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Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Contents lists available at ScienceDirect

Journal of International Accounting,


Auditing and Taxation

The nancing of the IASB: An analysis of donor diversity


Robert K. Larson a, , Sara York Kenny b
a
b

Department of Accounting, University of Dayton, Dayton, OH 937-229-2497, United States


IFRS Interpretations Committee, and Retired, International Finance Corporation, World Bank Group, United States

a r t i c l e

i n f o

Keywords:
International Accounting Standards Board
IASB
International Financial Reporting Standards
IFRS
Financing
Legitimacy

a b s t r a c t
The U.S. Securities and Exchange Commission (SEC) and others are concerned about the
funding of the International Accounting Standards Board (IASB), which is widely recognized
as the global accounting standard-setting organization. Issues raised include the long-term
viability and legitimacy of the IASB due to its historic reliance on voluntary donations, which
in turn has led to questions about the IASBs independence and whether donors to the IASB
might be able to exert undue inuence in the standard-setting process. These issues are
critical factors in the SECs analysis of the adoption of International Financial Reporting
Standards in the U.S. This exploratory study investigates these concerns by examining the
funding of the IASB with a focus on the characteristics of donors and their national and
stakeholder interest group diversity.
While the IASBs donor base is still relatively small and voluntary contributions from individual corporations and public accounting rms are still substantial, the ndings suggest
that many SEC concerns are being addressed. More permanent funding mechanisms are
being developed and more transparency of donors and the size of their contributions exist.
The IASBs donor base has expanded in both geographic and stakeholder interest group
diversity. No single entity or group appears to provide such a large amount of funding to
suggest undue inuence on the IASB. This holds for questions of undue geographic inuence, as donations by country are now signicantly correlated with measures of a countrys
economic and equity market size.
2010 Elsevier Inc. All rights reserved.

1. Introduction
The International Accounting Standards Board (IASB) is widely recognized as the leading global accounting standardsetting organization. Its International Financial Reporting Standards (IFRS) are accepted or mandated in more than 100
countries, including all of the European Union (EU) (Deloitte, 2010). In addition, other signicant markets, such as Brazil,
Canada, China, India, and Japan, are in the process of adopting IFRS. The U.S. Securities and Exchange Commission (SEC)
allows non-U.S. registrants to le nancial statements using IFRS without having to reconcile to U.S. Generally Accepted
Accounting Principles (GAAP). In addition, the SECs new Work Plan has a 2011 timeframe for deciding whether to require
or allow IFRS for U.S. registrants (SEC, 2010).
Despite widespread acceptance and use of IFRS, the IASB has been funded historically nearly entirely by voluntary contributions from stakeholders. The SECs 2008 Roadmap to IFRS and the 2010 Work Plan both list IASB funding as a major issue
the SEC will consider when deciding whether the U.S. should adopt IFRS (SEC, 2008, 2010). The EU states that stable and

Corresponding author.
E-mail address: Robert.larson@notes.udayton.edu (R.K. Larson).
1061-9518/$ see front matter 2010 Elsevier Inc. All rights reserved.
doi:10.1016/j.intaccaudtax.2010.12.003

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

secure nancing must be ensured in order for the IASB to fulll its function (EU, 2006). As the EU Commissioner for Internal
Market and Services stated, the IASB desperately needs more stable, predictable nancing (McCreevy, 2005a). Though former SEC Chief Accountant Nicolaisen (2005) noted that the IASB needs to work without undue funding pressures, others
question how the funding requirements will be achieved (Dzinkowski, 2007).
This paper does not seek to suggest future funding sources or structures but rather investigates how the IASB has been
funded to date. Given the relative short tenure of the IASB, we also provide context by commenting briey on the nancing
of the IASBs predecessor organization, the International Accounting Standards Committee (IASC).
We set our analysis in the context of organizational legitimacy, which can be dened as the acceptance of an organization
by its environment, noting that such acceptance is frequently viewed as vital for organizational survival and success (Kostova
& Zaheer, 1999; Meyer & Rowan, 1991). Organizational legitimacy may be assessed by analyzing an organizations sources
and access to redundant funding. Legitimate organizations gain access to resources. Firms which are not found to be
acceptable have limited or no access to necessary resources, and so their existence is threatened (Zimmerman, 1998, p.
12).
Authors have noted that the IASC struggled to gain acceptance and legitimacy as an organization, partially as a result of
its limited nancial resources (Camfferman & Zeff, 2007; Kirsch, 2006; McGregor, 1999). We do not dispute their assertions
but rather seek to analyze the extent to which stakeholders chose to legitimize the IASC and IASB by making nancial
contributions, recognizing that such contributions were entirely voluntary.
The SEC (2010) requires an independent functioning IASB before the U.S. adopts IFRS. The SEC (2010) and some stakeholders are concerned that the IASB has received political pressure to make or change certain accounting standards in
recent years (Luthardt & Zimmermann, 2009; Walton, 2004; Zeff, 2008). There is at some anxiety that money may inuence
outcomes preferential to the interests of donors. Therefore, we analyze the relative contributions of various stakeholder
groups to determine if evidence exists to suggest that one group might be in a position to assert undue inuence over the
standard-setting process.
The nature of the nancial support of the IASB and the IASC has not been investigated in the academic literature. Our
exploratory study analyses IASC nancial contributors from 1990 to 1999 and IASB donors during its rst eight years of
operation from 2001 to 2008. The SEC (2010) notes the importance of transparent funding for the IASB, something which
greatly improved by 2008. But with few exceptions until 2007, the actual amounts contributed by a donor are not disclosed,
although the IASB identies its larger donors and the general size of their gifts. Thus, our study investigates primarily the
number of donors with respect to stakeholder groups rather than actual amounts contributed by each donor.
The total number of donors increased over time from 127 in 19901994 to 425 in 2008. Corporations dominated all
periods, and averaged almost 80% of all donors. Most corporate donors through 2006 are large, listed on a domestic stock
exchange, and listed in the U.S. While public accounting rms, nancial and nonnancial corporations, stock exchanges,
and, since 2001, central banks are regular donors, few from other stakeholder interest groups, such as nancial analysts
and professional accountancy bodies, ever contribute. Overall, the large increase in donors supports the idea that the IASC
and IASB increased their legitimacy over time. Surprisingly, while the IASB in 2008 had more donors than in any prior year,
donors provided less money in 2008 than in 2001 and the IASB had decits from 2005 to 2008.
Most IASC donors were from Australia, France, Germany, the Netherlands, the U.K., and the U.S., and were mostly from
the EU and Anglo-American.1 The geographic diversity of donors increased dramatically with the creation of the IASB. IASB
donors come from 40 countries, and in 2008, two-thirds of donors were from Germany and Japan. However, many countries,
including a large number that have adopted IFRS, still have few or no IASB donors.
Actual donations for 2008 provide a different perspective, as major donors are the large public accounting rms (33%),
Anglo-Americans (26%), the EU (25%), the U.S. (15%), and Japan (12%). Each Big 4 accounting rm has pledged to donate U.S.$
2,000,000 per year for the next several years, which when combined is about 25% of the IASBs goal for annual contributions.
If the Big 4 are considered Anglo-American, then Anglo-Americans gave most of the 2008 IASB contributions. Overall, the
IASBs donor base has grown in geographic and stakeholder interest group diversity, and regardless of how the Big 4 is
categorized, 2008 actual country donations are highly and signicantly correlated with Gross Domestic Product (GDP) and
domestic equity market capitalization.
The study contributes to our understanding of past and recent funding of global accounting standards. This knowledge
is important since the SEC states explicitly that its decision whether or not to require use of IFRS in the U.S. in part depends
on its analysis of the funding of the IASB as the SEC wants IFRS standard setting that is accountable, independent, and free
from undue inuence that could affect the ability of U.S. investors to receive full, fair, and reliable disclosure (SEC, 2010, p.
19).
The remainder of the paper is organized as follows. The next section provides background information regarding the
nancing of global accounting standards. Then legitimacy theory and the motivation for donations are discussed. This is
followed by the research questions, sample and methodology, results, and conclusion.

1
In line with common usage, this study considers Anglo-American countries to include Australia, Canada, New Zealand, the U.S., and two EU members
Ireland and the U.K.

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Table 1
Income and donations for the IASC and IASB.
Panel A. Income and donations for the IASC 1988 through 2000 (in thousands of U.K.).
Year

Board
donations

IFAC
donations

Other
donations

Interest
and other*

Net from
publications

Total
income

Total
expenses

Surplus (decit)

1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000

316
338
359
388
484
504
522
555
631
653
674
694
715

35
38
40
43
54
56
58
60
70
72
75
77
80

0
3
142
219
280
306
296
284
932
742
820
663
134

18
23
36
28
46
13
14
129
190
149
167
177
161

10
33
27
84
123
267
407
294
384
588
884
1026
1111

379
435
604
762
987
1146
1297
1322
2207
2204
2620
2637
2201

381
419
550
815
975
1153
1205
1259
1823
2017
2102
2068
3099

(2)
16
54
(53)
12
(7)
92
63
384
187
518
569
(898)

Panel B. Income and donations for the IASB 2001 through 2008 (in thousands of U.K.)
Year
2001
2002
2003
2004
2005
2006
2007
2008

Donations
12,830
11,675
9680
9318
9374
10,382
11,277
12,747

Other
income

Net from
publications

Interest
income

54
24
22
46
27
25
61
41

1291
1053
1559
1230
1761
2136
2369
3345

206
278
348
460
534
568
595
553

Total
income

Total
expenses

Other

Surplus
(decit)

14,381
13,030
11,609
11,054
11,696
13,111
14,302
16,686

8761
10,743
11,380
11,966
12,024
13,533
14,513
16,158

103
1210
1261
1275
248
111
1
2275

5517
3497
1490
363
576
311
212
1747

Source: Panel A is adapted from Kirsch (2006) and Camfferman and Zeff (2007). Panel B is from IASCF Annual Reports (available at www.iasb.org).
*
Interest and other was mostly interest (after tax) and a large continuing World Bank donation to support the Agriculture Project started in 1995.

