1.1 – Principal currents of thought found in research on due process

6The existing literature on due process be divided into two main camps (Stenka & Taylor 2010). The first group is focused on identifying the determining factors for participation in due process, while the second is more concerned with the results of this participation and the influence exercised by different stakeholders.

7The studies which fall within the theoretical framework of “positive accounting” first defined by Watts and Zimmerman (1978) and/or the cost-benefit approach adopted by Sutton (1984). According to the latter, stakeholders only take part in consultation processes if they feel that they are in a position to influence the final outcome, and if the advantages they expect to see outweigh the costs involved. Sutton concludes that those accounting firms with the greatest available resources – who, in theory, will be most affected by changes in the applicable standards – are more likely to participate in due process than actual users, an observation borne out by other studies (Georgiou 2002; Giner & Arce 2012; Jorissen et al. 2012; Knopse & Dobler 2013; Le Manh 2012; Mezias 1989; Tandy & Wilburn 1992 1996; Weetman et al. 1996).

8The second current of thought covers research whose primary concern is to analyze the balance of power at play in due process. The studies in this category utilize various theoretical frameworks. The majority approach due process in national and international accounting standard-setters via case studies of specific standards. Various studies have revealed the clear influence of accounting firms on the final decisions (Brown & Feroz 1992; Cortese et al. 2010; Haring 1979; Hope & Gray 1982; Saemann 1995), but evidence of users exerting such decisive influence is decidedly rare. Other researchers have highlighted the emergence of coalitions between different stakeholders, bringing their influence to bear on the standards agency (Perry & Nöelke 2005; Walker & Robinson 1994). While the dominance of certain stakeholders over the standard-setting process is widely perceived as a negative phenomenon, a study focusing on the development of new regulations governing the financial information to be disclosed by firms operating in the Australian water industry (Chalmers et al. [2012]) offers an example in which the pursuit of private interests is compatible with the public interest. Several researchers have pointed out that, while the criticisms voiced by participants in due process do seem to influence standard-setters, it is impossible to identify one clearly dominant group (Hansen 2011; Kenny & Larson 1993; Yen et al. 2007). Other research focusing more directly on the IASB has shown just how difficult it is to establish a correlation between the responses of due process participants and the decisions ultimately taken by the standards board. This has led some researchers to question the role and importance of due process (Kahloul 2012; Le Manh 2012; Noël et al. 2010). More recently, Himick et al. (2016) have questioned the societal value of due process when it comes to setting accounting standards, apart from the appearance of democratic legitimacy which the process offers (Botzem 2014).

9The works cited above focus exclusively on the relationships between actors or groups of actors and the standard-setters. Based on our observations of more recent trends, we have adopted a different approach. In this paper we focus on companies who have organized themselves into sector-specific interest groups at the international level. This is a relatively recent phenomenon which has so far received little academic attention but which could, in our opinion, play a central role in our understanding of the way the IFRS are developed and implemented. Numerous researchers have already addressed the influence of certain industries on the process of accounting standard-setting at the national (Hope & Gray 1982) or international level (Cortese & Irvine 2010). However, as far as we are aware, nobody has yet demonstrated the existence of a genuinely transnational, sectoral network concerned with international accounting standards.

10We therefore propose to conduct an exploratory study in order to examine the operating methods of Telcos with reference to actor-network theory.

1.2 – The advantages of actor-network theory

2.1 – The challenges of the RevRec project for the Telcos

29Revenue recognition in the telecommunications industry has always been a source of lively debate (Moreaux & Encaoua 1987; SEC 2011). With the introduction of the IFRS in 2005, a broad transnational consensus emerged within the European Telecommunication Accounting Forum (ETAF). [2] The work conducted by this group led to the development of institutionalized accounting practices, inspired by the US GAAP model and already widely shared within the sector before the IFRS came into force.

30One of the main challenges of revenue recognition for the Telcos is how to deal with ‘bundle’ packages. These are contracts whereby operators provide users with subsidized handsets in return for a contractually-defined minimum subscription period. The problem with accounting for the revenue from such contracts emanates partly from the difficulty of determining the exact prices of both the handset and the services provided, and partly from how to record contract acquisition costs, i.e. the subsidy granted to the client.

2.2 – Current practice and expected evolution due to the new standard

31At time of writing, the vast majority of Telco revenue is recorded when invoiced, a system known as the “cash cap” method. This method consists of recording all sums invoiced to clients as revenue (see. Appendix A).

32The RevRec project caused a significant change in the way bundle contracts are recorded. The new standard stipulates the separation of revenue into handset and services, based on the relative price of each on a standalone basis. Both are vendor “performance obligations” regarding the client. Revenue from these activities is to be recognized when the transfer of control of each stipulated in the contract occurs (handset and services).

33For Telcos, the new standard promulgated by the IASB and the FASB has several disadvantages, including mainly (IFRS Foundation 2011):

• The allocation of part of the revenue generated by each contract to handset does not provide any useful information. This method tends to underestimate the revenue generated by the provision of services (calls etc.) in relation to the actual cash flow received;
• The estimation of the retail price of each individual component (handset and services) is complicated and is highly dependent on subjectivity, which makes it difficult to compare financial information from different companies;
• The main indicators being used by investors (essentially Average Revenue Per User, ‘ARPU’) lose some of their forecasting capacity, forcing operators to continue providing the same financial information as before;
• The implementation of this new standard will be a complex and costly, due to the huge volume and variety of contracts in existence. A significant update of operators’ information systems would be required;
• The recognition of higher revenue than the amount paid for the handset is not appropriate, as the company will only receive the extra amount if the corresponding communication services are duly provided.

