The INIS website (see the last section on
http://www.inis.gov.ie/en/INIS/Pages/ab ... ion-system) only says that you need to make an appointment and attend it to get a replacement.
However, Citizens Info (see
http://www.citizensinformation.ie/en/mo ... tml#ld1a9a) says that you do need a lost/stolen report.
It is a good idea to report this to your local Garda station anyway. Anytime you lose an official document, it is natural for any one to ask you if you reported it to the police. So, if the guy at the GNIB counter asks you the question, you will want to be covered.
You're lucky you don't have to pay the fee! All you guys need to spend is some time at the GNIB office* but it's a very small amount of time thanks to the appointment system.
*If your local Garda station is in a busy area (like the city), you might be spending a bit of time waiting before you get to speak to an officer to report the loss, but I'm not counting that.