Company Accounts:Written question - HL6436

Asked on: 19 March 2018
Department for Business, Energy and Industrial Strategy
Company Accounts
Lords
To ask Her Majesty's Government what assessment they have made of whether members of boards that set and endorse accounting standards (1) have the Financial Conduct Authority designation to represent the interest of public investors, and (2) have been adequately vetted for potential conflicts of interest.
A
Answered by: Lord Henley
Answered on: 05 April 2018

The UK requires the use of EU endorsed International Financial Reporting Standards (IFRS), which are issued by the International Accounting Standards Board (IASB). These standards are used by group companies listed on EU markets to prepare their annual financial statements. The IFRS Foundation is an international not-for-profit, public interest organisation. The IFRS Foundation Trustees are responsible for the governance and oversight of the IASB and are formally required to act in the public interest in the Foundation’s constitution, which is publicly available on their website.

The Trustees are accountable to the IFRS Foundation’s Monitoring Board. This monitoring function permits capital authorities to carry out their investor protection mandates. The European Commission is a member of the Monitoring Board acting on behalf of European capital markets.

The IFRS Foundation’s constitution only allows three out of fourteen members to be ‘part-time’. These part-time members are subject to guidelines of independence in the Foundation’s constitution established by the Trustees. All other members must be ‘full-time’, and therefore must commit all their paid employment time to the IFRS Foundation.

The Financial Reporting Council’s (FRC) Board sets UK Financial Reporting Standards, which are required to be used by private companies. The FRC is the prescribed body in Company Law to issue UK accounting standards. The members of FRC Board are not required to be designated to represent the interest of public investors in order to set accounting standards so no assessment of this is necessary. The FRC’s current Register of Interests is published on its website.

The Financial Conduct Authority plays no role in this process.

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