The International Financial Reporting Standards (IFRS) Foundation has rejected an anonymous whistleblower’s claim that an international rulemaker broke due process rules when making changes to one of its standards.

The claim alleged that the International Accounting Standards Board (IASB) made changes to its new financial instruments standard, IFRS 9, without following the proper processes for such changes.

Of particular concern to the whistleblower, according to the claim, was that the change amounted to a change in practice.

The chair of the Foundation’s due process oversight committee, James Quigley, said: “We as a committee are comfortable that due process has been followed.

“What we are really saying is that, when the board decides that standard setting isn’t needed, there is not any due process for us to oversee in reality.”

He added that his contact with the IFRS leaders at the leading six audit firms had revealed they did not view the board’s actions as a breach of due process.

“They agree with the conclusion of the board that standard setting was not required,” he added.

Quigley also noted that auditors believed that allowing differences in practice would have proved far worse than any action the board had taken.

The complaint under discussion on 7 November arose out of work done by the IFRS Interpretations Committee and the IASB on IFRS 9, which details how financial assets and liabilities should be classified and measured.

Specifically, the work dealt with the accounting under IFRS 9 for a modification or exchange of a financial liability measured at amortised cost that did not result in the de-recognition of the financial liability.

The matter started out life as a question to the interpretations committee.

At its July meeting, the IASB refused to sanction an interpretation, saying the requirements in IFRS 9 were clear and that no formal standard-setting activity was necessary.

Instead, the board decided to include it as a note in its “basis for conclusions” to the standard at the same time as it made other amendments on a separate project. This section contains extra accompanying material for the standards, and there are no specific requirements as to what must go in it.

IASB director Henry Rees told the trustees: “At all stages of the process, the board and the interpretations committee have agreed and have been clear about what IFRS 9 requires people to do in accounting for these transactions.

“So, we don’t think the board is establishing new requirements in the basis for conclusions.”

He said the board was merely recording the conclusion that standard setting was not required for companies to determine what appropriate accounting is.

Rees also noted that it was an appropriate use of the basis for conclusions, in that the board had used it to set out the rationale for its decision.

This is not the first time that the IASB has been accused of amending accounting requirements without going through its formal processes.

In June 2010, IPE reported that former IASB member Robert Garnett had delivered a stern rebuke to staff over potentially controversial ad hoc drafting changes. Then in 2011, reviewers of the board’s IAS 19 fatal-flaw review draft flagged up a last-minute change involving the treatment of plan administration costs.

The IFRS Foundation’s trustees have also signalled that they plan to review how they deal with anonymous complaints.

However, as a recipient of European Union funds, the IFRS Foundation would have to comply with developments within the bloc around whistleblower protections.

People with concerns about the board’s due process and its decisions have in the past been reluctant to bring complaints for fear of jeopardising their clients’ interests.

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