34More broadly, again according to Telcos, the application of this new standard will have very serious consequences in terms of operational implementation and financial reporting.

2.3 – Chronology of the RevRec standard project

35The basis of the RevRec project can be traced back to the work of the G4+1 group in the late 1990s, superseded in 2001 by the newly-formed IASB. The issue of revenue recognition thus features in the list of ‘current projects’ published in January 2001 to be finalized by the IASB. In January 2002 revenue recognition was added to the FASB agenda, followed by the IASB in June of that year. In September 2002, the two Boards decided to work together on this project. The development process for the new standard was remarkably long, with5 distinct phases (Fig. 1).

Figure 1

Revenue Recognition project chronology

Revenue Recognition project chronology

2.4 – Chronology of Telcos’ involvement

36Telcos’ involvement with the IFRS15 standard-setting process can be broken down into 3 main phases:

37Phase 1: December 2008 – November 2011 – from the publication of the DP to the ED 2

38As soon as the Discussion Paper (DP) was published in 2008, a group of 5 European Telcos recognized the challenges posed by this project and began to raise awareness across the industry. The member of this informal group also consulted their auditors. They all submitted written remarks to the IASB, mentioning the fact that they had consulted fellow Telcos in the same sector but making clear that their remarks were submitted on an individual, independent basis.

39Following the publication of the 1st Exposure Draft (ED1) in June 2010, including most of the contents of the DP, Telcos raised the issue with the IASB and were granted a special hearing on 11 May 2011, during a joint meeting of the IASB and FASB. Nevertheless, ED2 (published in November 2011) did not live up to their expectations.

40Phase 2: December 2011 – January 2013

41The publication of ED 2 seems to have galvanized Telcos against the new draft standard. All operators submitted individual responses to the IASB’s consultation, but a joint letter signed by 13 Telcos was also submitted on 26 February 2012. Communication with the IASB staff was stepped up. In a draft paper published in December 2012, the IASB staff advised the Board to modify the provisions of ED2 in order to preserve a revenue recognition model which would be acceptable to the telecommunications sector. The Board nonetheless decided to reject this proposal (IFRS Foundation 2012).

42Phase 3: February 2013 – May 2014

43Aware that they would probably be unable to alter the position of the IASB, the group of 13 Telcos wrote to the Board again to request that the portfolio approach, a possibility raised in discussions with the IASB staff, should be explicitly mentioned in IFRS 15. The portfolio approach would enable operators to organize client contracts into categories, avoiding the need to record each contract individually. This approach was indeed adopted in standard IFRS 15, published in May 2014.

3.1 – A single-case study

45Using a theoretical framework has various consequences for our research methodology. With regard to ANT, the consensus opinion is that it is essential to take the longitudinal dimension of the study into consideration. For Collin et al. (2016): “it is essential to relate the narratives […] as they unfold in order to understand the reasons for their success or failure, avoiding the temptation to resort to a posteriori explanations […] For detailed analysis of this nature, the preferred option is to conduct longitudinal qualitative research.”

46We thus chose for a single-case study which would enable us to take an in-depth look at a specific situation. Yin (2009, p. 52) provides a number of arguments in favor of single-case studies, one of which is the possibility of finding a “revelatory” case which allows researchers to analyze a phenomenon previously inaccessible to academic observation. Our case would appear to fit this description. In such conditions, a case study is clearly merited, if only for the potential value of the descriptive information alone.

47The challenge of reconciling the various constraints imposed by both the theoretical framework and our choice of case study led us to expand the panel of actors we interviewed and to extend the period covered by our investigation, with interviews spread over a period of more than three years. This long timeframe enables us to observe the evolution of attitudes and positions, and to better understand the stakes and forces at play.

3.2 – Data collection

48Conducting a case study is a considerable challenge, given the massive volume of data required to make the study feasible. In order to collect such data, we adopted took the approach of “methodical opportunism” as recommended by Girin (1989), which consists of seizing any opportunity which might appear. In our case, this methodological opportunism involved obtaining access to inside information. Our aim was to identify an emblematic case and interview as many key players as possible in the process. One particular encounter proved to be decisive: a contact made during a 6-month period in a leading auditing firm, with a field auditor (the partner in charge for the firm’s international Telco activities). He shared his experience of working with the firm’s largest Telco client on the due process leading to the RevRec standard. He also introduced us to this client a major telecommunications operator. The latter met us on three occasions and explained the major phases of the RevRec project. We were also able to make contact with the audit firm’s other Telco director, with close links to the firm Professional Practice Function (PPF). We were also able to interview one IASB Board member and 2 members of the IASB staff. The first Telco operator whom we interviewed then helped us to make contact with other executives in charge of accounting standards in international Telcos (cf. Table 1). Several members of the auditing firm PPF also took the time to answer our questions in detail. We thus had access to a broad range of interviewees, from a variety of professional (3 different professions) and geographical backgrounds (4 nationalities). [3] Given the transnational nature of the standard in question, this diversity serves to reinforce the pertinence of our data.

49We conducted a total of 22 semi-directive interviews with 16 subjects, all of which were recorded and subsequently transcribed. For the purpose of these interviews we drafted a questionnaire which was incrementally updated using the results of past interviews. Our first interviews were highly exploratory in nature, with general questions allowing actors to describe their involvement in the due process. These initial interviews enabled us to identify the key concerns of the Telco sector, and to begin to understand the operational approach adopted by the main players. As the interviews progressed we refined our questionnaire. This was partly to take into account our new our knowledge on the subject; for example, once we were familiar with the technical considerations at stake we were able to go through this section fairly rapidly to focus on issues we felt to be more fundamental. Updating the interview process also enabled us to triangulate different points of view and corroborate certain information. For example, if a European Telco had already described its relationship with its American counterparts, and we subsequently secured an interview with an American Telco, we would ask questions about the latter’s reaction to the Europeans’ call for solidarity. This process of “cross-comparison” enabled us to establish a form of indirect dialogue between the various protagonists.

