The literature reflects economic consequences as impact of accounting reports on the decision- making behaviour of business, government, unions, investors and creditors (Zelf, 1978; cited by Nobes et al., 2008). This articulation made by Zelf (1978) holds a strong significance until today because the interest holders in this process will pressurize the accounting- standard setters not to support / approve standard with an unpleasant attribute. This process has been explained as lobbying by the literature that entails writing letters, giving verbal evidence at an arranged hearing by the standard- setters. The aim of lobbying is to influence the decision- makers so that their views can be exposed and build in favour of their clients or the 'interest holders'.
In an answer to the findings of the reviewed research paper, this paper aims to identify the factors influencing the lobbying in accounting standard settings so that a detailed context can be understood while reaching the conclusions. Even though a diverse range of literature emerges on the subject, however following implications of the influential factors have been summarized (adapted by Kenny and Larson, 1993):
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Firms involved in the process of lobbying are large since it is a costly process that can only be justified by these firms while doing a cost- benefit analysis. Secondly only large firms have the capability of influencing the standard- setters and one of the motives behind the process is reducing the political costs (such as tax etc.) tolerated by large firms.
Another significant influencing the firm's decision to lobby is the debt position due to the affects of accounting on the lending arrangements and potential risks concerning the debt financing in the marketplace (Eising, 2008).
Thirdly, firms lobby for accounting treatments that is likely to widen their capabilities of management of reported income. As an example, if management's payment is drawn on reported income, then management prefers those accounting methods that make the most of its income.
There is a significant consideration made by the author towards the lobbying activities of financial statement users. Even though the identified reasons represent only a small sample of population stating that the analysts don't expect their views and opinions to be heard because it is the preparers of the accounts, who gain the power. The lobbying activities of different interest groups have also been observed including the report users, and a relaxed approach was recognized, however substantial resource allocation to lobbying was detected. Drawing on the research findings presented by the author, it has been evaluated that since lobbying is an exchange process whereby goods / opinions / dialogues are exchanged between the decision makers and the associations, therefore lobbying activities can be successful only if interest groups can furnish with the accessibility of their opinions (Bouwen 2002). The author implies different theories to develop an integrative explanatory model of user participation to identify the user perception on the outcomes of their participation. It was identified that users perceive that it was the task of the accountants to define accounting standards and not the users. Intriguingly noted, the end user participation in development of system, polices, procedures and standards etc. is crucial to its successful implementation. Conclusively, the literature review presented by the author identifies that user participation in setting accounting- standard setting has been either significantly low or there could be a possibility of dearth of research work carried out under this subject which can not represent the entire population.
Reviewing the methods of lobbying identified by the research paper, the most commonly used method of lobbying is making an appeal to trade organisation, where as other method such as comment letter was used by significantly low percentage of the population. This shows that the previous findings of why end- users' belief of not being valued as identified by the literature, gains support, which is why the most 'strongest method' of lobbying out of others (speaking at IASB's public hearings, participating in field visits, communicating firm's view to IASB's technical staff etc.) is mostly used. Other reasons for using this method are educational and professional experience of investment managers that are used in influencing the standard- setters.
Reviewing the factors that contribute towards non- participation in the IASB process, two factors cost of participating in the process and respondent's belief that other investment industry representatives sufficiently represented their views, dominate the findings. Assessing the first reason i.e. cost of participation is biggest reason for non- participation since lobbying is already costly process that should justify the cost- effectiveness factors. The second factor where respondents believe that other investment industry representatives can adequately represent their views has been viewed as a 'free- ride' by the research paper. It has therefore been concluded that the second factor also comes under the cost- factor where cost- effective measures are undertaken through others representing their views.
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The reviewed research paper has been found to be a valuable research contribution towards identifying the most popular method of lobbying and reasons for non- participation. Due to the rich findings of the research paper and limited scope of this essay, the author has maintained his focus on the implication of the method of lobbying, and reasons for non- participation. In order to further support the conclusions, the author of this essay also identifies the influential factor that motivates the firms to involve in the process of lobbying.
The interesting method of lobbying has been the revealed to be using comments letter lesser than making appeals to the respective bodies. The reasons for non- participation have been revealed as cost- issues that cannot be justified against the defined measures as a result of which, firms don't involve in the process. Another important reason for non- participation that emerged is saving cost on the basis of the fact that other representative can easily represent their views. Considering the fact that the process of lobbying influences the standard- setters, it has been argued that the non- participation issues should be sorted through lowering down the incurred cost of the process. Secondly, another significant question that arises here is that if lobbying is a costly process, then medium to small sized organisations can't contribute towards presenting their views, opinions and inputs, thus questioning the credibility of the set- standards. As an example as medium- sized organisation that aims to comply with an accounting standard can't be confident of experiencing the benefit outcomes because the standard didn't include its input.
Further questions that emerge upon reviewing the research paper are that a) while setting the standards, what is the extent of the proposed analysis of the auditors, b) when auditors advocate their clients (financial / investment institution) positions so that favourable relationships can be preserved, how would they explain their biased approach towards standard- settings? Thirdly, with these ambiguities in mind, the revision of accounting standards and cost of implementing the revised standard adds on to the operational cost, therefore what measures can be proposed by the legislative bodies to overcome this issue in order to reduce the compliance cost.
Conversely speaking, the aim of this essay is not to establish discussion in or against the process of lobbying nonetheless, the essay aims to lift those questions that have emerged in the author's mind upon reviewing the provided research paper.
This small- scaled research was carried out with an ambition of critically reviewing the research paper. The research was based upon secondary research data drawn from different research articles and academic books. There have been many limitations to this research study such as the data was provided by the secondary source presented more than a year ago, therefore the credibility of the analysis that has been presented, can be questioned. Secondly the research article has been presented by on author and not by group of people / organisation hence the data can be biased.
Further research possibilities that can be explored with in the same context are success and failure factors of organisational success as a result of compliance with specific accounting standards with in the context of outcomes of process of lobbying.