Funding for global accounting body finalised... but with strings attached

04-Dec-2013 @ 15:0

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Anthea McIntyre Anthea McIntyre

Anthea McIntyre Anthea McIntyre

Negotiations on a controversial funding programme for the International Accounting Standards Board (IASB) have finally been concluded after months of discussions.

Tasked with developing an international set of accounting rules, known as international financial reporting standards (IFRSs), the board has been working for several years to update the accounting standard it had produced on how to provision for potential losses on loans, after inadequacies allowed the precarious nature of some bank balance sheets to stay hidden.

Concerns have been raised repeatedly in recent years about the way in which the board has written its standards, in particular that they have allowed banks to hide losses and illegally pay out dividends.

Last week, the Investment Management Association, Association of British Insurers and National Association of Pension Funds, together representing the bulk of the UK's institutional investors, appeared to confirm serious doubts about the legality of certain standards.

In addition, the body that decides whether standards meet EU company law, the European Financial Reporting Advisory Group, has also come under criticism. It is currently undergoing a major overhaul of its governance structures.

Against this background, Conservative MEP Syed Kamall, has successfully called for much tougher checks on how funds are spent.

The London MEP, who is Conservative leader and spokesman on economic and monetary affairs in the European Parliament, said: "Although I would have liked much tougher criteria for EU money being given to these bodies, I am pleased to see that the Commission will now be shining a light on how the IASB does its work.

"Given that there are serious and legitimate concerns being expressed by the UK's investment community about the legality of IFRS, it is absolutely right that we keep the board on a tight leash by authorising its financing each year."

Related issues will also be investigated as part of the review of the 2001 International Accounting Standards Regulation, which will look at the successes and failures of IFRS in the European Union.

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