50In addition to these interviews, we made use of the highly detailed minutes of IASB board meetings provided by IFRS Monitor, a private organization. Although not strictly official, these minutes are regarded as reliable ‘proxy’ of the Board’s deliberations (Walton 2009). They are the only source through which we can obtain a thorough narrative of the Board’s deliberations, and have already been used for this purpose by several researchers (Baudot 2012; Kahloul 2012). With these minutes we corroborate the versions provided by certain IASB members whom we interviewed, and provided valuable information on the nature of the debates which took place during the Board meetings at which the Telco case was discussed. We also make occasional reference to the public documents issued by the IASB staff, and the letters submitted by the Telcos containing their remarks on the process.

3.3 – Content analysis

51All of our interviews were transcribed in full. The transcriptions were then analyzed using the NVivo software.

52We began with a level-one analysis which led us to convert this “mass of discourse” into “units of meaning.” (Deschenaux 2007, p. 10). As per Miles & Huberman (2007), this level-one coding consisted of grouping information around major themes to make the data more accessible. This initial analysis enabled us to organize and structure the data from a descriptive, longitudinal perspective.

53We decided to focus our coding efforts on two specific subjects: (i) actions taken by each category of actors and (ii) their interactions with other actors. Our coding was simultaneously deductive and inductive: deductive, as we were looking for actions and interactions, and inductive as we observed the emergence of sub-themes within these two main categories. We thus identified the following sub-themes: “Meetings and contact with the IASB,” “Joint responses by Telcos,” “Structuring the work of the Telcos” and “Enrollment of Telcos.”

54Once we had established this basis, we proceeded to a manual level-two coding in order to structure the sorted data and the four phases of actor-network theory. Introducing the theoretical framework helped us to put the data into perspective. We then conducted a final, manual comparison during the writing process, once our empirical framework was clearly established.

55Our methodology was thus entirely based on analyzing the content of our data. To be more precise, we structured the translation process led by Telcos into different phases or moments, according particular importance to the key concepts of actor-network theory: spokespersons, who seek to win others over to their cause, and the other actants who shape the process.

4.1 – Actants

57The decision to implement actor-network theory requires researchers to define a set of actants “of whom they will seek to demonstrate that the attainment of their objectives and the pursuit of their goals are dependent on their adhesion to the proposed program.” (Callon 1986, p. 181) Making use of the different interviews conducted, we were able to identify 3 categories of human actants who played leading roles in this process: Telcos, auditors and the IASB.Telcos are our translators, and the prism through which we shall approach this study (although they are not an entirely homogeneous group). Within this group is a sub-group which we will refer to as the “core,” in order to highlight the centrality of their contribution to the mobilization and enrolment process. This core is composed of 5 European Telcos who played an active role in the due process, and were the first signal the problems inherent to the RevRec project. As soon as the DP was published in 2008, this core group came to realize what was at stake in the IASB project: “during the process of submitting comments on the DP and the ED, I think that we as major operators [i.e. the core group] conducted the most analyses, did the most work, and acted most effectively as a team in terms of our lobbying efforts.” (T3)

58Of course the members of this core group also belong to the ETAF, whose membership includes almost all of the European telecom operators. Furthermore, as this was a joint IASB-FASB project, the Telcos applying US GAAP are also covered by our analysis.

59The auditors, and particularly the “Big Four” accounting firms, constitute our second category of actants. We chose to focus on auditors considering the abundant existing literature on their participation in the due process. Numerous works have demonstrated the close involvement of the accounting profession in this process (Giner & Arce 2012; Jorissen et al. 2006; Le Manh 2012; Tandy & Wilburn 1996). However, and with the exception of Puro (1984), researchers have devoted little attention to the positioning of auditors in relation to their clients within the context of due process to date.

60The IASB, responsible for setting accounting standards, is obviously a key player in the process.

61Finally, a third key player was to emerge during the translation process: the conceptual framework of the IASB. Colasse & Burlaud (2010) have demonstrated that, in the absence of genuine political legitimacy, the IASB has succeeded in imposing its procedural and substantial legitimacy. Its procedural legitimacy is derived from its impartiality, based on the independence of its Board members and its adherence to the due process. Its substantial legitimacy is based on the competence of the Board members and the use of a conceptual framework, a meta-standard designed to guide the work of the Board as it produces new standards. The second stated objective of this conceptual framework is to: “assist the Board in promoting the harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by the IFRSs.” (IFRS Foundation 2010, p. 8) The IASB is thus committed to producing standards applicable to all industries, without any specific, optional accounting methods as is the case under US GAAP.. In our description of the translation process, this non-human actant only appears at the point when its importance became truly apparent to the core group, which is to say, relatively late..

62Other actants were involved, but more marginally, and we chose not to take them into account in our analysis: the EFRAG (European Financial Reporting Advisory Group), the ANC (French accounting standards body) and users of financial statements.

63Table 2 summarizes the different moments in the translation process led by the core group with a view to convincing their fellow Telcos, their auditors and the IASB, to maintain the cash cap model.

