Interest group influence on the development of International Financial Reporting Standard (IFRS) 9, Financial Instruments

The International Accounting Standards Board (IASB) finalised its International Financial Reporting Standard (IFRS) 9 Financial Instruments project in July 2014. The project was significant, resulting in the replacement of the previous International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement with a new accounting standard that will be effective from January 2018. However, interest groups’ involvement in the development of the crucial IFRS 9 expected credit loss model from the release of its first proposal until the issue of its final proposal has not been studied. Redressing the research gap, this study investigates whether significant influence had been exerted by interest groups on the IASB during the development of all three expected credit loss model proposals of the IFRS 9 impairment phase. By conducting content analysis on 327 comment letters, this study did not find significant influence by any particular interest group across five out of the six key changes identified amongst the proposals (the 2009 exposure draft, 2011 supplementary document and 2013 exposure draft). Additional analysis conducted on the comment letters, the IASB expert advisory panel summary document and the two IASB outreach summary documents identified that interest group inputs had played an important role in shaping the proposed expected credit loss models, making them more operational, less complex and productive of more comparable financial information (within and across entities) than the preceding proposals. This study has important theoretical and practical implications.