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National Standard-Setters’ Lobbying: An Analysis of its Role in the IFRS 2 Due Process

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Accounting and Regulation

Abstract

As the IASB’s due process sustains, the national standard-setters play a key role in the development of IFRS. There is still much to learn, however, about their lobbying practices, which arguments they use and when they do it. This chapter focuses on the accounting of share-based payments that were under-regulated before IFRS 2. To analyze lobbying behavior of this relevant group of stakeholders, we conduct a content analysis of the 27 comment letters addressing the documents issued by the G4+1 and the IASB that preceded IFRS 2. Consistent with institutional theory, our analysis of lobbying activity by national standard-setters shows that participation increased at the end of the process, and they supported the IASB’s final proposals although they were not as much supportive at the beginning.

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Notes

  1. 1.

    In Giner and Arce (2012) we make an analysis of the lobbying procedure by all interested groups. This paper could be considered an extension of this analysis focused on the NSS.

  2. 2.

    See the Invitation to Comment ‘Proposal to Establish and Accounting Standards Advisory Forum’ (IFRS Foundation 2012). As stated in the document the two main reasons behind the proposal are the end of the convergence program with the FASB and the widely spread use of IFRS around the world what make necessary to rationalize the relationships of the Board with NSS and regional bodies.

  3. 3.

    The G4+1 was an association of the accounting standards-setting bodies of Australia, Canada, New Zealand, United Kingdom and United States. The IASC participated as an observer. The G4+1 was disbanded in 2001 when the IASC was transformed into the IASB.

  4. 4.

    Between 2002 and 2006 the IASB received 103 comment letters per document on average; IFRS 6 received the lowest number (24), and the DP on share–based payments received the most (281).

  5. 5.

    The IASB also issues interpretations that are prepared by the IFRIC. IFRIC members are appointed by the Trustees.

  6. 6.

    The supermajority rule was introduced in the reform on the IASB Constitution that took place in 2005. It aims to get more unity among the Board members in order to increase the perception of acceptance of the standards.

  7. 7.

    This is the estimated number of listed companies that prepare consolidated accounts. There is also an indirect and very important impact if Member States of the EU use the option included in the Regulation 1606/2002 and allow or oblige to use endorsed IFRS for individual accounts and for consolidated purposes to non-listed companies.

  8. 8.

    The comprehensive Basis for Conclusions that accompanies IFRS 2 explains that the IASB worked with the FASB after the latter added to its agenda in March 2003 a project to review US accounting requirements on share-based payment.

  9. 9.

    As a consequence of the accounting changes US firms reduced the use of stock options. The Towers Perrin’s (2004) report indicates that many US companies redesigned their executive incentive plans: they estimate a reduction of 16 % in the value of long-term incentives and an increase of cash compensation in 2004. According to Bear, Stearns & Co (2004) the impact of stock options on the 2004 earnings figure of S&P 500 and NASDAQ 100 is about 5 and 22 %, respectively.

  10. 10.

    The date at which the other party, having performed all of the services or provided all of the goods, becomes unconditionally entitled to the options or shares.

  11. 11.

    The date at which the contract between the entity and the other party is entered into.

  12. 12.

    The experience surrounding the changes in IAS 39 and IFRS 7 that occurred in 2008 questions this assumption, however. See the Minutes of Evidence by Sir David Tweedie, Chairman of IASB, taken before the Treasury Committee of the House of Commons of the UK Parliament (Tuesday 11 November 2008).

  13. 13.

    When EFRAG produces the comment letters, it follows a due process as well, and requires comments to its constituency before considering them final.

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Authors and Affiliations

  1. Universitat de València. Facultat d’Economia. Dpt. de Comptabilitat, Valencia, Spain

    Begoña Giner & Miguel Arce

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  1. Begoña Giner
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  2. Miguel Arce
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Correspondence to Begoña Giner .

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Editors and Affiliations

  1. Department of Business and Law, University of Siena, Siena, Italy

    Roberto Di Pietra

  2. The University of Sydney, Sydney, NSW, Australia

    Stuart McLeay

  3. Stern School of Business, New York University, New York, USA

    Joshua Ronen

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Giner, B., Arce, M. (2014). National Standard-Setters’ Lobbying: An Analysis of its Role in the IFRS 2 Due Process. In: Di Pietra, R., McLeay, S., Ronen, J. (eds) Accounting and Regulation. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-8097-6_15

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