Table 2

The translation process initiated by the core group

Telcos (exc. core group) Auditors IASB Identification of actors and “Problematization” Raising awareness across the whole industry about what is at stake in the IASB/FASB project Raising awareness among field auditors about the difficulties the IASB project would cause for their Telco clients Identifying a sub-group of actors capable of comprehending the implications of the project for Telcos: the IASB staff IASB staff IASB “Interessement” Convincing others of the importance of coordinated action across the whole sector: European and non-European Telcos Convincing partners to use their supposed influence with the IASB to defend the interests of the Telco sector Convincing the staff of the major problems this project would cause for the industry Alerting Board members Board to the specific case of Telcos Enrolment and “Mobilization” Uniting the Telco sector and delivering a single, coordinated message to the IASB Using auditors to persuade the IASB to update the project Encouraging the staff to draft amendments to the standard which favor Telcos Convincing some Board members to back Telcos during Board meetings

The translation process initiated by the core group

64In order to make our results easier to read, the different phases in the translation process are presented sequentially. However, in reality the process was not strictly linear and some phases overlapped. As we shall see later on, some Telcos, whom the translators initially sought to involve, subsequently attempted to initiate their own translation processes.

4.2 – Identification of actants and problematization

65As early as 2008, Telcos’ goals were to limit the impact of the draft standard on the existing practice of cash cap. They realized the importance of presenting a unified front in order to reach this objective, bringing together fellow stakeholders to campaign against the difficulties inherent in the RevRec project.

66Following the publication of the DP, our core group quickly identified the issues raised by this project and turned to the ETAF with a view to informing their peers, as T1 explains: “Because the whole issue revolves around the shared vision we have […] within the industry. So the work that gets done […] is a collaboration between different players in the sector, trying to understand this draft standard, to really discuss it as much as possible […] When the DP came out, we were the first to say: ‘hang on a second; this standard is going to cause real problems for us.’” At this stage, the main objective of the core group was to raise awareness of the operational consequences of the draft standard among their peers, enrolling them in a coordinated effort to influence the IASB. One respondent from a smaller operator admitted being slightly more reticent at the outset of the project (T5): “we weren’t really very involved. We’re a small player, and you end up kind of hiding behind the bigger players who are very proactive on these subjects.”

67Our core group is composed exclusively of European operators. The members of this group did, however, seek to convince their counterparts from elsewhere, particularly America and Asia, to join forces: “in 2008 [we] worked on bringing together fellow operators for this project […] we very rapidly expanded our view of the situation because it was a joint project between the IASB and the FASB, which meant we needed to get the Americans on board and look for support from elsewhere, not just Europe.” (T1)

68Outside their sector, Telcos also naturally turned to their auditors, who are traditionally their usual advisers on accounting matters. Assuming that the IASB would have close links to the major accounting firms, Telcos felt it was important to win over the auditors to their cause: “You need the auditors because I reckon about 80% of IASB members are auditors, and also because they have very structured, organized, institutional contacts. That’s the big difference between the issuer, the preparer and the audit firms: they’re inside the system, we’re not.” (T1) In order to persuade the auditors to push for the maintenance of the cash cap, Telcos emphasizes the consequences the draft standard would have for verifiability of financial statements.

69In theory, the IASB does not need to obtain the approval of the various stakeholders involved before issuing a new standard. However, adopting an overly confrontational approach would pose several problems for the standard-setter. On the one hand, as it would cast doubt upon the validity of the due process; one of the pillars on which the legitimacy of the IASB’s decisions is founded (Burlaud & Colasse 2010). On the other hand because a minimum degree of consensus is essential to ensure that the standards will be correctly implemented (Black 1997, 2002). To interact with the IASB, Telcos had the choice of talking directly to the Board members, or to the IASB staff. The staff is responsible for drafting the text of new standards, which are then approved by the Board. The staff thus has the power of authorship. In her analysis of the due process of IFRS for SMEs, Ram (2013) highlights the decisive role played by the staff. The success of any efforts to influence the IASB thus depend largely on the relationships with the staff, as a member of the Board explains: “It’s very useful to talk with the staff and try to influence them, of course. In fact that’s what we expect of the staff, that they do that ‘outreach’ work on our behalf, before it reaches the Board […] Which means that the companies involved need to get organized and find out the staff’s point of view as soon as possible.” (I2). Telcos did indeed seek to gain the attention not only of the Board, but also of the IASB staff: “To begin with there were discussions with the staff, and you can see very clearly from the written remarks submitted by Telcos that the staff, and then of course the Board, were very aware that the Telco industry would be one of the most heavily-affected by the new standard.” (T3)

70This awareness culminates in the creation of an “obligatory passage point” (OPP) which Callon (1986) defines as the only route which will allow all of the actants involved to achieve their objectives (Fig. 2).

Figure 2

The problematization phase

The problematization phase

71For the approach adopted by Telcos to succeed, all of the actants needed to agree to adopt a joint position on the accounting methods which would be required as a result of the draft standard.

72Identifying a spokesperson capable of representing the different groups of actants is an essential step in the translation process. The translator must “negotiate with the spokespersons who best represent each group, in order to achieve a problematization which is consistent with the problems encountered.” (Walsh & Renaud 2010, p. 13)

73In our case, the core group of Telcos acted as translator while also attempting to adopt the role of spokesperson. Telcos solicited involvement of big auditing firms, but no clear spokesperson emerged until after the publication of ED 1. As for the IASB, the translators soon realized the crucial importance of the staff, responsible for drafting new standards, submitting proposals to the Board and interacting with stakeholders throughout the standard-setting process. The IASB staff thus appeared to constitute a representative spokesperson, who would be receptive to Telcos’ concerns about the consequences of the draft RevRec standard for their industry.

