Irish Accountants ignored company law and protected the bankers
Why was the Irish accounting profession not called to account for failing to reveal losses at financial institutions? The problem was exposed when Anglo Irish Bank announced impressive profits five years ago at a time when it was bankrupt. The recent revelations by Bloxham stockbrokers suggests that the profession is in no rush to change or even explain what is going on.
Unlike Ireland, the UK opened a House of Lords inquiry into the matter, during which concerns were raised about the quality of Irish bank audits.
The lords found that the UK big four accounting firms were too dominant and dangerous, that the quality of their work in bank auditing was questionable, and that they deliberately used EU-backed flawed rules known as the International Financial Reporting Standards (IFRS) which they knew to be misleading.
This, however, was only a side show. The real issue is revelations that show a profession that ignored company law and realised that protecting bankers’ bonuses was far more lucrative than serving the interests of shareholders who pay them or regulators who rely on them.
The UK inquiry was, for instance, given evidence showing how accounting groups lobbied to change company law rules so that directors of loss-making and bankrupt banks can award themselves bonuses by failing to disclose losses and calculating artificial profits.
Worryingly, Irish government officials have given these proposed changes their full backing. According to one official, the new Companies Consolidation and Reform Bill intends to remove prudence – ie the requirement to reveal losses – from company law. This is despite warnings from Nama’s Brendan McDonagh, who told an Oireachtas committee of his concerns that banks were giving misleading information about their loan losses to the stock exchange and to shareholders.
The list of IFRS critics is growing. Irish bank regulators claim they were unaware that auditors were ignoring company law by not revealing losses. Central Bank governor Patrick Honohan repeatedly voiced his frustration at the IFRS rules that allow banks to delay disclosing bad news.
A former PwC partner claimed the IFRS rules are “not fit for purpose”.
Nigel Lawson, who served as finance minister under Margaret Thatcher, criticised the rules for allowing banks to pay bonuses based on “paper profits”.
A shareholder association has questioned how the accounting profession can undermine the law in this way. Iain Richards of Aviva Investors described the IFRS rules as “a material cost to the taxpayer and to shareholders because dividend distributions have been made and bonuses paid that were imprudent”.
In Ireland, the Nyberg report drew the same conclusion: “the higher reported profits also enabled increased dividend and remuneration”.
PIRC, the UK corporate governance consultancy, has written to Brussels to have the IFRS rules changed. Although officially the EU has not admitted the error, official EU documents suggest there are concerns.
Recently the Irish Central Bank warned that Irish banks will need to raise more capital. The likelihood is that while the international standards are in force in their present form, shareholders will be reluctant to burn their fingers again. Even bankers are unwilling to trust each other, worried that there is still a mountain of losses waiting to be revealed.
A potential solution is to make the accounting rules “shareholder”-friendly as opposed to “bonus”-friendly.
However, standing up to bank lobbyists and telling them their bonuses will suffer under new reforms is not an attractive proposal for many politicians. One politician was allegedly warned “even if it is the law”, changing the IFRS rules “might have unintended consequences”.
According to Syed Kamall MEP, the EU acted illegally by adopting the advice of various accounting committees and he has questioned whether conflicts of interest within these committees exist.
In 2008 the accounting profession commissioned a legal opinion from Martin Moore QC. Hoping that Moore would confirm their view that as long as they complied with the IFRS rules they met company law requirements, Moore instead said that “mechanical compliance” with accounting standards was alone insufficient to meet the requirements of company law.
To the embarrassment of EU officials, Moore also warned it was illegal for the EU to endorse standards if they permitted entities to conceal losses. He presented case law to confirm that concealment of losses was illegal.
A UK minister who claims to have the backing of the accounting profession admits that banks can hide losses under these rules but that the practice is legal. The minister revealed that as long as banks keep an internal set of books that comply with company law, they are free to publish another set that does not reveal losses but complies with IFRS rules.
The report to Brian Lenihan that underestimated Irish bank losses was based on IFRS figures.
The accountants who commissioned the Moore opinion nevertheless reassured the House of Lords that there was no clash between company law and the IFRS rules. The Lords, fearful they were misled, wrote to the UK government producing evidence that accountants had unsuccessfully lobbied to change company law rules so that banks could conceal losses.
Internal documents reveal the EU is close to admitting it got it wrong.
The revelation could enhance Ireland’s bargaining position as the omission would suggest the EU contributed to Ireland’s banking problem by enacting accounting rules that were contrary to company law.
Can years of chocolate consumption protect your heart?
A scientific study says yes,
A scientific study likely to stir the souls of chocoholics has suggested that eating dark chocolate every day for 10 years could reduce the likelihood of heart attacks and strokes in some high-risk patients.
A team of researchers from Australia used a mathematical model to predict the long-term health effects of daily dark chocolate consumption in 2,013 people with a condition known as metabolic syndrome, which puts them at high risk of heart disease.
The team found that in the best-case scenario — with no patient missing any daily portions — the treatment might avert 70 nonfatal and 15 fatal heart attacks or strokes per 10,000 people over 10 years.
The model also suggested that mounting effective “dark chocolate prevention strategies” might cost an individual just $40 a year.
The researchers, whose work was published in the journal BMJ last week, stressed that protective effects have been shown only for dark chocolate containing at least 60 to 70 percent cocoa, not for milk or white chocolate. This is probably due to higher levels of flavonoids in dark chocolate.
But experts not involved in the study urged caution.
“Recommendations for daily consumption of dark chocolate . . . will certainly get people with metabolic syndrome excited, but at this point these findings are more hypothetical than proven, and the results need real-life data to confirm,” said Kenneth Ong at the Brooklyn Hospital Center in New York.
