International Financial Reporting Standards (IFRS) are often said to be "principle-based," meaning that they are based on clear-cut principles that can be applied without the need for detailed interpretive guidance. Even so, principle-based standards need a little interpretation once in a while. Enter the IFRS Interpretations Committee.
The IFRS Interpretations Committee (IFRIC or the Committee) assists the International Accounting Standards Board (IASB or the Board), which issues IFRS, in improving financial reporting through the timely identification, discussion, and resolution of financial reporting issues. Its mandate is to interpret the application of IFRS and to provide timely guidance on financial reporting issues not specifically addressed in IFRS. The Committee develops this guidance using a principle-based approach founded in the Conceptual Framework for Financial Reporting. The Due Process Handbook for the IFRS Interpretations Committee makes it clear that in providing interpretative guidance, the Committee should not try to create an extensive rules-oriented environment or act as an urgent issues group.
The Committee meets approximately six times a year and summarizes the results of each meeting in an IFRIC Update, published electronically on the IASB website.
Three-tiered structure of the IFRS Foundation
A little background on the structure of the international standard-setting process may be helpful in understanding the Committee's role in that process. The IFRS Foundation comprises a three-tiered governance structure: the Monitoring Board, the Trustees of the IFRS Foundation, and the IASB. That structure has been established to ensure the transparency, public accountability, and independence of the international standard-setting process.
The Monitoring Board provides a formal link between the Trustees of the IFRS Foundation and public authorities. That link was established to help capital market authorities effectively carry out their mandates relating to investor protection, market integrity, and capital formation. In general, the Monitoring Board, which consists of public capital market authorities, is responsible for approving the appointment of Trustees to the IFRS Foundation and for monitoring the Foundation's activities.
The Trustees of the IFRS Foundation oversee the standard-setting process. The Foundation's mission is to develop a single set of high-quality, understandable, enforceable, and globally accepted...