Brussels, 24/04/2008 (Agence Europe) - On Thursday 24 April, the European Parliament adopted the own-initiative report by Alexander Radwan (EPP-ED, Germany) on International Financial Reporting Standards (IFRS) and the governance of the International Accounting Standards Board (IASB), the private international body responsible for developing and interpreting IFRS standards (see EUROPE 9404). Although its tone has become less harsh since going through parliamentary committee, the report highlights shortcomings in transparency and democratic control which are a feature of the way IASB works. “Where do international accounting standards come from and who is responsible for them? No-one knows”, said Mr Radwan during the plenary debate.
MEPs take the view that governance and democratic control of the IASB must be improved, especially through the creation of a public oversight body set up involving all IASCF/IASB public stakeholders including legislators and supervisors. MEPS wish to launch a debate on how to integrate the IASB into the international governance system involving the IMF, the World Bank and the OECD. They also stress the need to appoint more Europeans in the various IASB bodies in so far as the European Union is by far the largest economic entity applying IFRS standards.
During the plenary debate, Commissioner McCreevy responsible for the internal market backed the EP's requests in favour of heightened public supervision of the IASB and spoke of the similar appeal launched at the end of 2007 with his American and Japanese partners (see EUROPE 9539). He expressed agreement on the need for the EU to bear more influence, as far upstream as possible, for developing IFRS standards. With this in view, he said he was willing to study the possibility of giving financial support to the European Financial Reporting Advisory Group (EFRAG) - while unequivocally stressing that EFRAG should under no circumstances become an embryonic body for standardisation or interpretation.
The EP considers as far too complicated for most European SMEs the version currently proposed by the IASB for them with regard to accounting standards. It finally calls for the “fair value” principle to be limited in scope, noting that it can be costly and lead to unrealistic valuations in some circumstances. (M.B.)