4.3 – European Telcos’ attempt to bring other actants on board

74The stage of “interessement” requires the creation of a new system of alliances, which in some cases required actants to break existing links with their environment (Dreveton & Rocher 2010, p. 4). The “interessement” of European Telcos outside the core group was conducted via the ETAF: “Over the past four and a half years [Editor’s note: this interview was conducted in May 2012], to start with there has been an educational effort within the sector […] And that then has led to regular meetings within the industry, written remarks and contact with the IASB…” (T1).

75Getting non-European operators on board, especially American Telcos, was particularly challenging. Telcos hoped to find a single, united voice in order to send a strong, consistent message to the IASB and the FASB: “establishing a connection with the American operators was particularly important because we wanted to be sure that when we started our discussions with the IASB, […] the American operators would be sending the same message […]” (T3) It should be noted that the American operators appear to have taken longer to get involved than their European counterparts. This delay may have given the Americans the impression that they were being manipulated by the Europeans when the latter sought to secure their signatures for the joint letter to the IASB, as we shall see later on (§ 4.4.1).

76The strategy adopted by Telcos is perfectly consistent with the IASB’s due process guide, which explicitly states the importance of having a sufficiently representative spokesperson. This guide specifies that Board members need to know if the viewpoints expressed are shared by all stakeholders in the same industry (IFRS Foundation 2013, § 3.66), a point of view shared by the Board member we spoke to: “We need to understand the issues facing companies […] And it’s much more productive if they come to us as a group, having already reflected on the matter and talked through their viewpoints to reach a consensus […] So when we meet with an organized delegation who come to us and say ‘this is the shared viewpoint of our industry’, that’s very useful.” (I2)

77The variety of local contexts faced by the different telecom operators makes it more complicated to achieve a consensus in this manner: “the way we do business in the United States is different from the way we do business in Europe, and very different from what happens in India and Japan… We had representatives from all of those countries, so we could hold discussions and understand how we all do business, and the extent to which the proposals would have an impact on us. And the fact is the proposals would affect us all very differently.” (T4) This statement highlights the difficulties encountered early on in the translation process, difficulties which would become greater with time.

78European Telcos thus sought to challenge the highly-localized thinking of the American operators who, unlike their European counterparts, do not have a strong international presence and conduct their business almost entirely within the USA. American Telcos have a close relationship with the FASB. Their first response was therefore to start a dialogue with the FASB, focusing exclusively on matters relating to the North-American context: “We have a longstanding relationship with the FASB: they generally call us and ask us for information about the practical implications of draft projects they’re working on.” (T4)

79When they became aware of the RevRec project, it would seem that the American Telcos tried to launch their own translation process, ignoring the joint nature of the project (FASB-IASB). They naturally entered into discussions with the FASB, as usual,, and even presented an alternative solution to the American standard-setter: the “residual approach.” (Appendix A). This approach would appear to be incompatible with the economic model of European Telcos. From an accounting perspective, the whole problem stems from how best to break down revenue into its essential sub-components: services and handset. In the USA, due to the commercial practices in place, operators are capable of providing a reliable estimate of the retail price of a telephone contract without handset (SIM Only). They can therefore calculate the cost of the handset. However, in Europe, the majority of telephone packages sold by operators come in the form of bundle contracts, and estimating the sale price of a SIM-only deal is more complicated. The translators thus attempted to isolate American Telcos from their local environment by underlining the importance of presenting a united front: “one of the biggest challenges was getting the Americans to understand that we couldn’t have a solution which works for the United States but doesn’t work in Europe.” (T1). The objective of the core group was to establish itself as the legitimate spokesperson for all Telcos, enabling them to present a consensus viewpoint in discussions with the IASB.

80In an attempt to win over the auditors, our translators spoke to their field auditors. These were auditors with who they were in almost daily contact, who are directly confronted with the problems that may arise from the application and interpretation of an accounting standard in the process of auditing. They were therefore representative spokespersons for the auditing profession, easily convinced.

81However, conflicts of interest emerged among the auditors which had the potential to undermine their support for the Telco industry: “There has always been tension within the auditing firms, because if they go lobbying exclusively for one industry then that may not be consistent with the interests of another group of industries, and they may also have clients in that group.” (T3)

82There is clearly tension within accounting firms, due the need to protect the company’s technical legitimacy in the eyes of the IASB and the urge to support their clients. In terms of auditability, Telcos’ wish to maintain the cash cap was compatible with the interests of field auditors. Nevertheless, it would have been very difficult for PPF members from these firms, who are in direct contact with the IASB and are involved in the submission of written remarks during the consultation process, to justify the conceptual and normative cohesion of cash cap. As it happens, the institutionalized practice of cash cap was accepted by PPF auditors even though some experts considered it to be a somewhat questionable interpretation of IAS 18. IFRS 15 probably seemed more conceptually consistent to the PPF auditors. It is much more prescriptive in its approach to revenue recognition, and limits sector-specific interpretations. The PPF auditors did not seek to question the stated aim of the IASB: to create non-sectoral, standards, without options and which are applicable to all, i.e. the non-human actant referred to above. They were thus less inclined to defend the interests of specific clients, partly to avoid being detrimental to other sectors and partly because they have a different view of their responsibilities: “We can get involved by commenting on the weaknesses of the text – where relevant and if there’s a general interest involved –, without going into sector specific examples of the impact it would have.” (A1).

