The European Parliament has called for the international standard setter to improve its governance, saying it lacks in transparency and accountability as it is not under the control of any democratically elected parliament or government.

Parliament adopted a report yesterday, drawn up by MEP Alexander Radwan, which detailed the deficiencies International Accounting Standards Board.

According to the report, the IASB's oversight body, the International Accounting Standards Committee Foundation, has indicated that it will make efforts to redress the lack in accountability, but Radwan insisted more needs to be done.

MEPs believe that since the EU is the largest jurisdiction which has adopted the IFRS, there should be more representatives of a European background in the standard setting bodies, and that all trustees of the IASB should come from nations that have signed up to the IFRS, or intend to do so.

Parliament wants to see a public oversight body set up involving all IASCF/IASB public stakeholders, including legislators and supervisors, and a body representing market participants, which would deliver an annual report on the functioning of the IASCF/IASB. Such a body could also be responsible for selecting and appointing trustees in a transparent manner with a geographically balanced representation of all stakeholders.

The report also urges IASB to carry out impact studies among all interested parties before adopting new accounting standards and want parliament to be seriously consulted on the IASB work programme.

The report also criticised the IASB's proposed version of the IFRS for small and medium sized enterprises (SMEs) for being far to complicated.

The report also called for the “fair value” principle to be limited in scope, noting that it can be costly and lead to unrealistic valuations in some circumstances.

Further reading:

Key IASB project is 'not under-staffed'

Regulators call for end to self-appointed trustees