Questions have been raised by the European Parliament about the governance structures and lack of transparency of these bodies, as well as their close links to the accounting industry. The three organisations play a key role in the development of accounting and auditing standards.
Commissioner Barnier said: "High-quality, international financial reporting and auditing rules are of vital importance not only for transparency, comparability and the smooth functioning of capital markets, but also for the economy at large.
The support of the European Parliament to renew the financing programme of the IFRS Foundation, EFRAG and the PIOB is an important step towards ensuring that these organisations continue to play a key role in the development of accounting and auditing standards and that the EU’s interests are properly taken into account in that process.
As far as EFRAG is concerned, I am particularly keen that, following last year's recommendation by Philippe Maystadt, its governance reforms are implemented adequately and without delay. I will also make sure that Parliament is properly informed on the progress achieved by EFRAG in this respect."
Main elements of the Regulation
The regulation will form the legal basis for the continuation of financing the International Financial Reporting Standards (IFRS) Foundation and the Public Interest Oversight Board (PIOB) for the period 2014-2020 and the European Financial Reporting Advisory Group (EFRAG) for the period 2014-2016.
In financial terms, the regulation proposes to contribute annually approximately €4.3 million to the IFRS Foundation (17% of its budget), €3.4 million to EFRAG (43% of its budget) and €0.3 million to PIOB (22% of its budget). The current EU financing programme for these beneficiaries was established in 2009 and will expire at the end of 2013. Consequently, it is important to formally adopt the proposed regulation as soon as possible to ensure the continuity of co-financing of these organisations by the EU.
The regulation will limit the financing period of EFRAG to three years in view of prospective reforms of this organisation following the recommendations presented on 12 November 2013 by Mr Philippe Maystadt acting as a special advisor to Commissioner Barnier (IP/13/1065). After that period, the Commission could propose to continue the financing of EFRAG on the basis of an assessment of its activities and the implementation of these reforms.
Full press release
ECON chair Sharon Bowles said: "My parliamentary colleagues have done a great job in highlighting the much-needed reform of these accounting quangos, which will improve public confidence in how accounting standards are implemented in Europe. We have, for the first time, shone a light on how bodies such as the IFRS Foundation and EFRAG are constituted and governed, which has not made for pretty reading.
"Any potential conflicts of interest have to be weeded out and if they are not then the Parliament has shown that it has the power to withhold funding, which sends a powerful message. The European Commission also has a very important role to play in ensuring reform happens, and it is of vital importance that Internal Market Commissioner Michel Barnier's successor listens to the Parliament's concerns when the new Commission is appointed in the autumn."
Full press release
See also: ACCA-comment
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