83Finally, regarding the standard-setter, the priority is to make the staff, in charge of proposing amendments to draft standards, to rework any sections which are felt to be inappropriate. Telcos succeeded in getting the attention of the IASB staff, as we can see from the many working meetings they held together: “We drew up a list of all the meetings we had with Telcos, and it’s a very long list.” (I1) However, during the translation phase it appears that certain members of the core group of Telcos felt that focusing efforts on the staff alone would not be sufficient to alter the IASB position. They felt that direct contact with Board members was required in order to make their voices heard. One of the Telcos, a member of the core group, therefore contacted the Board member who was a fellow national: “He’s an ambassador, so the fact that there’s a […] designated ambassador means that should be the person you turn to […] And given that he’s a fellow countryman, that’s also an advantage.” (T1) An attempt was thus made to gain support from one or several Board members, encouraging them to challenge the dominant position. This action can be interpreted either as a proof of doubt in the representativeness of the initial spokesperson, i.e. the IATB staff, or else as awareness that the IASB is not a single actor, and can in fact be broken down into two actors: the staff and the Board members. According to the latter interpretation, which we consider the most plausible, the translators came to see that, as well as the staff, there were spokespersons among Board members.

84As seen before, the phase of “interessement” should theoretically involve a convergence of goals, i.e. actants must accept the problematization raised by the translator. But this does not exclude the possibility of interference (Walsh & Renaud, 2010). In our case we might conclude that the translators did succeed involving of all of the actors identified, but their efforts were disrupted by major interference: American Telcos made a new suggestion, the residual approach, and embarked upon their own translation process, with their own problematization, attempting to convince the standard-setters to consider this new alternative. Telcos also had to compete with differences of opinion between auditors, between the field auditors and the PPF auditors, raising thus issues as to the representativeness of the designated spokespersons.

4.4 – A partially successful enrolment process

85In this section we will look at the concrete actions taken by the different actants whom Telcos attempted to enroll to their cause.

5.1 – A theoretical contribution to the academic literature on due process

105Most researchers who have studied the due process have set out to better understand the balance of power at play or to cast light on the influence of certain categories of respondents (preparres, the accounting profession, users etc.), without giving much consideration to the possibility of alliances between participants. Our research helps to shed new light on the behavior of a group of actors seeking to establish a network of alliances in order to oppose a draft standard issued by the standard-setter. The existence of strategic alliances in the international accounting standard-setting process has not previously been explored in the academic literature. As far as we are aware, with reference to the IASB specifically, only Perry & Noelke (2005) have discussed the dominance of the accounting profession and financial institutions which contributes to explaining, in their view, the adoption of “fair value” as the preferred valuation method. The authors conclude that there is a de facto coalition in place, without determining whether this is a strategic alliance initiated by one particular party. One of the major criticisms of the existing literature on due process is its almost exclusive reliance on publicly-available data, which does not enable us to understand the more informal aspects of the process (Walker & Robinson, 1993). By limiting our study to a specific group of actors, considered over a long period, we were able to very precisely observe how the due process operates, showing both its formal and informal dimensions. In their study on the due process of IFRS for SMEs, Ram & Newberry (2013) supplemented their documentary analysis with a dozen interviews conducted exclusively with current or former members of the IASB and EFRAG who were involved in the project. By interviewing Telcos, auditors, members of the IASB staff and members of the Board, we were able to triangulate our data in a manner which is absent from Ram & Newberry’s work. Although the results from a single study can never be extrapolated to give a general rule, our research allows us to better understand what goes on both formally and behind the scenes, studying the interactions between due process participants and the standard-setter.

106On an empirical level, our use of ANT enables us to highlight two key elements of the due process which may be of use to stakeholders in their future interactions with the IASB: the representativeness of spokespersons and the role played by the IASB’s conceptual framework.

5.2 – Challenging the representativeness of spokespersons

107One potential explanation for the failure of the lobbying action undertaken by the Telcos lies in the representativeness of their chosen spokespersons, a key element in actor-network theory. The failure of “mobilization” can often be ascribed to the insufficient legitimacy of the spokespersons involved (Callon 1986; Dreveton & Rocher 2010; Rocher 2011; Woods 1998). In our case, the core group of Telcos faced representativeness problems within the industry, as we can see from the incident which occurred during the special meeting of 11 May 2011 between Board members, the staff and several Telcos. During this meeting, a German operator (representing 6 other European operators), a Swedish operator and an American operator (official spokesperson for AT&T and Verizon) all gave their opinions on ED 1. All the Telcos presented a united front against the draft standard, with the exception of the Swedish operator who presented their own method of revenue recognition, similar to the proposals made in ED 1 (IASPLUS). [4] According to one auditor, by inviting this Swedish operator to contribute to this session, the IASB deliberately sought to undermine the cohesiveness of the Telco sector: “The IASB were very crafty in that respect. […] the IASB asked several Telecoms operator to explain their accounting policies, one of whom was [the Swedish operator] […], who had already discarded the cash cap. And to be very honest that was a bit clumsy of the IASB, because they then wrapped up the session by saying: ‘You’re telling us there’s a standardized practice across the sector, but it’s not true. You’ve come to us with two different practices, there’s nothing we can do to help.’ Which was a bit dishonest, really. Because the cash cap practice was used by a huge majority of operators in the sector, and [the Swedish operator] is a very small operator from an international perspective.” (A1) By inviting this Swedish operator to contribute, the IASB cast doubt upon the federal nature of the message conveyed by the core group. Their legitimacy as spokespersons for the industry as a whole was thereby undermined.

