Controversy around global accounting standards continued this week as members of European Parliament, unhappy with the regulations, targeted the accounting board's funding.

According to a report published in The Daily Telegraph, members of parliament are expected to vote this week to attach conditions to the budget for the International Accounting Standards Board (IASB) and the European Financial Reporting Advisory Group (EFRAG). Those conditions would force the standards bodies to prove the controversial International Financial Reporting Standards (IFRS) comply with other European financial rules and do not skew financial results as critics charge.

Rather than releasing all of the six-year budget at once, the members of parliament also are reported to be considering doling out the budget a year at a time, following annual reviews to ensure the standards are meeting the criteria, the Telegraph reported. The €60 million budget represents the bulk of funding the two standards groups depend upon. The Economic and Monetary Affairs Committee was expected to vote on the matter at the end of the week.

Leading the drive to target IASB's and EFRAG's budgets is Member of Parliament Syed Kamall, a frequent critic of the standards who has previously called for a thorough review of the framework.

“The accounting bodies have told us we have no right to do this because they are independent. But they cannot be independent from the law,” Kamall told the Telegraph.

Adopted in 2005, IFRS has come under fire from investors and other groups who argue that the accounting principles do not include the concept of prudence,  leading to flawed financial statements that can hide risks accumulated on a bank's or company's balance sheet. A British investor group, spearheaded by the Local Authority Pension Fund Forum, commissioned a legal opinion from counsel George Bompas to review the standards. Bompas' report, released this summer, found the rules to be legally flawed and said insolvent banks could appear solvent under the faulty framework.

The Bompas report was submitted to the U.K.'s Parliamentary Commission on Banking Standards, which echoed the concerns and joined the investors in calling for a more thorough review of the matter.

The IASB did not publicly comment on the latest move by Kamall. Actions by the board indicate it is steadily plugging ahead with efforts to spread the implementation of IFRS as the global framework for accounting standards. The IFRS Foundation earlier this month announced an agreement with the International Organization of Securities Commissions (IOSCO) on a joint set of protocols to develop and implement IFRS globally.

IOSCO represents 120 securities regulators covering 95 percent of all securities markets around the world.

“IOSCO and the IFRS Foundation have a common interest that global accounting standards be well developed and consistently applied in practice across varying national settings,” Michael Prada, chairman of the IFRS Foundation Trustees, said in a statement.

Topics