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IFRS Standard-Setting Process and Due Process Explained

Updated 11 October 2026 · Fact-checked

The IASB develops IFRS Standards through a public due process. It sets an agenda, researches the issue, may publish a discussion paper, then issues an exposure draft for comment, reviews the feedback, and finally publishes the Standard. Consultation at each stage gives users and preparers a voice and makes standards more credible.

Understand IFRS Standard-Setting Process and Due Process

Accounting standards affect companies, investors, auditors and regulators worldwide. If one group wrote them in private, many would not trust or accept them. So the IASB follows a due process: an open, transparent route that lets anyone affected comment before a rule becomes final.

The process starts with agenda setting. The IASB decides which problems to work on. Ideas come from many sources, such as the IFRS Interpretations Committee, national standard-setters, regulators, investors and preparers. The IASB also consults the public on its overall work plan from time to time.

Next comes research and standard-setting. For big or complex topics the IASB may first publish a discussion paper. This sets out the issue, explores possible approaches and asks for views. It does not propose a specific rule and is not mandatory. When the IASB is ready to propose actual requirements, it publishes an exposure draft. This contains the proposed text of the Standard or amendment, and comments are invited, usually over a fixed period.

After the comment period the IASB considers the responses. It may hold public meetings, field tests or consult further. It may re-expose the draft if it makes significant changes. When satisfied, it issues the final IFRS Standard, together with supporting material such as a Basis for Conclusions. After issue, the IASB and the Interpretations Committee may review how the Standard works in practice, often called a post-implementation review.

For the exam, remember the sequence and the purpose of each stage. The key contrast is simple: a discussion paper asks questions and floats ideas; an exposure draft proposes specific wording.

Key rules to remember

Typical sequence of due process
Agenda setting → Research → Discussion paper (optional) → Exposure draft → Consider comments → Final IFRS Standard → Post-implementation review
Know the order. The discussion paper is not mandatory; the exposure draft is the standard step before a final Standard.
Discussion paper versus exposure draft
Discussion paper = ideas and options, no proposed wording; Exposure draft = proposed requirements, with comments invited
This is the most commonly tested distinction.
Purpose of due process
Transparency + consultation + accountability = credibility and acceptance
Use this when asked why due process matters.

How to solve IFRS Standard-Setting Process and Due Process questions

Use this method for any question on how IFRS Standards are developed.

  1. 1Read what is asked: list the stages, explain one stage, compare two documents, or give the purpose of due process.
  2. 2Write the stages in order: agenda, research, discussion paper (if needed), exposure draft, review of comments, final Standard.
  3. 3For each stage, state what the IASB does and who can take part.
  4. 4If asked to compare documents, contrast purpose, content, and whether it contains proposed wording.
  5. 5Add why the stage matters: transparency, consultation, credibility, better quality rules.
  6. 6Link to the scenario if one is given, for example a preparer or investor who wants to influence a proposal.
  7. 7Check that your answer is in sequence and does not mix up the documents.

Quickest way: Sequence and contrast shortcut

When to use it: Use this for Section A or Section B objective questions where you must pick the right stage or document quickly.

  1. Spot the key phrase: 'proposed requirements' means exposure draft; 'explores options' or 'seeks views' means discussion paper.
  2. If the item is the final authoritative text, it is the IFRS Standard.
  3. If the question asks which step is optional, choose the discussion paper.
  4. Eliminate options with the wrong order, such as an exposure draft before agenda setting.
  5. Choose the answer that fits and move on.

Common mistakes in IFRS Standard-Setting Process and Due Process

  • Saying a discussion paper contains proposed standard wording.

    Both documents invite comments, so they seem alike.

    Fix: Remember that a discussion paper explores ideas and options. Only the exposure draft sets out proposed requirements.

  • Treating the discussion paper as a compulsory stage.

    Textbook lists show every step in one line.

    Fix: Mark it as optional. The IASB uses it mainly for broad or complex topics.

  • Putting the stages in the wrong order.

    Students memorise names but not the logic.

    Fix: Think of the flow: decide topic, research, ask for views, propose wording, review feedback, issue.

  • Forgetting the purpose of due process.

    Students focus on listing steps only.

    Fix: Add one line on transparency, consultation and credibility whenever the question says 'explain' or 'discuss'.

  • Assuming the exposure draft becomes final unchanged.

    The draft looks like the finished Standard.

    Fix: State that the IASB considers comments and may change the proposals, or re-expose them, before issuing the Standard.

Worked examples

Example 1

Section C style: Explain the main stages the IASB goes through in developing an IFRS Standard, and why it follows a due process.

Show the solution
  1. Start with agenda setting: the IASB decides which issues to address, using input from the Interpretations Committee, regulators, national standard-setters and others.
  2. Research follows. For significant topics the IASB may publish a discussion paper, which sets out the issues and options and asks for views, without proposing specific wording.
  3. Then the IASB publishes an exposure draft, containing the proposed text of the Standard, and invites comments over a set period.
  4. The IASB considers the comment letters, may hold consultations or tests, and may re-expose if it makes major changes.
  5. It then issues the final IFRS Standard with supporting material, and later may carry out a post-implementation review.
  6. Explain the purpose: due process makes the work transparent, lets users and preparers contribute, and so raises the quality and acceptance of the Standards.

Answer: Stages: agenda setting, research, optional discussion paper, exposure draft, consideration of comments, final Standard, and later review. Due process ensures transparency, consultation and credibility.

Example 2

Objective test: A company wants to influence a proposal that includes draft paragraphs of a new accounting requirement. Which document is it most likely commenting on? A. Discussion paper B. Exposure draft C. Final IFRS Standard D. Agenda consultation

Show the solution
  1. Identify the key clue: the document includes draft paragraphs of a new requirement.
  2. Draft wording of requirements, open for comment, is the feature of an exposure draft.
  3. A discussion paper explores options with no proposed wording, so A is wrong.
  4. A final Standard is no longer open for comment on its content, so C is wrong.
  5. An agenda consultation asks which topics the IASB should work on, so D is wrong.

Answer: B. Exposure draft

Exam tips

  • Always give the stages in order and say which one is optional.
  • Write one clear contrast line for discussion paper versus exposure draft; it is a favourite objective test item.
  • In written answers, add the purpose of due process to earn the explanation mark.
  • Read the verb: 'list' needs a short sequence, while 'explain' needs what happens at each stage and why.
  • Link this topic to the IASB structure: the IFRS Foundation oversees, the IASB sets the Standards, and the Interpretations Committee supports application.

Practice questions from Regulatory framework

IFRS Standard-Setting Process and Due Process in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IFRS Standard-Setting Process and Due Process: frequently asked questions

What is the difference between a discussion paper and an exposure draft?

A discussion paper explores an issue and possible approaches and asks for views. It does not propose specific requirements. An exposure draft sets out the proposed wording of a Standard or amendment and invites comments before it is finalised.

What are the steps in IASB due process?

The usual steps are agenda setting, research, an optional discussion paper, an exposure draft, consideration of comments, and issue of the final IFRS Standard. A review of how the Standard works in practice may follow.

Is a discussion paper always issued before a standard?

No. The IASB uses it mainly for larger or more complex topics. Some projects go straight to an exposure draft.

Why does the IASB use due process?

It makes standard-setting open and accountable. Input from users, preparers, auditors and regulators improves the quality of the Standards and helps them gain acceptance.