An influential group of UK pension funds has called for a review of the process of setting the global IFRS accounting standards following advice from eminent corporate law figure George Bompas QC.
The Local Authority Pension Fund Forum (LAPFF) – which represents 56 public sector pension funds with combined assets of more than £115bn (€134.7bn) – says it is seeking a full review of the process of setting International Financial Reporting Standards after Bompas found what it says are “substantial legal flaws” with them.
Queen’s Counsel Bompas is one of the top advocates in the UK – described by industry bible the Chambers UK Guide as “brilliant at everything”.
The LAPFF was part of a group of investors, alongside the Universities Superannuation Scheme, Threadneedle Asset Management and the UK Shareholders Association, that sought Bompas’ advice.
Now LAPFF says his opinion suggests that directors must override IFRS in order to comply with current company law – and that they may have to ignore legal advice from the Financial Reporting Council watchdog.
“The issues identified in the opinion raise fundamental concerns about accounting practices in recent years,which have had a particularly damaging effect on the banking sectors in the UK and Ireland,” LAPFF said.
In turn this raises questions about the decisions taken by bank directors which LAPFF reckons were based on faulty numbers produced under the IFRS regime. So the forum wants a full review into how the defective standards were adopted, including an investigation into whether the existing financial reporting regime requires fundamental structural reform.
LAPFF also wants accounting firms scrutinised for their role in both setting the accounting standards and approving “faulty accounts”.
The investor group submitted Bompas’ opinion to the Parliamentary Commission on Banking Standards and agreed not to make it public until the Commission produced its final report this week.
“This opinion suggests that something has indeed gone very badly wrong in the standard setting process, leading to the conclusion that IFRS should be overridden,” said LAPFF Chairman Kieran Quinn.
The FRC said it was aware of the opinion and that it would be considering it in detail, adding: “However our initial reading of the opinion is that it is not as robust as has been stated.”