108The limited success of the efforts made to enroll the American Telcos also compromised the representative legitimacy of the core group. The Americans refused to sign the joint comment letter submitted in February 2012; a refusal interpreted in different ways by the European Telcos we interviewed. For European operator T1, the main reason was the American legal context, whereby signing documents of this nature is a delicate matter: “[…] for that American mindset, signing up to the same letter as everyone else isn’t easy. They’re asking themselves: ‘Can I do this? Can’t I? Whose permission do I need to ask?’ etc.” American operator T5 offers an alternative interpretation: “The Europeans had already been working on it for a long time, they came to us and just said: ‘Here’s the letter, sign it or don’t’ […] I don’t think that it reflected our views. We weren’t involved with the drafting of that letter, which surprised me. They just asked us if we wanted to sign it, and we didn’t. The Europeans never asked us to help them write something which everybody could agree on.” This latter remark suggests that the problematization and “interessement” phases failed to adequately take the Americans into account, as if the Europeans had attempted to go straight to the enrolment phase by presenting the Americans with the finished letter, ready to be signed.

109Although it is difficult to assess the real impact of the refusal of the American Telcos to sign the joint letter, as well as the exception of the Swedish operator, these were nonetheless clear signals that the coalition was not truly sector-wide. For Rocher (2011, p. 140), a failed mobilization may also indicate that the alliances formed around the project were too weak, and that the spokespersons were not sufficiently representative: “actors who appear to be won over, convinced and transformed, may betray and desert the project or idea if they are pushed too far from familiar ground […] either because the project which first attracted them evolves into something which no longer represents their own interests, or else because they are reluctant to take on the role pressed upon them in this process of innovation. They therefore lose interest, and the network collapses.” This analysis would appear to correspond perfectly with the sentiments expressed by the American operator cited above.

110It seems fair to say that the core group of Telcos did not constitute a sufficiently representative spokesperson for the Telco industry as a whole, lacking the legitimacy required to influence the IASB.

111A similar problem emerged with auditors. Some of the Telcos we interviewed expressed a fairly negative view of the auditors’ contributions to this due process: “The auditing firms […] analyzed almost everything […] and after that they didn’t have much to say […] We got an incredible number of documents telling us how to interpret the standard. Great, but that wasn’t the question. We didn’t ask you how to interpret the standard, we’ve already done that, we understand how it works…” (T1)

112T3 nonetheless admits that the involvement of the major accounting firms, although it came later than he had hoped, did serve to facilitate dialogue within the industry and with the IASB: “In the later stages of the lobbying process […] when the IASB was more open to holding discussions with us, […] the big auditing firms also poured resources into the lobbying process, to try and secure certain changes.” (T3)

113The accounting firms were restricted by considerations of internal integrity, described in detail above, with the result that some Telcos felt that the auditors, particularly in their written submissions to the IASB, did not sufficiently emphasize the auditing issues arising from the implementation of the new standard. Our translators singled out some field auditors as spokespersons for the profession, but were they representative enough of the interests of auditors on the whole? Perhaps not. It is impossible to say with any certainty that a more targeted effort on behalf of the PPF auditors would have had a greater impact, but the only partially-successful enrolment of auditors and the insufficient legitimacy of the core group of Telcos both serve to demonstrate how hard it is to find the “right” spokesperson. Furthermore, we feel it is important to reiterate that, in our opinion, the main goal of auditors was not to ensure that Telcos’ wishes were granted. Their aim was simply to ensure the smooth functioning of the “regulatory conversations” (Black 1997, 2002) between Telcos and the IASB. Ideally, these exchanges would result in some form of consensus. If this was not the case, for whatever reason, auditors would have to deal with the tensions, misunderstandings and dissatisfaction, which would surely occur when the new standard was implemented.

114Insufficient representativeness of spokespersons as a factor in the failure of the translation process has already been discussed in the academic literature. Rocher (2011) partly attributes the failure of efforts to introduce consolidated accounts for French local authorities to the fact that the spokespersons from several groups of actors involved, lacked sufficient representative legitimacy.

115In light of this, we can turn to other theoretical frameworks to explain the lack of involvement and enrolment observed. Habermas (1986) provides a useful model, and we may question whether the core group succeeded in fulfilling the conditions for consensus, namely:

• all parties who wish to take part in the conversation are permitted to do so,
• all parties are allowed to make proposals,
• all parties have the right to question or criticize all proposals,
• no party is prevented from fully exercising these rights, whether in or outside the discourse.

116These concepts may provide a useful counterpoint to our analysis, and could even help future core groups to achieve greater representative legitimacy. Clearly here, time constraints prevent us from examining all four of these conditions in detail, although partial responses can be found elsewhere in our research. Nevertheless, we can once again highlight the presence of perimeters or borders separating the actors on the inside from actors excluded of the conversation. Moreover, the answer to this question is fluctuating and depends, among other things, on the timeframe of the actions taken. This temporal dimension would appear to be a crucial factor in two respects. Firstly, because achieving a broad consensus requires the involvement of all actors concerned very early in the process, even those who will not go on to play an active role. This early involvement is important to secure their enrolment when the time comes. Even if the core group becomes an efficient working unit capable of producing deliverables such as draft comment letters, they must not neglect their duty to maintain a regular dialogue with their all actors. The best solution is to launch the process with a general consultation – making it as exhaustive as possible – with all actors who need to be involved. In our case, this should have included the American operators.

117A second point relates to the sectoral dimension which we have already explored. This sector-wide approach requires a certain momentum, at the very least in terms of the arguments to be used in discussions with the standard-setter – although this in no way detracts from the importance of the sector’s work behind the scenes. In our opinion, the relative importance of the industry dimension should increase as the project progresses: it is a relatively small factor at the start of the standard-setting process – when “conceptual” arguments are to be prioritized – but should become more important as the process moves towards a final version. An overbearing sectoral presence in the early phases of due process may be a handicap in that it risks being confronted with a significant non-human actant: the conceptual framework.

