in circumstance as set out in company
law). Charity companies and small and middle sized entities are prohibited from using IFRS.
Irish GAAP has a standard for SMEs. Irish-incorporated investment companies who have been
registered in SEC are permitted by Irish company law to apply US GAAP, under some
conditions (Bonham et all).
The issuer of Republic of Ireland
The main requirements of the Regulation apply directly without any need for ROI
(Republic of Ireland) legislation. However, Article 5 of the 2002 Regulation allows Member
States the option of extending its requirements to unlisted companies and thereby permitting (or
requiring) the use of IFRS in the preparation of their consolidated accounts and/or of individual
annual accounts. The options include: Strict application of the Regulation to only consolidated
listed financial statements from 1 January 2005 includes: application to all companies (as defined
in the Companies Act(s)) from 1 January 2005, application to listed companies at 2005 and to all
other companies at some later date, application of the Regulation to a defined group of
companies from 2005, strict application to consolidated listed entities with an option for other
companies, a combination of a number of the above. The Irish Government can therefore choose
whether it wishes to require all unlisted companies to prepare their accounts under international
financial reporting standards. The UK Government has decided to allow unlisted companies to
choose between existing local accounting rules and international standards (“IFRS Application”).
In a letter to the Department of Enterprise, Trade and Employment, in December 2002
the Consultative Committee of Accountancy Bodies-Ireland (CCAB-I) outlined its favoured
position as follows: extension of regulation to cover all types of company accounts from 1
January 2005, transitional period of 2 or 3 years during which certain types of company can
27
choose whether to apply IFRS or Irish GAAP, after which a full move to IFRS must be
compulsory, transitional period option not to be made available to non-listed banks, insurance
companies, Irish Funds Industry, credit unions or other financial institutions, option to postpone
application of the Regulation for debt-listed entities should not be availed of (IFRS Application).
All or some domestic companies whose securities traded in public market either require
or permit the use of IFRS in their consolidated financial statements. In accordance with the EU
Accounting Regulation, IFRS as adopted by the EU is required for the consolidated financial
statmenets of all European companies whose debt or equity securities trade in a regulated market
in the Republic of Ireland (“IFRS Application”)
The principal securities exchange in the Republic of Ireland (the Main Securities Market
of Irish Stock Exchange)is a regulated market to which the EU IAS Reguation applies.The
Republic of Ireland has other public securities markets that are not regulated markets. Domestic
companies whose securities do not trade in a regulated market are permitted to use IFRS as
adopted by the EU.However,issuers on the ESM that are incorporated in the European Economic
Area and that are parent companies are required by the ESM Rules to apply IFRS as adopted by
the EU (“IFRS Application”).
Not only consolidated financial statements are permitted to use IFRS,other kinds of
financial statements can be used as well.For instance,separate company financial statements
whose securities are traded on a public market can be used. Companies whose securities do not
trade on a public market are permitted to use IFRS as well (other than companies not trading for
gain).If the jurisdiction does not require or permit the use of IFRS for domestic companies whose
securities trade in a public market,there are no plans to permit or require IFRS for companies in
the future (“IFRS Application”).
28
All or some securities traded on a public market either required or permitted to use IFRS
in their consolidated financial statements. Foreign companies whose securities trade in a
regulated market in Republic of Ireland(and generally in the EU)are required to report under
IFRS as adopted by the EU for their consolidated financial statemetns unless the European
Commission has deemed their accounting standards to be equivalent to IFRS. If this is the case
they may use their local standards that apply (“IFRS Application”).
IFRS Endorsement
IFRS as adopted by the EU, which is IFRS as issued by the IASB with some limited
modifications. However,the resulting financial statements of the majority of companies would
still be in compliance with IFRS.The auditor’s report and the basis of presentation footnotes
states that financial statements have been prepared in conformity with IFRS as adopted by the
EU.It is possible for the auditor’s report and/or the basis of preparation footnote allow for “dual
reporting”(comformity with both IFRS and the jurisdiction’s GAAP),additionally,to asses
compliance with IFRS,provided compliance with IFRS as adopted by the EU would also result in
compliance with IFRS as issued by the IASB. IFRS is incorporated into law or regulations. The
whole process is described in the profile of the European Union. The jurisdiction has a formal
process for the ‘endorsement ‘or ‘adoption’ of new or amended IFRS. The jurisdiction also
eliminated some accounting policy options permitted by IFRS and details are in the profile of the
EU as well (“IFRS Adoption by Country”).
Application of the IFRS for SMEs
On 14 March 2013 the Financial Reporting Council issued FRS 102.The Financial
Reporting Standard applies in the UK and republic of Ireland.It is effective for periods beginning
after 1 January 2015.FRS 102 is based on the IFRS for SMEs,but with significant modifications
29
described below.The jurisdiction made some modification to the IFRS for SMEs (“IFRS
Adoption by Country”).
In adopting FRS 102, the following modifications were made to the IFRS for SMEs,
among others: Added an option to Section 17 to revaluate property, plant and equipment and,
similarly, to Section 18 to revalue certain intangible assets, added an option to Section 18 to
capitalize development costs when specified criteria are met, changed the presumption in Section
18 of a ten-year useful life for amortisable intangible assets, including goodwill, when a reliable
estimate cannot be made to amortisation over not more than five years, added an option in
Section to capitalise borrowing costs on qualifying assets, require merger accounting (pooling)
for combinations of entities under common control, non-cash distributions to owners do not have
to be measured at fair value, added an accrual accounting option for government grants, require a
timing difference approach to deferred income taxes, rather than temporary difference approach,
permit historical cost model for all biological assets and made numerous other changes to permit
accounting treatments that exist in FRSs at the transition date that align with EU-adopted IFRS
(“IFRS Adoption by Country”).
Comparison with Culturally Expected Accounting System
From a review of accounting literature and practice, Gray identified four widely recognized
accounting values that can be used to define a country’s accounting subculture: professionalism,
uniformity, conservatism and secrecy (Tegarden 37). By using Gray’s Hypotheses, Ireland has
almost the same index in five dimensions as the US. Ireland’s actual accounting system is not
perfect at this time in some aspects.
As in the aspect of professionalism and statutory control, it represents the preference for the
exercise of individual professional judgment and the maintenance of professional self-regulation
30
as opposed to compliance with perspective legal requirements and statutory control (Tegarden
37). Ireland ranks relative high in term of individualism, low on power distance and uncertainty
avoidance, which indicates that their desirable accounting system is professional.
For uniformity vs. flexibility, it represents a preference for the enforcement of uniform
accounting practice between companies and for the consistent use of such practice over time as
opposed to flexibility in accordance with the perceived circumstances of individual companies
(Tegarden 37). Ireland ranks low in term of uncertainty avoidance and power distance, relatively
high on individualism, which indicates that their desirable accounting system is flexible.
Conservatism vs. optimism represents a preference for a cautious approach to measurement
so as to cope with the uncertainty of future events as opposed to a more optimistic, laissez-faire,
risk-taking approach (Tegarden 37). Ireland ranks low in uncertainty avoidance, relatively high
on individualism and masculinity, which indicates that their desirable accounting system is
optimistic.
For one last aspect, secrecy vs. transparency, Ireland should be more transparent based on
its lower ranking in uncertainty avoidance and power distance, and relatively higher ranking on
individualism and masculinity.
According to Gray’s Hypotheses, the Ireland’s expected accounting system should have the
characteristics of: professionalism, flexibility, optimism and transparency. However, the fact is
that Ireland’s actual accounting system is less transparent than the expected, which is the
discrepancy when comparing Ireland’s actual accounting system to its expected accounting
system.
31
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