“I suspect that consuming dark chocolate every day for 10 years may have unintended adverse consequences,” he added. “The additional sugar and caloric intake may negatively impact patients in this study, who are overweight and glucose-intolerant to begin with.”
All participants in the study had high blood pressure and metabolic syndrome but no history of heart disease or diabetes, and they were not on blood-pressure-lowering medication.
Why do Guinness bubbles sink? Science has the answer
It’s because of the shape of the pint glasses usually used for the stout, study finds
The mystery of why the bubbles in the legendary black beer Guinness sink as opposed to rise as one might expect has finally been solved — the secret apparently lies in the shape of the pint glasses from which Guinness is often sipped, researchers in Ireland say.
After you pour a glass of the famous Irish stout Guinness, the white bubbles settle downward. Since bubbles are lighter than beer, you might think this defies the laws of gravity.
“In one’s everyday life, one rarely comes across such a counterintuitive phenomenon, challenging equally the imagination of a university professor as well as that of Bill, John and Harry from the local pub,” said researcher Eugene Benilov, an applied mathematician at the University of Limerick in Ireland.
The solution to this puzzle lies in how the beer flows in the glass. The beer flows downward near the walls of the glass, dragging the tiny bubbles along with it, and then upward in the interior. This circulatory pattern eventually leads to a creamy white head of foam resting on top of the almost-black brew.
The question, then, is why the beer flows this way in the first place. Now computer models and lab experiments reveal the answer lies in the geometry of the pint glasses in which stouts are typically enjoyed.
Normally, if you started with a perfectly straight cylindrical glass, all the bubbles in the beer would rise together from below. However, pint glasses are typically narrower at the bottom and wider at the top. There is more space under the wide flat middle of the glass than under its angled walls, which means more bubbles rise from the middle than the sides. This higher density of bubbles in the middle of the pint glass leads to a kind of fountain of beer there, with a strong upward rush of bubbles from the middle that ultimately results in the brew flowing downward along its sides and then back up.
“Don’t drink too much Guinness while testing our conclusions!” Benilov told LiveScience.
Such research might not only solve a mystery of beer. Understanding these kinds of bubbly flows could help control how bubbles flow in champagne glasses, designing pint glasses that minimize the notoriously long time it can take for bubbles in stouts to settle, and certain industrial chemical processes involving bubbly flows.
“We’ll probably look into potential industrial applications of our results,” Benilov said.
Benilov and his colleagues Cathal Cummins and William Lee have submitted their findings to the American Journal of Physics.
There will be life on Mars:
Mission to create the first human colony of four people by 2023
And it will be filmed for reality TV show
- Seven-month mission to be financed by reality show on Earth
- By 2033, there will be 20 people living on Mars
- Mission backed by co-creator of Big Brother and Nobel-winning physicists
- Reality show on Earth will finance mission
An independent space launch company aims to put four people on Mars by April 2023 – and the team will not be coming back.
Mars One claims that a new crew of four will join every two years as the explorers build their settlement, and that by 2033 there will be 20 people living on Mars.
The company has been in talks with independent space suppliers such as Space X, which recently launched the first privately owned rocket to the Space Station.
The Dutch company is backed by a Nobel prize winning physicist, Gerard ‘t Hooft – and also by Paul Romer, co-creator of Big Brother.
The company aims to start training astronauts next year – and will turn the selection and training programme into a ‘media event’ similar to a reality show.
‘We see this as a journey that belongs to us all, and it is for this reason that we will make every step one that we take together,’ says the company.
‘This will also be our way to finance the mission: the mission to Mars will be the biggest media event ever!
‘The entire world will be able to watch and help with decisions as the teams of settlers are selected, follow their extensive training and preparation for the mission and of course observe their settling on Mars once arrived. The emigrated astronauts will share their experiences with us as they build their new home, conduct experiments and explore Mars.’
Mars One’s plan has been in development since 2011.
Big Brother creator Römer says, ‘When the Mars One founders first approached me, asking whether they could speak to me about a mission to Mars, my first response was ‘these people are crazy. What can they do that NASA’s can’t?’
‘That conversation made it clear to me, however. They think so creatively, and outside of the box and the concept of a ‘one-way’ mission is both outrageous and exciting. These aspects are what brought me to the idea of making the mission the biggest media event in the world. Reality meets talent show with no ending and the whole world watching. Now there’s a pitch!’
Galway based man in custody over cannabis drugs haul valued at €280,000
A 32-YEAR OLD MAN HAS BEEN REMANDED IN CUSTODY IN CONNECTION WITH THE SEIZURE BY GARDAÍ OF CANNABIS PLANTS WORTH AN ESTIMATED €280,000 AT A RURAL HOUSE IN GALWAY.
Lim Chun Wan, with an address at Corbally South, Cummer, Tuam, Co Galway, was remanded in custody when he appeared before a special sitting of Galway District Court yesterday morning.
Judge Gerard Furlong was told by Inspector Michael Coppinger that Gardaí had been unable to positively identify the defendant and were not sure whether he was from China or Malaysia.
Inspector Coppinger objected to bail because they could not positively identify the defendant and believed him to be a flight risk.
Garda Noel McNulty said Chun Wan made no reply when charged. Chun Wan, who is unemployed, is charged with possession of cannabis, cultivating cannabis plants, and possession of a controlled drug for the purpose of selling or supplying at Corbally South, Cummer, Tuam, Co Galway.
Garda McNulty said Chun Wan had been in Ireland since August and may have lived or worked in Dublin, Trim in Co Meath and Cork.
Defence solicitor Adrian Mac Lynn made an application for bail but the judge, who granted Chun Wan free legal aid, said it could not be dealt with until the defendant’s identity was confirmed.
He remanded Chun Wan in custody to appear before Harristown District Court next Friday.
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