Corporate Lobbying in Private Accounting Standard Setting: Does the IASB have to Reckon with National Differences?

Abstract

This paper explores whether the attitude of preparers towards lobbying to a private accounting standard setter is different depending on the regulatory background of the preparers' home country. Prior literature examined the preparers' incentives and characteristics as drivers to participate in the due process of international accounting standard setting, but it did not investigate the impact of the preparers' national regulatory background on participation. As a result of the acceptance of the International Financial Reporting Standards promulgated by the International Accounting Standards Board (IASB) in different countries, preparers who are traditionally accustomed with an accounting standard setting process initiated by governments with few opportunities for formal participation, are now able to participate in a private accounting standard setting process characterised by several possibilities for participation. Comparing survey evidence of Belgian preparers with existing survey evidence of UK preparers, we notice that the participation methods used, the perception on the effectiveness of the participation methods and the reasons for non-participation differ across both groups of preparers. This finding suggests that the national regulatory background of the preparers may affect the behaviour of preparers in their decision to participate in private accounting standard setting.

Acknowledgement

We thank Katleen Collet for her contribution with the data collection and the participants of the Accounting in Europe conference in Catania (2009) for their useful comments.

Notes

The SAC provides advice to the IASB on several issues with an emphasis on practical application and implementation. The SAC is comprised of representatives from user groups, preparers, financial analysts, academics, auditors, regulators, professional accounting bodies and investor groups that are affected by and interested in the IASB's work (http://www.iasb.org/The+organisation/Advisory+bodies/The+SAC/Standards+Advisory+Council.htm).

The IASB will issue a discussion paper when an important change in a method of accounting or in a disclosure issue is envisaged. The publication of a discussion paper precedes the publication of an exposure draft and is an optional step in the IASB's due process.

EFRAG is a private sector body set up in 2001 to assist the European Commission in the endorsement of IFRS by providing advice on the technical quality of these standards. EFRAG submits comment letters on proposed standards, attends IASB working group meetings as an observer, has meetings with members of the IASB and works together with national standard setters (http://www.efrag.org/content/default.asp?id=4103).

In addition to shares issued by companies, the Belgian stock market also includes debt instruments such as bonds, warrants and certificates issued by several preparers. We do not include these preparers in our study, as they are different from the population used by Georgiou (2002, 2004).

The list of preparers having filed their consolidated financial statement at the Central Balance Sheet Office of the Bank of Belgium can be found at following URL: http://www.nbb.be/pub/03_00_00_00_00/03_07_00_00_00/03_07_01_00_00/03_07_01_04_00.htm?l=en

The results in Table 3 can be criticised since respondents who do not know certain lobbying methods may face difficulties in rating the perceived effectiveness of them, which may bias the results. We therefore compare the responses from preparers that know a particular method with the responses from preparers that do not know this method. Untabulated findings reveal that the results are indifferent between both groups. In general terms, we can conclude that the results presented in Table 3 are unbiased, despite the variation in knowledge.

As a robustness check, we eliminate the two non-financial unlisted preparers who are a subsidiary of a foreign listed preparer, but this does not alter the research results.