2. The nancing of global accounting standards


Until 1990, the IASC was almost entirely funded by the International Federation of Accountants (IFAC) and the organizations on its board, including professional accountancy bodies, public accounting rms, and multinational corporations (IASC,
1990). IASC board members were required to donate money, or have someone donate money on their behalf, in order to be
members of the IASC board (Kirsch, 2006). To increase its funding and gain further legitimacy, the IASC began in the early
1990s to solicit donations from a wider variety of organizations, including accountancy rms, corporations, professional
accountancy bodies, and international development organizations (IASC, 1992, 1994a). Fundraising efforts aimed at many
of these groups increased considerably after 2000.
While avoiding discussion of specic contributors, Kirsch (2006) describes in great detail the efforts made to secure more
funding so that the IASC could be made a more viable standard-setting body. While it made signicant efforts to increase
nancial contributions, the IASC was in a constant struggle to obtain continued annual donations (Kirsch, 2006). Table 1,
Panel A shows how IASC funds increased through 1999. The signicant drop in donations in 2000 was due to a conscious
decision not to raise funds for the IASC during the transition to the IASB.
While IASC revenue and expenses increased dramatically during the 1990s, the organizations budget was quite small
when compared to that of major national accounting standard-setters. For example, in 1995 the IASC budget was U.K.1.25
million, compared with U.K.2.25 million for the U.K. Accounting Standards Board and U.K.9.8 million for the U.S. Financial
Accounting Standards Board (FASB) (Camfferman & Zeff, 2007). The IASCs small budget restricted staff hiring, payment for
research assistance, and the number of meetings it held with experts from around the world, which limited its ability to
accomplish all of its goals.
With the establishment of the IASB, the IASC Foundation (IASCF) was given the task of raising money to pay for the
operating expenses of the IASB. Until 2007, the IASCF raised most of its money through voluntary contributions from the major
accounting rms, private nancial institutions and industrial companies throughout the world, central and development
banks, and other international and professional organizations. A major problem was that these donations were all voluntary,
which raised questions about the IASBs nancial stability, its ability to meet its standard-setting objectives, and possible
undue inuence and political pressure (SEC, 2010).
In 2007, the IASCF began work to switch from directly receiving voluntary (primarily corporate) donations to a system of
national levies where a national organization collects and forwards contributions from corporations and other organizations
in a particular country. At the same time, the IASCF continued to work to increase voluntary donations from corporations
and others in countries without a formal levy system. The IASCF goal in 2008 was to start raising U.K.16 million annually,

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

which is similar to the FASBs 2008 budget of U.S.$31 million. While major strides have been made, the goal is yet to be met.
Several countries either have not yet agreed to contribute or have made only short-term commitments. Mandatory levies
on corporations are being implemented or considered in several countries. Some countries, including the U.S., continue to
provide only voluntary contributions. What has not materialized is the January 2009 EU suggestion that it might provide
the IASCF D 5 million annually in 2011, 2012, and 2013 (EC, 2009).
3. Legitimacy theory and the motivation for donations
3.1. Legitimacy
Legitimacy is a crucial concept in institutional theory (Deephouse, 1996) and is the result of a positive judgment by
individuals and organizations in a society of the appropriateness of an organization (Zimmerman, 1998). Legitimacy enhances
the stability and comprehensibility of an organization (Suchman, 1995). Organizations that have achieved legitimacy are
perceived as more worthy, more meaningful, more predictable, and more trustworthy.
Institutional support of powerful external actors is often critical for new organizations (Starr & MacMillan, 1990) and
organizations work for legitimacy by becoming and/or remaining acceptable to their environment (Meyer & Rowan, 1991;
Meyer & Scott, 1992; Oliver, 1990). Thus, organizations need to continuously monitor their constituencies in order to adjust
their operations so as to accommodate outside demands.
The application of legitimacy and institutional theory is well-documented in research related to accounting standardsetting bodies, e.g. Johnson and Solomons (1984), Wallace (1990), Fogarty, Ketz, and Hussein (1992), Fogarty (1992), Larson
(2002), Durocher, Fortin, and Cote (2007), and Chua and Taylor (2008). However, to date, legitimacy and institutional theory
have been most frequently applied in the context of comment letter submissions. Legitimacy also might be judged by whether
companies voluntarily use IFRS or whether countries require or permit IFRS. We argue that constituents also legitimize
organizations by making nancial contributions to organizations that they deem to be signicant and/or important.
3.2. Pragmatic legitimacy
Durocher et al. (2007) and Larson (2002) apply the three primary forms of legitimacy as identied by Suchman (1995)
to the accounting standard-setting process. The rst primary form, pragmatic legitimacy, is relevant here as it considers the
self-interest of an organizations stakeholders (interested parties). This form is important since there is concern that stakeholders may attempt to exert pressure on the IASB in order to obtain desired accounting standards (Botzem & Quack, 2009;
Hughes, 2008; Zeff, 2008). Pragmatic legitimacy is seen as having three parts: exchange legitimacy, inuence legitimacy,
and dispositional legitimacy.
Exchange legitimacy suggests that constituents will support an organization and its policies, such as accounting standards,
when those standards are in the self-interest of the constituent. Durocher et al. (2007) suggest that if a standard-setter is seen
as acting in the constituents self-interest, then that constituent would participate more in the standard-setting process. By
extension, with exchange legitimacy, a stakeholder might be more likely to make nancial contributions to a standard-setter
if it is seen as acting in the stakeholders self-interest.
Inuence legitimacy is granted by constituent groups when an organization incorporates some of these groups representatives into their decision-making structures. Durocher et al. (2007) suggest that inuence legitimacy can link the
instrumental dimension of power of the standard-setting process with a constituents perceived value of participating. This
relates to the perceptions a constituent has in regard to any comparative source of power or strategy used to mobilize
power that insures (an organizations) responsiveness (Durocher et al., 2007, p. 38). Inuence legitimacy suggests that
a constituents level of participation in the accounting standard-setting process relates to its perception of being able to
inuence the content of the nal standards (Durocher et al., 2007, p. 38). This could be extended to suggest that donations
might relate to stakeholders perceptions of being able to inuence accounting standards.
Dispositional legitimacy is granted by constituents to an accounting standard-setter that shares the groups values or
has its best interests at heart (Durocher et al., 2007, p. 38). This form is the most altruistic form of pragmatic legitimacy.
If the standard-setter is seen as taking the needs of the constituent into consideration when making decisions regarding
accounting standards, then that constituent will participate more in the standard-setting due process. This may be extended
to suggest that the constituent also might be more likely to nancially support the standard-setter.
3.3. Motivation for donations
While the need to nance the IASB is clearly understood, the motivation for donors to contribute money is much
more difcult to ascertain. Some stakeholders and observers are concerned that the IASB has been and will increasingly
be under political pressure to conform to the desires of certain stakeholders and interest groups (Benston, Bromwich, Litan,
& Wagenhofer, 2006; Buttell, 2009; Kessler, 2008; Luthardt & Zimmermann, 2009; NASBA, 2009; SEC, 2010; Walton, 2004;
Whittington, 2005; Zeff, 2008). In most political processes, there is at least some anxiety that money may inuence outcomes
in a way that is preferential to the interests of the donors. It is important to know that the independent standard setter is
not inuenced by signicant contributors (Roberts, Weetman, & Gordon, 2008).

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The IASC stated that each contributor is regularly contacted in order to provide input on the issues and principles being
considered in current projects (IASC, 1994b, p. 2). While that statement simply denoted that the IASC desired regular input
from its constituents, some ask why an organization would give money if it did not imagine that there would be some
benet to itself from the contribution (Singleton-Green, 2002).
Others hypothesize that donors might withhold gifts if the IASB adopted rules they oppose, so that while the IASB has
inuence legitimacy, it does not enjoy full legitimacy because stakeholders may refuse to provide nancial support. As
a side note, this same concern was also expressed in the U.S. during the period when the FASB was funded by voluntary
contributions (Miller, Redding, & Bahnson, 1998). Former SEC Chief Accountant Nicolaisen (2005) notes that the IASB should
have an assured source of funding so that necessary but unpopular projects do not undermine its viability (Nicolaisen, 2005).
A key EU ofcial noted that the IASBs funding system in the early 2000s raises potential issues of conict of interest
(McCreevy, 2005b). In order to avoid any perceptions of conict of interest and secure long-term funding, different nancing
proposals exist. The SEC has directed its staff to analyze possible funding mechanisms to provide the U.S.-based contribution
(SEC, 2010, p. 16). Singleton-Green (2002) wants unimpeachable sources, such as national securities regulators, to fund
the IASB. The EU (2006, 2007) desires balanced contributions by a broad-base of market participants where no specic group
is dominant. Miller and Bahnson (2009) advocate that fees should be paid on security transactions by users in order to fund
the IASB or other independent accounting standard-setters.
Overall, many are concerned about how the IASB supports its operations. While the IASB desires to increase its legitimacy
by increasing its level of nancial support, it also wishes to minimize perceptions of inuence on it by donors. Determining
the actual motivation for donations is beyond the scope of this study. However, our analysis examines the diversity of donors
in order to explore the validity of some concerns regarding possible undue inuence.