5.3 – Insufficient consideration of a non-human of a non-human actor: the IASB’s conceptual framework

118One of the fundamental principles of IFRS, set out in the conceptual framework (cf.§ 4.1), is the reduction of the number of authorized alternative treatments and the removal of sector-specific exemptions. The reification of this comparability “ideal,” by means of its inclusion in this meta-standard, is thus as much of a constraint as it is an aid (Giddens 1986): a constraint because it limits the standard-setter’s room for maneuver, but an aid due to the power it confers upon the standard-setter to make decisions and stand by them. This is a perfect illustration of the relationship between human and non-human actants described by Akrich (2006b, p. 161): “What interests us here is to determine whether or not the configuration of the technical object imposes a certain number of constraints on the relationships between actants themselves and between actants and the object, and, reciprocally, how the nature of these actors and the links between them might serve to (re)shape the object and its uses.”

119The IASB devoted particular attention to the Telcos case, but the following statement made by a Board member during an “education session” made it very clear that the IASB will not be ceding to their demands: “[Member W] said one answer would be to have a different standard for telecoms, but that was complicated. The idea of the revenue recognition standard was to get a consistent revenue number across all industries”(IFRS Monitor 2012, p. 29). It was thus almost impossible for Telcos to provide a conceptual grounding for their rejection of the cash cap method without fundamentally challenging the founding principles of IFRS: “In order for a sector-specific accounting treatment to be justified we needed to prove that this treatment was conceptually sound for all cases.” (A5) According to T1, Telcos understood this, but still failed to produce a conceptually-solid alternative: “the problem with the IASB is that they want to see a concept; fine, we had a look at it […] there was only one way of doing it: they needed to discard their model, there was no other option because there was no way that they could make everybody happy […] So we very quickly realized the problem we were going to have, which was ‘are we going to be able to find an outcome which is compatible with their model?’ And the truth is no, we didn’t find a solution, so we then started trying to imagine one.” (T1)

120Without this conceptual justification, it was also extremely difficult for auditors to argue in favor of the cash cap: “I would agree that it’s probably the simplest method [i.e. cash cap] in terms of auditing […] The problem is that, with this project, the IASB wanted a standard which would apply to all industries and all organizations. The cash cap doesn’t work for all companies. And, conceptually speaking, it was never clear why cash flow should be the guiding principle in an accrual-based accounting.” (A5)

121While one of the major advantages of actor-network theory is its capacity to take non-human actors into account, some researchers find it difficult to put this principle into practice. Woods (1998), for example, while looking at the introduction of an anti-hunting law in a specific English county in the 1990s, considers the possibility and advisability of attributing equal importance to both the human and the non-human actants involved, i.e. the deer. Obviously it is more difficult to deal with a non-human actor, and Telcos certainly struggled with this difficulty. In this context, the ideal of comparability is a sort of black box which the standard-setter refuses to touch: “A black box is where we put things which are not up for discussion; things whose content has become irrelevant. The more elements we put into black boxes – reasoning, habits, forces, objects – the larger the structures we can create.” (Callon & Latour 2006, p. 19)

122Telcos attempted, with very limited success, to get around the black box and integrate this non-human actantindirectly, via other actants with identifiable and human spokespersons: other industries concerned by the IASB project. Since the conceptual framework states that IFRS must apply to all private organizations, without sector-specific considerations, representativeness cannot be derived from the Telco sector alone. Argumentation founded exclusively on the preoccupations of a single industry therefore has little chance of succeeding, as one Board member clarified: “The problem Telcos had, in my opinion, is that it’s quite hard for them to be compatible with the general model. But our problem was: if we start creating a specific system just for the Telcos, we’re going to have to agree to do the same for the next industry with a similar economic model, and then the next one… One thing leads to another, and you end up with a different standard for each sector.” (I2)

123Unfortunately, the Telcos did not succeed in finding other industries who shared their preoccupations. One PPF auditor emphasizes the significance of this obstacle to the Telcos’ efforts to obtain a reform: “It was really difficult for them, being in such an isolated position […] It was really a big challenge to reach an agreement. But I agree that if there had been more sectors with similar problems that would have pulled more weight with the Board.” (A5)

124A point of view shared by Callon & Latour (2006, p. 25): “In the key battles that we have just described, there will always be winners and losers – at least for a time […] As we have seen, the greater an actor’s capacity to bring together as many elements as possible – and, of course, to dismiss as rapidly as possible the elements mobilized by other actors – the stronger that actor’s position will be. Strength lies in the power to interrupt or interlink. More broadly, strength is the power to intervene, interrupt, interpret […]”

125Telcos clearly lost their first battle, the fight to retain the cash cap. Nonetheless, as Callon & Latour (ibid.) rightly point out, victory in this battle is only temporary. We could have chosen to tell this story from the point of view of the IASB, which conducted its own translation process and emerged as a “winner.” A winner whose victory was achieved not by violence, but by a successfully conducted process of translation which ultimately led Telcos to concede that the new standard was not without merit: “The conversations changed over the years. I think that, at first, many of them were worried about what it meant for their industry. I think that over the years, after much discussion, not only did we end up assimilating their point of view, but I think they also got a better understanding of our position […], and I think they felt that they had been heard and understood […] So I feel like it was a very positive process.” (I1) This opinion, voiced by a member of the IASB staff, is echoed by interviewee T1: “We needed to get something: we didn’t get everything we asked for, but at least we got something. With the passage of time (and the way the systems have evolved since the first drafts of the DP), as the portfolio method has been clarified […] we should be able to cope. So in a certain sense we got what we were fighting for, or at least our second objective. That’s not too bad!”