It is actually quite easy to lose sight of Interpretations, even though they are just as much part of the authoritative literature as standards. Essentially the IFRS Interpretations Committee (previously known as the International Financial Reporting Interpretations Committee – IFRIC, which replaced the Standards Interpretations Committee) responds to queries on how to interpret standards. It is an unpaid committee, consisting of 14 people, mostly auditors and preparers, and it meets six times a year to discuss technical questions put to it. The questions often come from international audit firms, but might also come from national regulators or others: their origin is never revealed publicly. The Committee is supposed to provide an authoritative Interpretation, which is approved by the IASB. The Committee also deals with issues under the IASB’s Annual Improvements Process.
In theory the IFRS Interpretations Committee cannot change the existing literature but is supposed to address questions where there is a possible conflict between standards, or there is confusion about what a standard means, or people want to know if a standard can be applied in circumstances other than those considered in the standard.
An example of an Interpretation is IFRIC 13 Customer Loyalty Programmes. Constituents noted that IAS 18 Revenue provided two possible treatments of ‘free’ gifts given to customers when they make a purchase, such as air miles granted with a ticket purchase. One ...