4. Research questions
The IASB, the EU (2006, 2007), and others agree that donations to fund the IASB should be from a wide range of stakeholder
interest groups as well as different countries and regions. While many have commented upon perceived problems with the
current funding mechanisms or have suggested potential solutions, no study has done an in-depth empirical investigation
on the actual donors to the IASC and IASB. Our study investigates the historical funding structure and nancial sources of
the IASC and IASB. We analyze donor characteristics and changes in donation patterns over time.

4.1. Major stakeholder interest groups of the IASC and IASB


A number of stakeholders, or constituents, could reasonably be expected to become involved with the IASC and the IASB.
In its early years, the IASC had to develop stakeholders, create its brand, and then market itself as the international accounting product. In working to establish its legitimacy, the IASC interacted with a variety of stakeholders. Key stakeholders
previously identied include public accounting rms, professional accountancy bodies, corporations, regulators, and users
(Botzem & Quack, 2009; IASCF, 2005; Jorissen, Lybaert, & Van de Poel, 2006; Kenny & Larson, 1995; Kwok, 1999; Larson,
2002, 2007; Nicolaisen, 2005; Wallace, 1990). Following Kwok (1999) and Larson (2007), stakeholder interest groups in this
study are divided into the accounting profession (professional accountancy bodies and public accounting rms), regulators
(national accounting standard-setters, stock exchanges, central banks, and government regulators (such as the SEC)), preparers (non-nancial corporations and their trade associations), users (nancial institutions, their trade associations, and
nancial analysts), and others.

4.1.1. Large public accounting rms


Large public accounting rms have strongly supported the work of the IASC and the IASB for many years. They have
sought the development of a single set of high quality internationally applicable accounting standards around which all
national accounting standards could harmonize. Suggested reasons for doing so include enhancing their own prestige as
experts, strengthening their competitive advantage over local national rms, reducing their training costs, increasing the
demand for their audit and advisory services during IFRS adoption, and maintaining private control over the accounting
standard-setting process (Chandler, 1992; Chua & Taylor, 2008; Miller & Bahnson, 2009; Selling, 2008; Taylor, 1987). Wallace
(1990) and the IASC (1992) noted that accounting rms sought to inuence the IASC, and studies document that most large
accounting rms regularly write comment letters to the IASC and the IASB and are more likely to do so than smaller or
national rms (Kenny & Larson, 1995; Larson, 2002, 2007). Cooper and Robson (2006) argue that the large accounting rms
are increasingly important in regulatory processes and have not received the attention they warrant.
Minter (2007) and Botzem and Quack (2009) are concerned about the nancial inuence of accounting rms over the
IASB. In regards to the IASC, Botzem and Quack (2009) assert that the global auditing rms had a dominant position. Minter
(2007) is concerned that with much of the IASBs current funding coming from public accounting rms, the same question
of independence that led to SOX (the Sarbanes-Oxley Act) arises here. These issues lead to our rst research question:
Research Question 1 (RQ1): Over time, did professional accountancy rms donate more to the IASC and IASB?

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

4.1.2. Large corporations


Since the preparation of nancial statements is a costly activity, corporations are directly impacted by the activities
of accounting standard-setters. Therefore, we view corporations as a major stakeholder group. Given the importance the
market places on accounting information, one would expect corporations to favor harmonized global accounting standards
to level the playing eld vis a vis other corporations in the same industry. Therefore, we expect corporations to be actively
engaged in the standard-setting process and legitimize the standard-setter by following the prescribed accounting standards,
providing comment letters, and perhaps even making contributions to the standard-setter (Durocher et al., 2007; Elbannan
& McKinley, 2006; Georgiou, 2005; Watts & Zimmerman, 1986).
Concern has been expressed that contributions from large corporations may not be in the public interest. U.S. politicians
note that the IASB could be vulnerable to inuence-buying by big business (Cameron, 2002), and Singleton-Green (2002)
lamented that the IASB should not be nanced via corporate sponsorship. This apprehension may in part relate to the
IASCFs solicitation of a donation from Enron. Enron agreed to donate $250,000, although it never gave the IASCF any funds.
A controversy erupted over a memo showing that Enrons chief accountant was interested in determining what kind of
inuence a gift to the IASCF would buy Enron (Singleton-Green, 2002; Taub, 2002). The IASCF trustees were told later
that the controversy over IASB solicitations to Enron may have deterred some potential donors from making contributions
(Cameron, 2002). Since there is still concern that the IASB depends on corporate contributions (Miller & Bahnson, 2009), this
leads to the next research question:
Research Question 2 (RQ2): Over time, did corporations donate more to the IASC and IASB?
Studies examining corporations comment letters to the IASC or IASB nd that the corporations are quite large (Jorissen
et al., 2006; Larson, 1997, 2007). Larson (1997) found that 78% of non-U.S. corporations that wrote comment letters to the IASC
had equity issues traded in the U.S., and that in most countries responders were larger than non-responding corporations.
Given that concerns over corporate giving appear heightened when large, multinational corporations are donors and given
the characteristics of corporate comment letter writers, the next research question explores the size and U.S. stock exchange
listings of corporate donors.
Research Question 2A (RQ2A): What were the characteristics of the corporations that donated to the IASC and IASB in
regards to size and stock exchange listings in the U.S.?
4.1.3. Other stakeholder interest groups
Professional accountancy bodies consistently supported the IASC (Wallace, 1990). During the tenure of the IASC, professional accountancy societies were members of the IASC. In addition, they frequently wrote comment letters to the IASC and
the IASB (Kenny & Larson, 1995; Larson, 2002, 2007).
Financial analysts and other users also should benet from convergence (Durocher et al., 2007; Kwok, 1999). Increased
comparability of nancial reports should facilitate and lower the cost of international nancial statement analysis and lead
to the more efcient allocation of investment capital. Besides actual Board membership and writing comment letters, users
and others could support convergence through the donation of money. These lead to our third research question:
Research Question 3 (RQ3): Over time, did other stakeholder interest groups donate more to the IASC and IASB?
4.2. Major geographic stakeholders of the IASC and IASB
In addition, we analyze donors by country and region. The IASB notes that it can gain acceptability and legitimacy from
constituents only if it is recognized as the global standard-setter in all geographic regions (IASCF, 2005; Nicolaisen, 2005;
Schaub, 2005; Tweedie & Seidenstein, 2005). Prior research nds that involvement with the IASC and IASB varies signicantly
by geographic location (Jorissen et al., 2006; Larson, 2002, 2007; Wallace, 1993). Assuming that part of the IASBs legitimacy
depends upon the nancial support of constituents from all geographic areas, four research questions investigate various
geographic constituencies contributions to the IASC and IASB.
4.2.1. EU participation
Many stakeholders in the EU desire a larger role in shaping IFRS (Bolton, 2005; Christodoulou, 2009; ECIMSDG, 2008;
Reilly, 2005; Seib & Jagger, 2008; Veron, 2007; Walton, 2004). EU stakeholders write a majority of the comment letters to
the IASB and the IASBs International Financial Reporting Interpretations Committee (IFRIC) (Jorissen et al., 2006; Larson,
2007). It was noted widely that strong pressure was applied successfully in October 2008 by French President Sarkozy,
German Chancellor Merkel, British Prime Minister Gordon Brown, and others in the EU to have the IASB make changes in
their standards regarding nancial instruments (Hughes, 2008; Seib & Jagger, 2008). While the EU itself continues to make
its desires known on a variety of issues, IASB Chair Tweedie recently stated that we cannot always allow Europe to tell us
what to do. . . We are the IASB, not the European accounting standards board (Reuters, 2010).
The EC also noted that Member States want to have an in depth reection on the standard-setting process (ECIMSDG,
2008). Conversely, Walton (2009) surmises that many EU constituents believe that they have little inuence in standardsetting.

