UK – The International Accounting Standards Board (IASB) is involved in "a race to the bottom" and should be forced to examine the social impact of proposed changes, a UK parliamentary committee has been told.

The joint parliamentary commission on banking standards, set up in the wake of the LIBOR scandal, heard evidence earlier this week on how current accounting standards could in future be amended.

Giving evidence alongside several other academics, Prem Sikka of the Centre for Global Accountability at University of Essex repeatedly criticised the IASB for its role as a private company in setting public policy.

While being questioned by Lord Lawson, formerly Margaret Thatcher's chancellor of the exchequer, Sikka said there should be a way of measuring the "harmful effects" – social and otherwise – of allowing new financial instruments and methods of measurement within accounting standards.

"Now we can see that one of the outcomes of the IASB's recommendation is not only [that] the national accounts, but the household accounts are infected – people's pensions, savings, everything is infected as a result, because this has a knock-on effect," he said.

"A key requirement should be that the rule-markers should test any measurement method they are recommending to see what the outcome would be.

"The second thing is, they have to be accountable to national governments."

Sikka added that, in the absence of a federal Europe, the question of who was accountable for change remained.

"One of the problems is that we have delegated public policymaking decisions to a private, limited company," he continued.

"It has some kind of oversight from the European Union, but it has not really adopted any kind of social perspective."

Sikka said the IASB had "its own political objectives", referring to the Chinese government's reluctance to adopt international standards if this had included related-party disclosures.

"When a new related party accounting standard came into operation, one of the exemptions was government-linked organisations need not provide any related party information," he said.

"In other words, it's a race to the bottom – the lowest-common denominator."

He added that this also addressed one of the commission's main concerns about if the standards enhanced transparency – to which he said the answer could only be no.