MEPs threaten IASB and EFRAG funding
24 Sep 2013
24 Sep 2013
MEPs are threatening to limit funding to the International Accounting Standards Board (IASB) and the European Financial Reporting Advisory Group (EFRAG) unless the standards setters respond to demands to overhaul International Financial Reporting Standards (IFRS).
The European Parliament's Economic & Monetary Affairs Committee wants to make changes to IFRS a condition of agreeing a budget of up to €60m (£50m) for IASB and EFRAG, according to the Daily Telegraph.
The committee's move is in response to claims by investors that IFRS includes 'dangerous flaws' which allow banks in particular, and other companies, to disguise the built-up of risks on their balance sheet. It wants company accounts to reflect 'economic facts rather than concepts'.
Instead of giving six years of funding in one go, the committee wants to conduct an annual assessment of whether these criteria are fulfilled and release the money in stages.
British MEP Syed Kamall who backs the amendments, told the paper: 'The accounting bodies have told us we have no right to do this because they are independent. But they can not be independent from the law.'
Last year investors from 10 leading organisations, including Threadneedle Investments, the Co-Operative Asset Management, London Pension Fund Authority and Railpen wrote to Michel Barnier, commissioner for the internal market and services, saying that IFRS was harming shareholders and allowing banks to mask losses and inflate profits. They were particularly concerned by the replacement of the concept of 'prudence' with 'neutrality'.
If the MEPs pass the amendments on Friday, the conditions for funding will be passed for approval to individual member states.