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

In the future, the EU may provide the IASCF with a relatively large amount of funding. However, as EU Commissioner for
Internal Market and Services McCreevy (2009) noted, the idea is that the funding we provide would be conditional upon
further concrete improvements in governance. Many observers suggest that this relates directly to the many EU statements
desiring greater input and control of the IASB. The EU, however, has refused to sign and formally join the IASB Monitoring
Board that the EU helped initiate. Questions surrounding EU interaction with the IASB lead to the fourth research question:
Research Question 4 (RQ4): Over time, did stakeholders residing in the EU donate more to the IASC and IASB?
4.2.2. Anglo-American participation
Anglo-American interests have been active with the IASC and IASB for many years (Camfferman & Zeff, 2007; Kirsch, 2006;
Luthardt & Zimmermann, 2009). Larson (1997) found that three Anglo-American countries provided most IASC comment
letters from corporations: Australia (11% of total), U.K. (15%), and the U.S. (42%). The G4 + 1, composed of Board members
and senior staff from accounting standard-setting bodies in the Australia, Canada, New Zealand, the U.K., and the U.S., was
seen as a highly inuential group during the later years of the IASC (Howieson, 2009; Street, 2005). Jorissen et al. (2006)
nds three Anglo-American countries providing half of all IASB corporate comment letters during the period from 2002 to
2005: Australia (10% of total), U.K. (31%), and the U.S. (9%). More recently, Botzem and Quack (2009) strongly suggest that an
Anglo-American coalition has been successful and has managed to ensure its inuence through the IASCs transformation
into the IASB.
Research Question 5 (RQ5): Over time, did stakeholders residing in Anglo-American countries donate more to the IASC
and IASB?
4.2.3. Other stakeholder interest groups and relative amounts of donations
The IASCF, the EU, and others advocate that the funding of the IASB should include donations from areas worldwide.
Some have suggested that the amount of donations should roughly align with a countrys stock market capitalization. More
recently, the IASCF forwarded the notion that funds generally should reect a countrys GDP (IASB, 2010). Funding roughly
proportionate to either of these measures would tend to support the notion that no country or geographic region has undue
inuence due to its contributions.
Research Question 6 (RQ6): Over time, did non-EU and non-Anglo-American stakeholders donate more to the IASC
and IASB?
Research Question 6A (RQ6A): To what extent did donations to the IASB correspond to a countrys GDP or Equity
Market Capitalization?
4.3. Major IASB donors and comment letter writing
Durocher et al. (2007) extends all three parts of pragmatic legitimacy to suggest that for a variety of reasons, constituents
may write comment letters. We extend that notion to suggest that stakeholders may donate to the IASB. Luthardt and
Zimmermann (2009, p. 82) note concerns that successful lobbying of the IASB increases with the nancial contribution
made towards the IASB. Or, constituents may simply use both methods to further increase an organizations legitimacy. We
investigate whether major IASB donors also frequently write comment letters.
Research Question 7 (RQ7): Do major IASB donors frequently write comment letters?
5. Sample and methodology
Our analysis of IASC donors begins with 1990, when the IASC adopted a more aggressive donation solicitation strategy
targeting the business community, and ends in 1999, at which time the IASC started the transition into the IASB. The year
2000 was excluded because fundraising efforts that year focused on obtaining commitments for donations to the IASB that
would actually be contributed beginning in 2001. We continue our analysis with the rst eight years of the IASBs existence,
2001 through 2008.
Most donor data was obtained from IASC and IASB publications, such as the IASCs Annual Reviews and the IASCFs Annual
Reports. The IASCF reports and comment letters to the IASB and the IFRIC were obtained from the IASB website. The IASC
provided additional information on donors domiciles for the 1997 and 1998 data. Except for that information, all data
sources used are publicly available or available via subscription.
Before 2007, the IASC and IASB provided few details about amounts given by specic organizations, and some donors
remain anonymous. An exception was the general size of gifts by most IASB donors from 2001 to 2005. Thus, the analysis
focuses primarily on who donates without regard to donation size. Mandatory donations by IASC Board members were not
included in the analysis.
Because donors had quite diverse characteristics and were from over three dozen countries, many different sources
were used to classify them properly. Data about donors and their characteristics was obtained primarily from corporate and organization websites, Hoovers Online, and Forbes. This search was supplemented with information on

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Table 2
Number of donations to IASC and IASB by different stakeholder interest groups.
Stakeholder
groups

IASCa

IASB

19901994

19951999

20012005

2006

No.

No.

No.

No.

2007
%

No.

2008
%

No.

Accounting profession
Accounting professional bodies
Public accounting rms
Total actg profession

1
14
15

1%
11%
12%

3
13
16

2%
6%
8%

1
13
14

6%
6%

1
11
12

4%
4%

1
15
16

4%
4%

1
18
19

4%
4%

Regulators
Accounting standard setters
Stock exchangesb
Govt entities and central banks
Total regulators

1%

1%

7
1
8

3%
1%
4%

1
9
32
42

4%
15%
19%

1
7
25
33

3%
9%
12%

4
7
22
33

1%
2%
6%
9%

5
10
28
43

1%
2%
7%
10%

Preparers
Listed non-nancial corporations
Other non-nancial service businessesc
Business trade associations
Total preparers

87
2
1
90

68%
2%
1%
71%

130

2
132

63%

1%
64%

105

5
110

46%

2%
48%

180
1
2
183

63%

1%
64%

266
9
3
278

68%
2%
1%
71%

287
10
3
300

68%
2%
1%
71%

Users
Financial service listed corporations
Other nancial service businessesc
Financial trade associations
Analyst organizations
Total users

20

20

16%

16%

42

2
1
45

20%

1%
1%
22%

49
2
6
2
59

21%
1%
3%
1%
26%

45
1
5
2
53

16%

2%
1%
19%

54
2
5
2
63

14%

1%
1%
16%

45
9
7
2
63

11%
2%
2%

15%

1
127

100%

4
1
206

2%

100%

228

1%

100%

283

1%

100%

2
1
393

100%

425

100%

Others
Intl development organizations
Other
Total responses
a

Does not include donations by IFAC or those required by IASC board members during the 1990s.
By 2008 many stock exchanges had demutualized and became for-prot listed nancial corporations, but are still listed here separately and not as
users.
c
Includes private (non-listed) businesses, government owned businesses, mutuals, and cooperatives.
b

lesser known corporate donors from the Directory of Corporate Afliation, Dow Jones Retrieval, LEXIS/NEXIS, Moodys,
and Worldscope. The Bank of New York website provided information on ADR listings. Stock market capitalization
data was obtained from the World Federation of Exchanges. The World Banks measures were used for national
GDP.
Donations from subsidiaries were considered to be from the parent corporation and from the country of the parent rm
unless the subsidiary was listed separately on a stock exchange. For corporate analysis, four panels were developed. Since
IASC donors varied considerably each year, they were divided into two ve-year panels (19901994, 19951999). An IASC
donor was included if it gave at least once during a period, and a corporate donor was included in the quantitative analysis
if it was large enough to be included in the Forbes Foreign 500 (U.S. rms had to be of similar size) and if the corporate entity
still existed (corporate nancial data from the last year of each panel was used). Use of this source is consistent with Larson
(1997) and Jorissen et al. (2006) and allows for more direct comparisons between the characteristics of corporate donors
and corporate comment letter writers. The IASB panel for 20012005 was essentially stable as the vast majority of donors
made ve-year commitments.
6. Results
6.1. Total number of donors to IASC and IASB
Overall, the total number of donors increased in each period examined. The number grew from 127 in 19901994 to 206
in 19951999 for the IASC, and for the IASB from 228 in 20012005 to 283 in 2006, 393 in 2007, and 425 in 2008 (see Table 2).
The high percentage increases over time support the notion that the IASC and IASB increased their legitimacy during the
study period. The total number of contributors, however, is still relatively small. In addition, many changes occurred over
time in the patterns of giving by different stakeholder interest groups and countries.
While donors were still relatively few in number, the IASC was more successful in its nancial appeals during the later
1990s. While non-board donations averaged about U.K.250,000 per year during 19901994, non-board donations averaged
almost U.K.700,000 per year during 19951999.
The low level of nancial participation by some stakeholder interest groups and those in certain countries supports
concerns that the IASC did not achieve its desired level of legitimacy. It may also support notions that the IASC might have

