EU ministers move to rein in IASB powers

Political pressure on the international accounting standard setter has intensified, with demands led by the French finance minister calling for a formal limit on the term of its chairman and improvements to transparency and accountability if it wants to secure funding.

The IASB receives £3.6m of its £16m budget from Europe. The Council of European Finance Ministers met in Brussels on Tuesday to debate reforms of the International Accounting Standards Board.

Ecofin, chaired by French finance minister Christine Lagarde, has told the IASB to improve the transparency and legitimacy of standard-setting and agenda-setting processes; consider changing the terms of IASB members, including a ‘possible term limitation’ for the chairman of the IASB if the EU’s budget contribution is to be maintained.

The proposals also suggest a desire to see the International Accounting Standards Committee Foundation, which oversees the IASB, become more involved in the work agenda of the board, something currently regarded as sacrosanct.

Bournemouth University professor in accounting, Stella Fearnley, said: ‘Ecofin is reflecting concern expressed to it from various quarters in Europe. One of the problems is the IASB’s consultation process. The politicians wouldn’t step in if things were going smoothly,’ she said.

The current chairman, Sir David Tweedie, has headed the IASB since 2001 after being appointed by the trustees, who decide the length of service for board members.

Fearnley criticised the failure to address off-balance-sheet issues. ‘What have they been doing for the last six years ­ concentrating on the convergence agenda, and so they’ve missed the big picture of what’s going on around them,’ she said.

Financial Reporting Council chief executive Paul Boyle said Ecofin’s points concerned funding.

‘They’re obviously thinking about whether the European Union should spend public money in contributing to the IASCF and the significance of their points is that they are effectively conditions which have to be met before funding has to be given,’ said Boyle.

The IASB refused to comment.