Preparers' Lobbying Rationale and Impact on IASB Standard Setting: The Case of Lease Accounting

Abstract: This study models preparers' lobbying with respect to the IASB/FASB project on lease accounting, improving the methodology applied in prior studies. Therefore, we investigate (1) the lobbying rationale, divided in a) lobbying position and b) lobbying decision; and (2) the lobbying impact on the due process outcome. Through a content analysis of submitted comment letters, we determine preparers' lobbying positions on lessee accounting, which were pre-dominantly opposed to the Right-of-Use Model and the related Key Issues. Testing our developed hypotheses, we conduct both qualitative and quantitative analyses. Regarding the rationale of the lobbying position, results are not consistent with economic theory (Watts & Zimmerman 1979). Adverse economic consequences seemingly do not explain variations in preparers' lobbying position on lessee accounting to a substantial degree. Further, results indicate that firm attributes of power and healthiness, and past lobbying experience are crucial drivers of the lobbying decision. As previous studies (Hussein 1981; Kwok & Sharp 2006), we show that, although preparers do not dominate the due process, their lobbying activity has a significant influence on the due process outcome. We recommend future research on leases to include the re-exposure, lessor accounting and all constituents' submissions. In general, studies should continue to analyze two different levels of the lobbying position, devote attention to past lobbying, and refine proxies on the lobbying decision.