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

been perceived as too closely tied with the accounting profession or some other organizations (Kirsch, 2006; Morris & Ward,
1999).
6.2. Participation by professional accountancy rms
In all study periods, between 11 and 18 different public accounting rms donated money (see Table 2). Public accounting
rms accounted for 11% of all contributors from 1990 to 1994, but thereafter were only four to six percent of donors as the
total number of donors increased.
In terms of the actual amounts of contributions, a more signicant role emerges for public accounting rms. The limited
data released by the IASC indicates that large public accounting rms gave larger gifts to the IASC than most other (mostly
corporate) donors.2 The actual amount of contributions by donors has become increasingly transparent under the IASCF.
The Big 5 accounting rms each donated $1,000,000 per year from 2001 to 2003. The Big 4 each gave $1,000,000 per
year in 2004 and 2005, $1,500,000 per year in 2006 and 2007, and $2,000,000 in 2008. These large public accounting rms
provided about 2025% of the IASBs donations for 20012005, 29% in 2006 and 2007, and 33% in 2008.3 As in the early years
of the IASC, the IASB depends heavily upon nancial support from the largest public accounting rms. In regards to research
question 1, we nd that a relatively steady number of public accounting rms nancially supported the IASC and IASB, but
that their annual gifts to the IASB increased substantially both in total amount and as a percentage of total donations in 2006
through 2008.
6.3. IASC corporate donors and their characteristics
During the 1990s, corporations were the dominant contributors to the IASC, being 83% or 84% of all donors (see Table 2).
Both the number and total amount of corporate gifts also rose during that period. Non-nancial corporate donors increased
from 87 (68%) in the early 1990s to 130 (63%) in the late 1990s. Financial service corporations, mostly banks and insurance
companies, grew from 20 donors (16%) in the early 1990s to 42 (20%) in the late 1990s.
Corporate donors in the 1990s were large, with 60% listed on the Forbes Foreign 500 or being U.S. rms of similar size (see
Table 3). Of rms on the Forbes Foreign 500 and U.S. rms of similar size, donor rms were generally larger than non-donor
rms and had a greater tendency to be listed in the U.S. (although the small numbers in the country level panel analyses
limit ndings of statistical signicance). For 19901994, signicant differences (at .01 or .05 using the MannWhitney U
test) for at least one size measure existed for Canada, the U.K., and the U.S., and for 19951999, this occurred for Germany,
Switzerland, the U.K., and the U.S. Most U.S. corporate donors were listed on at least one foreign stock exchange in addition
to a U.S. stock exchange. Most non-U.S. corporate donors were listed on at least one foreign stock exchange and/or had ADRs
traded in the U.S. Cross listing also was a characteristic of many smaller corporate contributors not reected in Table 3,
particularly those from Australia, the Netherlands, New Zealand, Switzerland, and the U.K.
While country diversity is discussed later, there is a noticeable absence of IASC donations by corporations in the 1990s
from several countries, including Japan and Spain. For example, only one Japanese corporation ever donated to the IASC.
This nding is not totally unexpected as prior research found that Japanese corporations rarely wrote comment letters to
the IASC (Larson, 1997). Also, Spain was the only country with more than 2% of global stock market capitalization in 1999
that did not have a single IASC donor in the 1990s.
6.4. IASB corporate donors, and their characteristics
To increase the nancial stability of the new IASB and to raise funds rapidly, before the IASB began operations the
IASCF requested donations from central banks, international organizations, and nearly 450 of the worlds largest companies,
representing a broad range of industries, countries, and ofcial institutions (Volcker, 2002). While public accounting rms
could donate more, a corporation could give no more than $200,000 annually. Companies were asked to pledge $100,000
per year for ve years (Singleton-Green, 2002), and 35 companies made ve year commitments of between $100,000 and
$200,000 per year. The total amount donated from 2001 through 2008 increased markedly over the amount donated between
1990 and 1999, and ranged from just over U.K.9 million in 2004 and 2005 to almost U.K.13 million in 2001 and 2008 (see
Table 1). Donor characteristics changed again in 2006 as the IASCF began to develop alternative funding mechanisms and
approached new potential donors.
Non-nancial corporate donors dropped from 63% of donors (130) in the late 1990s to 46% (105) in the early 2000s, but
increased to 63% (180) in 2006, and to 68% for both 2007 and 2008 (266 and 287, respectively). Between 45 and 54 nancial
service corporations comprised another 1121% of IASB donors. While the number held fairly steady, the percentage of
donors that were nancial service corporations dropped as the total number of IASB donors increased through 2008.

Camfferman and Zeff (2007) report that each of the Big 5 or Big 4 public accounting rms donated 25,000 to the IASC each year from 1990 to 2000.
Using end of year exchange rates for 2001 through 2006, and using IASCF provided exchange rates for 2007 and 2008. Using an average or end of year
exchange rate for 2008 suggests an even higher percentage of support from the largest public accounting rms.
3

10

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Table 3
Characteristics of corporate donors to IASC.
Country

Australia
Donors
Non-donors

Number of
companies
19901994a

5
6

Number listed
in U.S. (%)
19901994

5 (100%)
6 (100%)

Belgium
Donors
Non-donors
Canada
Donors
Non-donors

Number of
Companies
19951999b

Number
listed in
U.S. (%)
19951999

Used IASs
(%) 1999

2
10

2 (100%)
9 (90%)

1 (50%)

2
5

1 (50%)
1 (20%)

2
21

2 (100%)
12 (57%)

1 (50%)
2 (10%)

2 (100%)

4
15

4 (100%)
6 (40%)

France
Donors
Non-donors

4
41

4 (100%)**
16 (39%)

7
38

3 (43%)
17 (45%)

4 (57%)**
5 (13%)

Germany
Donors
Non-donors

1
37

1 (100%)
16 (43%)

16
23

11 (69%)
10 (43%)

10 (63%)*
5 (22%)

1 (100%)

3
12

2 (67%)
6 (50%)

1 (33%)
3 (25%)

1
178

87 (49%)

7 (4%)

10
10

9 (90%)
6 (60%)

South Africa
Donors
Non-donors

2
3

1 (50%)

1 (50%)

Sweden
Donors
Non-donors

1
11

1 (100%)
7 (64%)

1 (100%)
3 (27%)

Hong Kong
Donors
1
13

1 (100%)
7 (54%)

Japan
Donors
Non-donors
Netherlands
Donors
Non-donors

19901994

19951999

All

Rev. only

All

Denmark
Donors

Italy
Donors
Non-donors

Donor revenue, net income and


assets larger than nondonors

All, Rev.**

All, NI***

All

Rev.***, Assets

All, Assets***

Rev.*, NI***
Assets*

Rev. Only

Rev.***, NI

NI only

Rev., NI
3
14

3 (100%)
13 (93%)

Rev., NI

NI only

Rev., NI

Switzerland
Donors
Non-donors

4
13

3 (75%)
5 (38%)

7
9

6 (86%)
5 (56%)

6 (86%)
4 (44%)

United Kingdom
Donors
Non-donors

26
40

22 (85%)
28 (70%)

29
38

25 (86%)
30 (79%)

United States
Donors
Non-donors

17
242

19
296

Rev., NI***

Rev., NI**
Assets

Rev.**, NI*
Assets*

Rev.***, NI*
Assets*

All*

All*

1 (0%)

Donors signicantly different from non-donors: * at .01; ** at .05; *** at .10. The MannWhitney U test was used for the Revenue, Net Income, and Assets
variables. The Fisher Exact test was used for Listed in U.S. and Used IASs. Forbes 2000 International 500 uses 1999 nancial data. Forbes 1995 Foreign 500
uses 1994 data. Data for companies claiming to use IASs was from the IASC (1999) list of 832 companies.
a
Includes countries with corporate donors (19901994) on Forbes 1995 Foreign 500 List and similar sized U.S. rms.
b
Includes countries with corporate donors (19951999) on Forbes 2000 Intl 500 List and U.S. rms of similar size.

For 2001 through 2006, IASB donor corporations were quite large and had a different prole than most corporations (see
Table 4). Consistent with the IASCF strategy of focusing on donations from large corporations, donor rms listed on the Forbes
Foreign 500 or being a U.S. rm of similar size increased from 65 in 19901994 to 104 in 19951999, 129 in 20012005 and
dropped to 125 for 2006. In most countries, IASB corporate donors were larger than non-donors. For 20012005, corporate
donors were signicantly larger than non-donors on at least one size measure, such as revenue, net income, and total assets,
in Australia, Canada, France, Germany, Italy, Japan, the Netherlands, the U.K., and the U.S., and in 2006 for Germany, Japan,
Spain, Switzerland, the U.K., and the U.S.

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

11

Table 4
Characteristics of corporate donors to IASB from 2001 to 2006.
Country

Australia
Donors
Non-donors
Belgium
Donors
Non-donors
Brazil
Donors
Non-donors
Canada
Donors
Non-donors
China
Donors
Non-donors
France
Donors
Non-donors
Germany
Donors
Non-donors
Hong Kong
Donors
Non-donors
Italy
Donors
Non-donors
Japan
Donors
Non-donors
Mexico
Donors
Non-donors
Netherlands
Donors
Non-donors
South Africa
Donors
Non-donors
Spain
Donors
Non-donors
Switzerland
Donors
Non-donors
United Kingdom
Donors
Non-donors
United States
Donors
Non-donors

Number of
companies
20012005a

Number listed
in U.S. (%)
20012005

2
14

1(50%)
7(50%)

Number of
companies
2006a

Number
listed in U.S.
(%) 2006

Donor revenue, net income and


assets larger than nondonors
20012005

2006

Revenue***, NI**

1
5

2(40%)

All

5
2

2(40%)
1(50%)

4
4

1(25%)
3(75%)

Revenue, NI

All

6
23

3(50%)
17(74%)

1
29

22(76%)

All, Revenue*
Assets*

All, Revenue***
Assets***

1
8

1 (100%)
4(50%)

5
33

4(80%)***
10(30%)

33
6

13(39%)
2(33%)

All, NI*

Assets

18
15

10(56%)***
4(27%)

15
17

9(60%)**
4(24%)

All*

All*

3
7

1(33%)
6(86%)

3
16

1(33%)
2(13%)

1
17

1 (100%)
2(12%)

Revenue**, Assets

NI, Assets

29
74

19(66%)**
33(45%)

34
59

20(59%)
28(47%)

Revenue*, NI
Assets smaller*

Revenue*, NI

1
4

1 (100%)
2(50%)

1
5

1(100%)
2(40%)

All

All

9
8

5(56%)
2(25%)

8
8

4(50%)
2(25%)

Revenue*, NI***
Assets*

All

1
4

1 (100%)
1(25%)

1
5

3(60%)

Revenue, Assets

2
19

1(50%)
3(16%)

Revenue**, NI*
Assets**

Revenue, NI

Revenue, NI

4
12

4 (100%)***
5(42%)

3
13

3(100%)
6(46%)

All*

Revenue**
NI***, Assets***

15
41

11(73%)
23(56%)

6
49

6(100%)***
30(61%)

All*

Revenue*
NI smaller**

All*

All*

27
256

15
248

Donors signicantly different from non-donors: * at .01; ** at .05; *** at .10. The MannWhitney U test was used for the Revenue, Net Income, and Assets
variables. The Fisher Exact test was used for Listed in U.S.
a
Includes countries with corporate donors on Forbes 500 Largest Non-U.S. rms and U.S. rms of similar size for stated years. 20012005 donors on
Forbes 2006 list (uses 2005 data). 2006 donors on Forbes 2007 list (uses 2006 data).

