International Firm Lobbying and ED 8 Operating Segments

Abstract

Exposure Draft 8 (ED 8) Operating Segments was introduced to replace the revised IAS 14 Segment Reporting and to align segment reporting requirements with their United States counterparts in SFAS 131. ED 8 proposed material changes in the identification, measurement and disclosure of corporate segment information. In response to the ED, there were 182 comment letters from various respondents including firms, professional associations, regulatory authorities and accounting firms. This paper investigates the influence of firm characteristics such as size, performance, and number of segments on firms’ lobbying position choices on ED 8. Results reveal that larger firms were more likely to lobby in favour of ED 8, and firms with two or fewer segments were more likely to lobby against ED 8. It also provides evidence that relatively profitable firms operating in an environment of low competition are less inclined to support ED 8.

The Impact of IFRS 8 on Segment Disclosure Practice: Panel Evidence from Italy

“…Generally speaking, our results seem consistent with a prior study on the ED IFRS 8 (Katselas et al, 2011), that revealed that larger firms, firms with more than three segments, and relatively profitable firms operating in an environment of high competition, were more likely to lobby in favor of ED 8.…”

“…Unlike the past, this allows managers complete freedom to identify reporting segments only on the basis of the company decision making process. In other words, the implementation of IFRS 8 has increased the managerial discretion both to define the operating segment and to define the extent and evaluation criteria of the segment information disclosure (Véron, 2007;Katselas and Kang, 2011).…”

Response of the EAA FRSC to the EFRAG/ANC/FRC Discussion Paper:Towards a Disclosure Framework for the Notes

“…Increases of required disclosures in a post-IFRS environment raise concerns related to proprietary costs. Katselas et al (2011) find that lobbying firms opposing the implementation of IFRS 8 Segment Reporting cited the threat of releasing sensitive information to the market (i.e. potential proprietary costs) as a disadvantage of the proposed standard.…”

Executive Remuneration: Achieving Accountability through Disclosure

“…In this sense, this setting differs from that found in prior studies that have generally considered lobbying arising in response to a single type of regulatory change, such as a change to accounting standards (Georgiou, 2004;Katselas et al, 2011;Stenka and Taylor, 2010).…”

“…Prior studies have generally considered lobbying arising in response to a single type of regulatory change (for example a change to accounting standards) (Georgiou, 2004;Katselas, Birt & Kang, 2011;Stenka & Taylor, 2010), and directed towards accounting standard setters (Walker & Robinson, 1993) whereas this study examines lobbying in response to the PC Inquiry whose recommendations had the potential to and ultimately did impact corporate reporting regulations at multiple levels. The recommendations were encapsulated in changes to accounting standards, corporate governance guidelines and corporations law.…”