EU: More Companies Should Pay for IASB

A broad new system for funding the International Accounting Standards Board through voluntary contributions receives formal support from European U...
Tim ReasonJuly 11, 2006

European Union finance ministers are expected to formally declare support Tuesday for changes to the International Accounting Standards Board’s funding, the Financial Times reports.

Currently, the IASB receives about 35 percent of its funding from the Big Four accounting firms, with the remainder coming from fewer than 200 other companies and exchanges, according to the FT.

The European Commission views that funding system as inadequate and subject to possible conflicts of interest as IASB’s influence grows. Last year, some 8,000 publicly traded companies in the 25 countries that make up the European Union were required to adopt the International Financial Reporting Standards set by the IASB.

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IASB’s American counterpart, the Financial Accounting Standards Board, is funded by mandatory contributions from all publicly listed companies. That funding system was put in place by the Sarbanes-Oxley Act in an effort to ensure FASB’s independence from accounting firms and other contributors. The Securities and Exchange Commission now manages the collection and disbursement of the mandatory contributions.

The EU declaration does not imitate that system, however. According to the FT, the finance ministers plan to express their support for a “very broad base of contributors,” across the world, but envision a voluntary funding system. The EU ministers will declare that funding “partly through public means” is a possibility, the FT reports, but only if the proposed voluntary system fails.

The IASB, whose budget, according to the FT is expected to rise to $29.4 million in 2008, has been seeking a new funding system that is, in part, compulsory. “We’re pleased [EU ministers] are supportive of a broad-based funding initiative that will maintain the independence of the organization,” IASB Director of Operations Tom Seidenstein told the FT.

Editor’s Note: This article has been updated to include a corrected figure for the IASB’s projected 2008 budget, and the correct title for Tom Seidenstein.