The number of French and Japanese corporate donors rose dramatically in 2006. While the vast majority of these rms
were listed on at least one foreign stock exchange, about one-third of French and two-thirds of Japanese corporate donors
were too small to be listed among the 500 largest non-U.S. businesses as dened by Forbes. Conversely, the number of
Canadian, U.K., and U.S. rms donating dropped considerably.
French, German, Japanese, and Swiss corporate donors for 20012005 were more likely than non-donors in those countries to be listed in the U.S. In 2006, donors from Germany and the U.K. also were signicantly more likely than non-donors
to be listed in the U.S.

12

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Major changes in donor patterns continued in 2007 and 2008 as the IASCF moved toward a new funding model set
upon the four principles of being broad-based (should include major market participants, ofcial institutions, international
organizations, central banks, and major accounting rms), compelling (should make free riding very difcult), open-ended
(should not be contingent on any particular action by the IASB), and country-specic (should be paid by major economies
proportionately based on their GDP) (IASB, 2010). Some countries that moved to a levy-like system, such as France and the
U.K., saw a major drop in the number of individual corporate donors. Conversely, Germany and Japan, which moved to a
strong voluntary contribution system, in 2008 represented 60% of all donors and over 85% of all direct corporate donors.
Only about 30 U.S. corporations made donations in 2007 and 2008, which was lower than previous years and a bit surprising
given the increased U.S. interest in IFRS.
The results indicate that corporate donors are the vast majority of donors for both the IASC and IASB. For the 16 years
examined, the study shows that most corporate donors are very large, ranked on the Forbes 500 largest non-U.S. rms or a
U.S. rm of a similar size, listed on a foreign stock exchange, and traded in the U.S.
6.5. Participation by other stakeholder interest groups
From 1990 to 1994, donations from stakeholder interest groups other than corporations and public accounting rms
were rare, with only six other organizations contributing (see Table 2). For the 19951999 period, 21 of these other types
of entities began donating to the IASC. Stock exchange donors increased from one in the early 1990s to seven, accountancy
bodies donating increased from one to three, and one central bank, one analyst group, and four international development
organizations, including the World Bank, made contributions.
The most noticeable change in stakeholder interest groups donating in the 2000s is that 32 central banks and regulators began to make donations, and most continued to donate in later years. The number of donors from other
stakeholder interest groups, including accountancy bodies, analyst organizations, and stock exchanges, stayed about
the same.
Compared with the IASC, the IASB donor group is a relatively diverse group and includes central banks, IFAC members,
large public accounting rms, stock exchanges, analysts, nancial institutions, and corporations. However, the ndings for
research question 3 suggest that corporations and public accounting rms are more dominant than other stakeholder interest
groups and there does not appear to be as much donor diversity as the IASCF and others desire.
6.6. Geographic diversity of nancial contributors
Geographic diversity is examined though the extent of EU participation (RQ4), Anglo-American participation (RQ5), and
participation by others (RQ6). These research questions are further examined for 2007 and 2008 by utilizing the IASCF
released data on the actual amount contributed from each country, as well as the number of donors from each country.
6.7. Geographic diversity by the number of nancial contributors
From 1990 to 1994, 80% of the 127 donors were from just ve countries: the U.K. (50, 39%), the U.S. (19, 15%), France
(15, 12%), Australia (12, 9%), and the Netherlands (8, 6%) (see Table 5). As noted earlier, the number of IASC donors grew
over time as many donors began contributing during the last one or two years of this period. The EU accounted for 61% of
all donors, with 22% from non-Anglo EU countries, and 73% came from Anglo-American stakeholders (including accounting
rms). Together, the EU and Anglo-Americans comprised 97% of contributors.
From 1995 to 1999, 70% of donors were from ve countries: the U.K. (61, 29%), U.S. (28, 13%), Germany (29, 14%),
France (17, 8%), and the Netherlands (13, 6%). The signicant increase in donor corporations domiciled in Germany supports Camfferman and Zeff (2007), who note the IASCs work to increase donations in a few countries during this period.
From 1995 to 1999, 64% of all IASC donors were from the EU, 35% were from non-Anglo EU countries, and only 51% were
from Anglo-American stakeholders (including accounting rms). Together, EU and Anglo-American stakeholders provided
88% of IASC contributors, a drop from the early 1990s as more donors came from other countries, such as Japan and
Switzerland.
The number of countries with donors grew and the concentration of donors by countries changed signicantly in the
2000s. The number of countries with donors increased by 17 to 40 in 2008, in major part due to donations by central banks.
Donors domiciled in Japan became frequent contributors to the IASB, making up 22% of the donors in the early 2000s, 42%
of 2006 donors, and 45% of 2008 donors. The number of donors from Germany increased substantially, rising from 10% of
donors in the early 2000s to 22% in 2008. The U.K.s new funding scheme being organized by the Financial Reporting Council
to levy U.K. listed companies may explain why donors from the U.K. went from 20 (8%) in the early 2000s to just one in 2008.
Donors from France rose from 8 (3%) in the early 2000s to 54 (19%) in 2006, to none in 2008 as a new funding scheme by the
French Ministry of Finance was organized. Donors from the U.S. increased to 43 (19%) in the early 2000s but dropped to 35
(8%) in 2008.
EU countries provided 3336% of donors from 2001 to 2006, but dropped to 2426% in 2007 and 2008. The number of non-Anglo EU contributors varied greatly, going from 56 (24%) from 20012005, to 94 (33%) in 2006, to 85
(21%) in 2007, and to 108 (26%) in 2008. This change reected France, Germany, Italy, and the Netherlands switch-

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

13

Table 5
Number of donors to IASC and IASB by country.
Country

EU
Belgium
Denmark
European
Francea
Germany
Greece
Hungary
Italya
Luxembourg
The Netherlandsa
Poland
Slovakia
Spain
Swedena
Other EUb
Total Non-Anglo EU
Ireland
United Kingdoma
Total EU
Macedonia
Switzerlanda
Total Europe
Non-Europeans
Australiaa
Brazil
Canada
China (with Hong Kong)
Indiaa
Japan
Korea, South
Malaysia
Mexico
New Zealanda
Russia
Singapore
South Africaa
United States of America
Other Countriesc
Intl Public Actg Firmsd
International Othere
Total donorsf

IASC

IASB

19901994

19951999

20012005

2006

No.

No.

No.

No.

2007
%

No.

2008
%

No.

15

4
1
8

28

50
78

3
81

12%

3%
1%
6%

22%

39%
61%

2%
63%

2
7

17
29

3
1
13

73

61
134

10
144

1%
3%

8%
14%

1%
1%
6%

1%

35%

29%
64%

5%
69%

1
8
23
1
1
6

10
1
1
1

2
56
1
20
77

6
83

1%

3%
10%

3%

4%
1%

1%

1%
24%
1%
8%
33%

3%
36%

1
54
19
1
1
3
1
8
1
1
2

94
1
8
103

5
108

1%

1%
19%
7%

1%

3%

1%

33%

3%
36%

2%
38%

1
48
17
1
1
3
1
8

2
1

85
1
10
96

5
101

1%

12%
4%

1%

2%

1%

21%

3%
24%

1%
25%

92
1
1
1
2
2

1
3
1
3
108
1
1
110
1
7
118

22%

1%
1%

1%

1%
26%

26%

2%
28%

12

3
19

129

9%

5%

1%

1%

2%
15%

4%

100%

6
2

1
5
28
1
7
3
210

2%

3%
1%

3%

1%

1%
2%
13%
1%
3%
1%
100%

4
7
11
8
1
52
1
1
2
1
1
1
6
43
1
7
3
233

2%
3%
5%
3%
1%
22%
1%

1%

3%
19%

3%
1%
100%

3
4
3
3
2
119
1
1
2
1
2
1
2
25

6
2
285

1%
2%
1%
1%
1%
42%

1%

1%
9%

2%
1%
100%

3
6
3
3
9
182
23
1
2
1
1
1
15
37

7
2
397

1%
2%
1%
1%
2%
46%
6%

1%

4%
9%

1%
1%
100%

2
1
2
35
3
192
23
1
1
1

35
3
7

425

1%

1%
8%
1%
45%
5%

8%
1%
2%

100%

Levy/group collections begun or phased in during 2007 and 2008.


