MEPs highlighted issues around  the implementation of IFRS 9 Financial Instruments and the new IFRS 4 Insurance Contracts, in a wide-ranging resolution designed to address what it identifies as shortcomings in International Accounting Standards (IAS) evaluation.

The text of the resolution, which has been agreed by a majority in the European parliament, says the European Commission should put forward legal proposals to ensure that any delay in IFRS 4 implementation does not result in misalignment or disruption of competition within the insurance industry.

The resolution goes on to cover a number of other areas where the European parliament says the IASB is at odds with the European accounting directive and European Court of Justice case law, including its interpretation of the principles of ‘prudence’ and ‘stewardship’. It says  IASB’s interpretation of ‘prudence’ in its new conceptual framework only means ‘prudent treatment of discretion’ and should be accompanied by the principle of reliability.

The European parliament also calls on the IASB to examine whether a revised conceptual framework requires changes to existing accounting standards and to make modifications where needed; and says in its view the off-balance sheet accounting issue has not yet been properly and effectively addressed as the decision as to whether or not an asset is to be reported on balance sheets is still subject to a mechanistic rule which can be circumvented.

The resolution says that IASB and the European Financial Reporting Advisory Group (EFRAG) should strengthen their impact analyses, and assess the different needs of the wide variety of stakeholders, including long-term investors and companies, as well as the general public.

It flags up the absence of a quantitative impact assessment for IFRS 9, for which no data will be available before 2017, and says the scrutiny process for the adoption of IFRS in the EU should be formalised and structured by analogy with the scrutiny process applicable to ‘level 2’ measures in the field of financial services.

The European parliament resolution is also critical of the IFRS Foundation, saying it should shift its focus from the issue of internal organisation to discussing matters of public interest, and arguing there needs to be further progress regarding transparency, prevention of conflicts of interest and diversity of hired experts, as well as representation for medium-sized businesses.

An IASB spokesperson told Accountancy: 'We are aware of the resolution and look forward to discussing it with the European parliament.'

The European parliament’s resolution on International Accounting Standards (IAS) evaluation is here.