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Its proposal, obtained by the Financial Times, said that in appointing members to the International Accounting Standards Board, a clear preference should be given to countries that applied the standards or had promised to implement them soon. The same system should apply to the board of trustees that oversees the London-based body, according to an EU proposal to the IASB this week.
Accounting experts warned that, if implemented, the EU recommendations could imperil the prolonged efforts to narrow differences between accounting standards across the world. Because the Union is the biggest economic bloc that implements IASB rules, such a rebalancing could drastically increase its say in the drafting process. Controversially, the proposal would lead to a much lower profile for the US.
Although the US does not use IAS, it holds four seats on the 14-strong IASB. North Americans also account for six of the 19 trustees, the same number as the Europeans. One reason for the heavy US presence is that American and international standards-setters are working to harmonise their rules.
“It has long been an aspiration that the US would move to international accounting standards,” said Ken Wild, global head of international accounting standards at Deloitte. “If you reduce the American presence at this stage you will put that back by years and years.”
European officials said the Union was still committed to the convergence of international reporting rules and was working with the US towards that goal. “This is about finding the right governance and accountability structures for the IASB,” an EU official said.
The comment letter was one of several dozen submitted in recent months to IASB on the body's constitution. Paul Volcker, head of the IASB trustees, is reluctant to bend to bend to EU demands and wants to take account of the views of all interested parties.
But the EU feels the IASB lacks accountability and has been too dismissive of European concerns. Those perceptions were born out of last year's quarrel over IAS 39, an accounting standard that raised objections among regulators and some banks, but which the Union was incapable of amending because of the IASB's structures.
In the end, the EU decided to implement the standard minus certain key provisions. The latest EU reform proposals also contain a call to beef up the role of the trustees overseeing the IASB.
A letter accompanying the proposals says: “We feel that the board of trustees should monitor more closely the activities of the IASB, be able to approve the IASB's work programme, taking into consideration the public interest.”
The EU also calls for more transparency in the way trustees are appointed. It states that “trustees should no longer be able to appoint their successors” though makes no concrete proposals for an alternative procedure.
By Tobias Buck in Brussels and Barney Jopson in London