Austria and Czech Republic had 20012005 donor; Bulgaria, Cyprus, and Portugal had 2008 donor.
c
Bermuda had 19951999 donor, Saudi Arabia had 20012005 and 2008 donor, Uganda and Botswana had 2008 donor.
d
Does not include donations by afliates, such as those from Japan and Korea that also donated.
e
Includes World Bank (including International Finance Corporation) and Inter-American Development Bank.
f
Donors by country do not match donors by stakeholder group due to corporations with dual incorporations: 19901994: 2 U.K./Dutch rms; 19951999:
2 U.K./Dutch rms, a Swiss/Swedish rm, and a Dutch/Belgian rm; 20012005: 2 U.K./Australian rms, a U.K./Dutch rm, a U.K./South African rm, and
a Dutch/Belgian rm; 2006: U.K./Australian and Dutch/Belgian rms; 2007: Dutch/Belgian, Dutch/U.K., Australian/U.K. and South African/U.K. rms.
b

ing to systems where a national body would send one large contribution on behalf of that countrys IASB constituents.
As the overall number of contributors increased, the percentage of Anglo-American donors dropped dramatically, going
from 38% in the early 2000s to just 12% in 2008. A primary cause of this shift was the increase in Japanese contributors, as well as an increase in donors from other non-EU, non-Anglo-American countries, such as China and
South Korea.
Based on the number of donors, the ndings for RQ4 and RQ5 suggest EU and Anglo-Americans contributor domination
of IASC nances ended with the creation of the IASB. Conversely, the results for RQ6 show that the extremely small number
of other countries donating to the IASC has switched to a situation where these countries provided the majority of IASB
donors during 20062008. Examples of countries never contributing to the IASB include eight EU countries as well as
Argentina, Chile, Indonesia, Iran, Israel, Norway, Taiwan, Thailand, Turkey, and Venezuela. What is also interesting is the
list of countries that require or allow the use of IFRS and from which no donations are received. Of the more than 100

14

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Table 6
Donations to IASCF by country for 2007 and 2008 compared with 2008 GDP and domestic market capitalization.
Country

EU
Belgium
Bulgaria
Cyprus
EU Institutiona
France
Germany
Greece
Hungary
Italy
Luxembourg
Netherlands
Portugal
Slovakia
Spain
Sweden
Other EU
Non-Anglo EU
Ireland
United Kingdom
Total EU
Macedonia
Other non-EU Europe
Switzerland
Total Europe
Australia
Botswana
Brazil
Canada
China (and Hong Kong)
India
Japan
Korea, South
Malaysia
Mexico
New Zealand
Other Countries
Russia
Saudi Arabia
Singapore
South Africa
Taiwan
Uganda
United States
Sub-total
Intl accounting rmsb
Otherc
Total donationsd

2007

2008

Gross domestic

Stock market

Amount

Amount

Product % in 2008

Capitalization % in 2008

4%
9%

3%

4%

1%
2%

23%

7%
30%

2%
32%
3%

1%
1%
1%
2%
9%
1%

1%

18%
69%
29%
2%
100%

4272
3730
25,132

1,011,115
12,599
7293
632,218
39,219
313,160
12,566
5040
170,744
190,422

2,427,510
5026
730,000
3,162,536
2520

210,841
3,375,897
472,845
5039
7578
15,109
533,155
218,352
1,591,582
197,135
6840
25,132
71,999

5026
7540

5037
1,891,474
8,429,740
4,229,874
87,589
12,747,203

8%

5%

3%

1%
2%

19%

6%
25%

2%
27%
4%

4%
2%
12%
2%

1%

15%
67%
33%

100%

1%

5%
6%
1%

4%

1%

3%
1%
4%
26%
1%
4%
31%

1%
1%
33%
2%

3%
2%
8%
2%
8%
1%

2%

11%
3%
1%

24%
100%

1%

5%
4%

2%

1%

3%
2%

18%

6%
24%

3%
27%
2%

2%
3%
10%
2%
10%
2%
1%
1%

1%
2%
1%

36%
100%

24,795
425,740
965,991
12,700
7649
366,050

412,234

136,755
220,783

2,572,697
5080
787,164
3,364,941

239,585
3,604,526
339,059

139,092
62,700
90,088
174,358
1,026,750
150,904
4959
30,358
72,944

5000

7620
49,759

2,061,745
7,819,862
3,238,702
218,210
11,276,774

Additional data sources: World Bank, World Federation of Exchanges, and stock exchange websites.
a
In 2009, the European Commission proposed a D 5 million per year contribution for 20112013.
b
Amounts given by some national afliates, such as those in Japan and Korea, are listed under that country.
c
Includes Bank for International Settlements, IASCF Trustees, International Monetary Fund, and World Bank.
d
Goal in 2007 and 2008 was U.K.16 million per year.

countries now purporting to use IFRS, most have no donors to the IASB. This nding is examined in the further analysis
section.
6.8. Geographic diversity of 2007 and 2008 actual contributions
Data on donations by country for 2007 and 2008 shows that most funds come from relatively few countries (see Table 6).4
The IASCF lists the 2933% of its donations from the major international accounting rms in a separate non-country category.

4
Analysis of actual contributions by different stakeholder interest groups was not done because within countries, most individual donors were listed as
giving an amount within a certain range, such as 0 to 50,000, less than 25,000, and more than 50,000.

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

15

The largest donations by geographic grouping are Anglo-American (2630%), EU (2530%), non-Anglo EU (1923%), the U.S.
(1518%), and Japan (912%). This shows that no geographic group dominates IASB funding. However, including the large
accounting rms in the Anglo-American group increases its total to 59%, which suggests domination by the Anglo-American
group of current IASB funding.
6.9. Actual contributions relative to size of economy and capital market
Research question 6A investigates the size of a countrys donations relative to the size of a countrys economy or capital
market. The IASB/IASCF reports that its efforts to create a new funding system are incomplete but are proceeding well (EU,
2007; IASB, 2010; IASCF, 2007, 2008a,b, 2009). Although the IASCF has not published specic goals, it has made clear its
desire for nancing by a wide range of stakeholder interest groups. The IASCF has established national goals based roughly on
a countrys GDP in an effort to address the need for broad geographic support. In its renewed efforts to create a broad-based
nancing system, the IASCF concentrated initially on larger economies where the biggest contributions might be generated.
To test RQ6A, correlations were run using 2008 data to compare the actual amount of donations by 186 countries with
national GDP and national domestic equity market capitalization. Donations from the large public accounting rms, the
Central European Bank, and IASCF trustees were excluded due to the difculty of accurately assigning those contributions to
a particular country. A signicant correlation (at .01) was found between the amount of IASB donations and both GDP (with
a coefcient of .89) and Market Capitalization (with a coefcient of .84).5 Thus, in general, there is a very strong correlation
between the amount of a countrys donation and two key economic measures. This result provides some evidence that the
IASBs nancial base is relatively well-balanced geographically, and does not support the notion that the relative size of a
countrys donations should allow it undue inuence.
6.10. Major IASB donors and comment letter writing
From 2001 to 2005, the IASB disclosed the identity of the 37 corporations and nancial institutions giving between
$100,000 and $200,000 annually, and beginning in 2007 it disclosed the general range of the amounts given by almost
all contributors. RQ7 asks whether major IASB donors frequently write comment letters. Overall, we observe that major
donors are active in the development of IFRS (see Table 7). The Big 4 public accounting rms each responded more than 75
times with letters for the 79 IASB/IFRIC issues examined. In addition, a majority of the 37 large corporate donors frequently
submitted comment letters to the IASB, and of these eleven (Allianz, BP, Citigroup, Deutsche Bank, Goldman Sachs, HSBC,
Nestle, RWE, Royal Dutch/Shell, Swiss Reinsurance, and UBS) each wrote at least 10 comment letters to the IASB. While
assessing the actual level of inuence is beyond the scope of this project, the frequency of their involvement by writing
comment letters suggests that these large donors help legitimize the IASB through multiple avenues.
7. Additional analysis
We performed additional analyses to investigate whether relationships might exist between corporate donors and their
use of IASC Standards, or between donors from a specic country and whether or when the country adopted IFRS. The
IASC (1999) identied 832 companies claiming to use IASC standards in the late 1990s. This list was used to test whether
companies using IASC standards were more likely to be IASC donors. Of this large number of rms, few donated to the IASC.
Of the 832 rms, only 25 of the 61 companies on the 2000 Forbes Foreign 500 donated to the IASC (see Table 3). Within the
2000 Forbes Foreign 500, a correlation of .232 (signicant at .01) was found between being a corporate donor and using IASC
Standards. While a higher percentage of corporate donors used IASC standards than non-donors in most countries, results
were signicant for only France and Germany.6 Although corporate donors were likely to use IASC standards in the late
1990s, the vast majority of corporations using IASC standards did not provide nancial support to the IASC.
Data was examined to determine whether countries were more likely to have more donors contributing after the adoption
of IASC or IASB standards. No relationship was found. For example, the decision to use IFRS in the EU was announced in
the early 2000s, but of the 27 EU countries, through 2008, eight had never had a donor and 10 had only had one donor.
Moreover, some countries that had a large or respectable number of donors in the 1990s that adopted IFRS in the 2000s,

5
A .96 correlation between GDP and domestic market capitalization is signicant at .01. Correlations performed after including the large public accounting
rms donations with the U.S. found signicant correlations (at .01) between country donations and both GDP (.94) and domestic market capitalization
(.97). Almost identical correlations found when using market capitalization data from Standard & Poors Global Stock Markets Factbook (which covers more
emerging markets, but includes cross-listings in totals).
6
Several correlations were performed to better understand the characteristics of IASC donors on the 2000 Forbes Foreign 500 and U.S. corporations of a
similar size. Signicant positive correlations at .01 were also found between being a corporate donor and Sales (.170), being from an EU country (.339), being
from the U.K. (.272), being from Germany (.189), being from the Netherlands (.176), and being from Switzerland (.131). Signicant negative correlations at
.01 were found between being a corporate donor and being from the U.S. (.152) and being from Japan (.193). A logistic regression model with a p = .015
(Hosmer and Lemeshows Goodness of Fit Test) found relationships similar to those the correlations suggested.

