Stakeholder participation in the governmental accounting standard-setting process

Abstract

Purpose-Accounting standards are issued only after a comprehensive due process, which includes opportunities for external constituents to participate via public hearings and comment letters. The purpose of this paper is to identify stakeholders unique to government and evaluate the extent to which they respond to 13 due process documents issued by the Governmental Accounting Standards Board (GASB). The results provide insight into the comment letter element of due processwho participates, in what way do they participate, and why do they participate? Design/methodology/approach-Comment letters received by the GASB in response to eleven exposure drafts and three preliminary views (PV) documents from 2010-2013 were examined, and respondents were categorized according to Cheng's (1994) model as modified by Kidwell and Lowensohn (2011), resulting in the following 16 participant types: academics, budget officers, bureaucratic managers, state auditors/controllers, citizens, financial markets, elected officials, external auditors/CPA firms, finance officers, government accountants, government auditors, interest groups, media, professional associations, standard setters, and other governments. The authors next examined responses in favor of and opposed to for each document by group and responses by stakeholder group over time. Findings-The authors find that participants came from various stakeholder groups. Consistent with findings in different standard-setting environments, the primary financial statement preparersfinance officerswere the most frequent individual respondents; however, there was participation from a wide variety of stakeholders. Responses are generally constructive and relatively consistent in their balance of favorable and unfavorable feedback over time, with a few exceptions. Closer examination of comment letters in response to the financial projections PV document reveals both conceptual and practical considerations underlying respondent participation. Research limitations/implications-Motivations for participation were discerned from the letter content, but direct data on motivation was not measured, limiting the conclusions to apparent motivation. Future research might examine the extent to which comment letter content is incorporated into the basis of conclusions section of issued standards to assess the direct impact of comment letters on the governmental accounting standard-setting process. It would also be relevant to trace specific projects that advanced from a PV stage to the exposure draft stage to assess whether the proportional participation of these stakeholder groups is different throughout due process. Practical implications-The GASB has long been receptive to constituent feedback (Lowensohn, 2000) and can glean useful input from comment letters. By closely examining arguments impounded within comment letters, including conceptual and practical considerations, and by utilizing a more delineated understanding of the stakeholders in governmental accounting standard setting, the Board can be...

FASB's Not-for-Profit Financial Reporting Project: Analysis of Letters to ASU 2016-14 Exposure Draft

“…Therefore, an analysis for each constituent category is warranted. Recent studies have used the Durocher et al (2007) framework to analyze participation by financial analysts on IASB standard-setting (Allini et al 2018) and 16 participant types on GASB standard-setting (Kidwell and Lowensohn 2018). Our study examines the kind of response by the following seven types of respondents: (1) auditors, (2) college and university preparers, (3) healthcare organization preparers, (4) voluntary health and welfare organization preparers, (5) other NFP organization preparers, (6) individual and academic users, and (7) professional organizations.…”

“…Written submissions to the rule-makers are one way in which lobbying takes place. The analysis of comment letters to accounting standard-setting bodies is the most frequently used approach to examine attempts to influence the standard-setting process (e.g., Allini, Aria, Macchioni, and Zagaria 2018;Bline and Skekel 1991;Durocher and Fortin 2011;Durocher, Fortin, and Cote 2007;Georgiou 2002Georgiou , 2010Holder, Karim, Lin, and Woods 2013;Kidwell and Lowensohn 2018;Saemann 1999;Schalow 1995;Tandy and Wilburn 1996;Yen, Hirst, and Hopkins 2007). Sutton (1984) reasons that the cost/benefit calculation prompts the decision to lobby rule-makers.…”

“…They found that a majority of the respondents raised anticipated outcome-oriented effects and definitional arguments rather than theoretical concepts. More recently, studies have examined the comment letters to the IASB on international accounting standard-setting (Georgiou 2010), to the FASB and the IASB on accounting for contingencies (Holder et al 2013), and to GASB on exposure drafts and preliminary views documents affecting governments (Kidwell and Lowensohn (2018). ASU 2016-14 is the first significant change in financial reporting by NFP organizations in the last 25 years.…”

Going GAGAS for due process: examining Yellow Book standard participation

“…Public Company Accounting Oversight Board (PCAOB) and the Auditing Standards Board (ASB)), wherein the standard setter issues an exposure draft of proposed standards and solicits the views of its stakeholders. A relative dearth of empirical studies examines governmental sector accounting and audit standard setting (Kidwell and Lowensohn, 2018). The following study answers calls for researchers to further explore governmental audit standard setting and is the first to empirically investigate GAGAS due process standard setting (McEnroe and Martens, 1998; Zeff, 2003).…”

“…Prior research identifies stakeholder group participation as an important component of due process standard setting in the governmental sector (e.g. Kidwell and Lowensohn, 2018). The current study considers stakeholder group due process participation according to legitimacy theory, which assumes that an organization's survival depends upon its stakeholders perceiving it as legitimate.…”