IPE summarises views on a potentially damaging report of the Parliament’s Committee on Economic and Monetary Affairs (ECON) on the activities of the IFRS Foundation and the IASB.
The own-initiative report of ECON lends weight to criticisms made by leading investors of the IFRS.
Although the report is non-binding and lacks legislative force, it comes at a difficult time for the IASB as leading UK investors challenge the legality and financial-stability impact of its new financial-instruments accounting rules.
Tim Bush, head of governance and financial analysis at Pensions & Investment Research Consultants in London, welcomed the report’s findings, which in the UK could pile further political pressure on the IASB and its supporters.
“The Motion of the Parliament sets out the correct endorsement criteria, which, like the written answer from Lord [Jonathan] Hill, demonstrates that EFRAG and some member states of the Accounting Regulatory Committee have used the wrong criteria due to writing the law down wrongly.
“Each link in the endorsement chain seems to have involved the UK Financial Reporting Council, its immediate alumni, or its secondees.”
The ECON report also lends weight to the argument advanced by the Local Authority Pension Fund Forum (LAPFF) in the UK that the so-called true and fair view requirement for accounts under EU law applies to specific components of the accounts and not just to the accounts as a whole.
More damagingly for the IASB, the ECON report finds that the IASB’s understanding of the principles of prudence and stewardship is at odds with the legal position under European case law and the Accounting Directive.
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