16

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

Table 7
IASB (IASCF) major nancial donors and their submission of comment letters.

U.S.$1,000,000 per yearc


Andersena (only 20012003)
Deloitte Touche Tohmatsua , b
Ernst and Younga , b
KPMGa , b
PricewaterhouseCoopersa , b
Large accounting rm subtotal
(% of all letters written)
U.S.$100,000$200,000 per yearc
Belgium/Netherlands
Brazil
France

Germany

Netherlands

Netherlands/U.K.
Switzerland

United Kingdom

United States

Fortis SA/NVa
Banco Bradesco S/A
Banco Itau S/A
Aventis (Sano-Aventis)a
LOreal
Total Fina Elf SA (Total SA)
Allianz AGa
BASF AGa
Bayer AGa
BMW AGa
DaimlerChrysler
Deutsche Bank AGa
E.ON AG
RWE AGa
Siemens AG
ING Group NV
Royal Philips Electronics
NV
Royal Dutch/Shell Groupa
Nestle SAa
Swiss Reinsurance Co.
(only in 20022005)
UBS AGa
Amvescap PLC (now
Investco Ltd)
BP PLCa
HSBC Holdings PLCa
Bank of America
Corporation
Bear, Stearns & Co., Inca
Citigroup (Citigroup
Foundation)a
Goldman Sachs Group, Inc.a
J. P. Morgan Chase & Co.a
Lehman Brothers Inc.
Merrill Lynch & Co., Inc.a
Morgan Stanley & Co. (only
20022005)
New York Stock Exchange
(only 20022005)
Pzer, Inc.
Prudential Financial, Inc.
State Farm Insurance
Companies
TIAA-CREF

Also Donated to IASB/IASCF in

IASB letters for


55 issues

IFRIC letters for


24 issues

2006

2007

2008

(20012008)

(20012008)

3
54
55
55
56
223 (4%)

22
21
22
22
87 (8%)

b
c

3
21
3
2
1
5
11
1
14
4
8
5

1
1

19
29
11

1
7

39

15
19

4
1

1
1
1

10
8

5
5

1
1

Total (% of all letters written)


a

Donated to the IASC at some point from 1991 to 1999.


Donated $1,500,000 in 2006 and 2007, and $2,000,000 in 2008.
Unless otherwise stated, organizations gave the noted amount every year from 2001 to 2005.

2
484 (8%)

117 (11%)

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

17

such as Australia, Denmark, and the U.K., had far fewer donors to the IASB than the IASC. Other examples exist showing that
a countrys adoption of IFRS does not appear to relate to the number of donors from that country.7
In terms of legitimacy, the lack of nancial support from constituents in the countries where IFRS is used is an issue. The
IASB is concerned about possible free riders and is working to make its funding both broad-based and compelling.
8. Conclusion
This paper analyzes the composition of donors making contributions to the IASB. The results contribute to the understanding of the funding of the development and maintenance of IFRS, knowledge which the SEC deems important as it
considers whether to require the use of IFRS in the U.S.
We set our analysis in the context of institutional legitimacy theory, which suggests that providing funding to an organization is one means of signaling legitimacy. Pragmatic legitimacy suggests that stakeholder contributions may increase
either for altruistic reasons (dispositional) or for reasons of more self-interest (exchange or inuence). The results show that
the institutional legitimacy of the IASB has increased since the IASC days in that both the number of donors and the amounts
contributed increased signicantly.
The studys results have implications for several SEC questions regarding the nancing of the IASB. First, the SEC desires
transparent funding. While not completely disclosed, the paper documents that by 2008 the IASCF provided much clearer
details on both donors and the amount of their donations.
In regards to SEC questions regarding independence, possible undue inuence over the standard-setting process, and
the voluntary nature of contributions, the paper nds that the IASB has made great strides. First, the amount of donations
received by the IASB is dramatically greater than under the IASC. For example, the lowest annual donation total received by
the IASB is ten times greater than the highest annual amount received by the IASC.
Second, the number of donors tripled over the study period, and the IASBs donor base greatly increased in its stakeholder
interest group and geographic diversity. While corporations continuously dominated the list of stakeholder interest group
donors, the number of corporations making donations increased dramatically, thus decreasing the inuence of any particular
corporate donor. Central banks were the second largest number of donors to the IASB, followed by the large international
professional accountancy rms. The Big 4 accounting rms provide over one-quarter of the amount of total IASB contributions
and actively write comment letters. It is indisputable that they are actively involved in the development of IFRS, and some
suggest that they have too much inuence (Botzem & Quack, 2009; Minter, 2007). However, unlike some other groups, the
large accounting rms are not generally reported as exerting major political pressure (Camfferman & Zeff, 2007), and the
IASCF states that it is working to reduce its reliance on their contributions.
Stakeholder involvement is also growing from more countries and regions. The geographic diversity of donors increased
from a dozen countries in the early 1990s to over 30 countries in 2008. About 40 countries donated at some point during
the study period. In terms of the number of contributors, EU and Anglo-American donors are not the dominant donors to
the IASB as they were to the IASC.
Third, donations by country are now signicantly correlated with measures of a countrys economic and equity market
size. In terms of the actual amount of donations, EU and Anglo-American contributions are signicant. However, 2008
country donations are highly and signicantly correlated with GDP and domestic Equity Market Capitalization, suggesting
that contributions are in line with the stated goals of the IASCF and not in and of themselves a reason to perceive undue
inuence due to large contributions.
Finally, addressing another SEC concern, the number and amount of mandatory contributions is increasing and the
amount of voluntary contributions is declining. Since several countries, including Italy, South Africa, Sweden, and the U.K.,
are implementing mandatory broad-based payer nancing systems, concern should diminish that particular donors may be
able to have undue inuence over the standard-setting process.
This study is primarily descriptive in nature and has other limitations. Some desired analyses could not be done because
the IASC and IASB kept so much donor data condential. In addition, some units of analysis, such as country panels, had
small populations which inhibited statistically robust results.
The study also raises questions for future research. What factors are inuencing corporations and other organizations
to donate? What type of funding system would provide nancial stability? Will the IASB funding scheme meet the criteria
of an accounting standard-setter prescribed by SOX? Two U.S. Senators note that the SECs past proposal to treat IFRS as
GAAP in the U.S. is an end-run around Congresss intent in establishing the independent funding mechanism and other
qualications necessary to justify reliance on a standards-setter other than the SEC itself (Reed & Dodd, 2007, p. 3). Will
the funding requirements in SOX affect a U.S. decision to adopt IFRS? Given that the SEC has listed IASB funding as one key

7
While accounting for over 40% of donors in 2006, 2007, and 2008, Japan did not announce its intention to use IFRS until 2009. The number of U.S.
donors peaked in the early 2000s, before the SEC actively began pursuing any roadmap to IFRS. Similarly, the number of Canadian donors peaked before
Canada announced it would move to IFRS. Most developing countries that adopted or announced the decision to adopt IFRS have never had an IASB donor.
A time-series analysis with the actual amounts of donations by country could not be done because the IASCF only began to release that information with
2007 donations. No signicant correlations were found when comparing either the amount of 2008 donations or whether any donations occurred in 2008
with IASplus.com (Deloitte, 2009) data on whether 157 countries required IFRS for listed companies (if country had no listed companies, then whether
IFRS required for large nonlisted companies).

18

R.K. Larson, S.Y. Kenny / Journal of International Accounting, Auditing and Taxation 20 (2011) 119

issue regarding its 2011 decision whether to require IFRS in the U.S., these and other questions need to be addressed in a
timely manner.
Acknowledgements
The authors gratefully acknowledge the helpful comments and suggestions provided by Professor Kathleen Sinning (the
journal editor), the two anonymous reviewers, and the participants of the 2009 American Accounting Association (AAA)
Meeting and the 2009 Mid-year Meeting of the International Accounting Section of the AAA. The authors thank Matthew
Brackmann, Ken Enos, Michael Little, and Amy Schimmoeller for their research assistance. Any remaining errors are our
own.
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