19th March 2014
The central role of IFRS in global accounting is under threat. The European Union (EU) has approved funding for the International Financial Reporting Standards (IFRS) Foundation, but it has said it could withdraw support unless certain conditions are met.
MEPs approved a €50 million six-year funding programme for the IFRS’s standard setting arm, the International Accounting Standards Board (IASB). The money will also support the European Financial Reporting Advisory Group (EFRAG), which looks at how international accounting standards are incorporated into EU law.
However, there are worries about the bodies’ governance structures, as well as a “lack of transparency” and their “close links to the accounting industry”.
Sharon Bowles, chairman of the European economic affairs committee and a Liberal Democrat MEP, said: "The release of these EU funding streams will therefore only be forthcoming upon sufficient reform to prevent conflicts of interest, which will bring about much-needed trust and scrutiny on how these highly influential public bodies operate.” She added that potential conflicts of interest must be “weeded out” or funding could be withheld.
A spokesman for the IFRS Foundation responded by saying the organisation “takes seriously any such concerns and has already begun planning its constitutionally-required five-year review of its structure and effectiveness, to be undertaken during 2015, and we welcome any proposals to improve aspects of our work”.
Despite the concerns, IFRS has already become the “de facto global language for financial reporting”. Research from the IFRS Foundation shows the financial reporting regime is required for all or most listed companies in 101 countries around the world.
Richard Martin, head of corporate reporting at ACCA, welcomed the funding as showing continued support for the development of IFRS and its endorsement by the EU.
Since 2002, Europe has “benefited significantly from this global accounting language in fostering investment”, he explained, adding that EU funding is “essential for the continued development of the standards and to ensure European influence over that development”.