Development of Interpretations
Interpretations are developed by the Interpretations Committee but, because they are part of IFRS, they must be ratified by the IASB.
Three members of the IASB usually attend meetings of the Interpretations Committee. In addition, a report of each meeting of the Interpretations Committee is presented to the IASB at one of its public meetings. Interpretations are designed for general application and are not issued to resolve matters that are specific to a particular entity.
Development of a draft Interpretation
A draft Interpretation is developed on which the Interpretations Committee votes. Voting takes place at a public meeting. General agreement on the draft Interpretation is achieved when no more than four members have voted against the proposal.
Publication of a draft Interpretation is a mandatory step in the due process before a new Interpretation can be issued. It is the main vehicle for consulting the public and therefore includes an invitation to comment, setting out the issues that have been identified as being of particular significance.
Comment period and redeliberations
The IASB and the Interpretations Committee usually allow a minimum period of 90 days for comments on a draft Interpretation. If the matter is narrow in scope and urgent the IASB may consider a comment period of no less than 30 days, but it will set a period of less than 90 days only after consulting and obtaining approval from the Trustees’ Due Process Oversight Committee.
Comment letters are made publicly available unless confidentiality is requested by the commentator (supported by a good reason, such as commercial confidence). A staff summary and analysis of the comment letters is provided to the Interpretations Committee.
The Interpretations Committee reconsiders the conclusions in the draft Interpretation. based on the comments received and detailed staff analysis.
If the draft Interpretation is changed significantly, the Interpretations Committee will consider whether it should be re-exposed.
Finalising an Interpretation
A final Interpretation includes:
- a summary of the accounting issues identified;
- the agreement reached on the appropriate accounting;
- references to relevant Standards, parts of the Conceptual Framework and other pronouncements that have been drawn upon to support the agreement; and
- the effective date and transition provisions.
The reasons for the Interpretation are set out in a Basis for Conclusions. Members of the Interpretations Committee cannot dissent from an Interpretation. However, when the Interpretation is sent to the IASB for ratification, the technical staff paper accompanying the request for ratification should identify how many Interpretations Committee members objected to the Interpretation and their reasons for doing so.
Agreement and ratification by the IASB
When the Interpretations Committee has reached a consensus on an Interpretation, the Interpretation is put to the IASB for ratification (in a public meeting) before being issued.
When the Interpretations Committee has balloted the Interpretation it is submitted to the IASB for ratification.
Ratification of an Interpretation takes place in a public meeting of the IASB and requires a supermajority, the same level of support by IASB members as is required for a new or amended Standard.
The IASB votes on the Interpretation as submitted by the Interpretations Committee. If an Interpretation is not approved by the IASB, the IASB provides the Interpretations Committee with reasons for the objection. On the basis of these reasons, the IASB will decide whether the matter should be referred back to the Interpretations Committee, whether it should be added to its own agenda or that no further action should be taken.
Ratified Interpretations are issued by the IASB.