Constituent Feedback and Its Influence on IASB’s Standard Setting Decision: Evidence from IFRS 18

Abstract

The IASB faces an inherent challenge in responding to constituent feedback through its due process while maintaining its independence and developing standards consistent with its conceptual framework. Although prior research has examined constituent participation and influence in IASB standard-setting, comparatively little is known about constituents' positions on specific proposals, the arguments supporting those positions, and how these relate to subsequent IASB decisions. Against this background, this study examines constituent feedback during the development of IFRS 18, Presentation and Disclosure of Financial Statements. Specifically, it investigates whether constituent positions on proposals in the Exposure Draft of the General Presentation and Disclosures were associated with subsequent IASB decisions and whether this association depends on the nature of the arguments supporting those positions. Private interest theory and related perspectives from Positive Accounting Theory provide theoretical lenses for understanding constituent participation and lobbying behavior, particularly how constituents’ self-interest and expected costs and benefits may shape their participation and positions. Accordingly, the study examines two hypotheses: that constituent positions are associated with IASB decisions and that this association depends on the nature of the arguments presented.

The study employs content analysis of 216 comment letters submitted to the IASB in response to the Exposure Draft. Using NVivo 15, the letters are coded according to constituent group, position on selected proposals, and the nature of the arguments used to support those positions. Preparers represented the largest group of respondents (41.20%), followed by accounting professionals (16.67%) and national and regional standard setters (14.31%), while 42.60% of submissions originated from Europe.

The findings show that constituent feedback led to several changes between the Exposure Draft and IFRS 18, including changes to the financing category and the classification of associates and joint ventures, as well as the withdrawal of the unusual income and expenses proposal. However, constituent preferences did not uniformly correspond with IASB decisions, as some proposals were retained despite substantial disagreement. Differences in constituent responses were statistically significant across groups for three of the four proposals tested. The analysis also shows that constituents used both conceptual and non-conceptual arguments and frequently combined them. These findings provide partial support for both hypotheses. Overall, IASB responsiveness to constituent feedback appears selective rather than automatic.

The study extends the literature by providing evidence from IFRS 18 on comparatively underexplored aspects of IASB standard-setting, particularly constituent positions on specific proposals and the arguments supporting those positions. By examining these together with subsequent IASB decisions, the study provides further evidence on how constituent participation operates within the tension between responsiveness to constituent feedback and the IASB’s need to maintain independent and conceptually grounded standard-setting decisions.