A CONTRACT for Mazars and the ICAEW to investigate the costs and effects of using IFRS within the EU should be cancelled because of "clear and overwhelming conflicts of interest", European politicians have said.
In a letter sent to internal markets commissioner Michel Barnier, Sharon Bowles [pictured], chair of the European Parliament's Econ committee, raised concerns that the EC-commissioned review has been given to parties with potential "vested interests" in its outcome, despite pledges made during trialogue discussions that the review would be conducted by independent and objective parties.
Last month, Mazars and ICAEW were commissioned to take of IFRS reporting in the EU and assess the impact of the switch to IFRS on the comparability and transparency of the financial reports of European companies.
In the letter seen by Accountancy Age, Bowles and Dumitru Stolojan, the committee's vice chairman who also signed the letter, have questioned whether they are suitable appointments given that Francoise Flores, chairwoman of EFRAG - the body responsible for ensuring IFRS are endorsed in the EU - is a partner at Mazars and the ICAEW's main IFRS taskforce is made up of representatives of the Big Four and members of the IASB, the body responsible for setting global accounting standards.
"As well as there being clear conflicts of interest, it also questionable whether Union funds are being appropriately spent given that the ICAEW at the end of 2012 endorsed IFRS," the letter said. "It is clear that the ICAEW's starting point is that IFRS are a good thing and should be rolled out further.
"We would request that the Commission cancel the current contract and explain why it was awarded to Mazars and the ICAEW, given the clear and overwhelming conflicts of interest and the prior unambiguous warning issued during the first trialogue."
Mazars and the ICAEW were not immediately available for comment.
The MEPs also called on the EC to launch an investigation into the governance of the IFRS Foundation, after the oversight body of the IASB was found to have delivered late and inaccurate filings to Companies House.
Bowles and Stolojan have raised "serious concerns" about the organisation's governance and claimed its reporting irregularities were "unacceptable for a recipient of EU funding".
They have called for the vote on the Foundation's new funding package to be suspended until concerns over its reporting failings have been addressed.
Last week, the IFRS Foundation admitted that it failed to inform Companies House "on a timely basis" that certain directors had their positions at the organisation terminated.
In some instances, the IFRS Foundation, which oversees the work of the IASB, informed Companies House about the termination of its directors many years after the action had taken place. Under the Companies Act 2006, UK companies are required to notify Companies House within 21 days when directors' positions are terminated.
Paul Volcker, the well-known US economist, stepped down as chairman of the IFRS Foundation on 31 December 2005. However, documents were not published on Companies House until 7 February 2012.
Similarly, records show that Tommaso Padoa-Schioppa stepped down as a director at the IFRS Foundation on 1 November 2010, but Companies House did not publish the records until 2 February 2013.
"In a few limited cases such notifications were not provided on a timely basis," Yael Almog, executive director at the IFRS Foundation, wrote in an open letter published on the IASB's website. "In 2012, we introduced new procedures that corrected these historic anomalies and I can confirm that the list of directors is fully up to date as of 31 December 2013."
The move by Econ is the latest instance of European politicians using EU funding, - which represents about a third of the body's total contributions - as a stick with which to beat the IFRS Foundation. Last year, the EU threatened to pull its funding unless certain changes were made to the framework that underpins the IASB's standard-setting process.
Econ last year asked that funding arrangements for the IASB and EFRAG "will be reliant on the IASB achieving certain milestones in terms of updating its own governance".
This came in a series of amendments that will have the payments made annually, and be renewable under conditions set by the parliament. This will replace the financial support regime for the institutions from a guaranteed payment of the €60m (£50.7m) funding for the period 2014 to 2020.
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