IFRIC

IFRIC International Accounting Financial Reporting IFRS Interpretations Committee Global Standards
The term IFRIC stands for the International Financial Reporting Interpretations Committee, which is responsible for developing interpretive guidance on accounting issues under the International Financial Reporting Standards (IFRS).
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Definition of IFRIC

The International Financial Reporting Interpretations Committee (IFRIC) is a body under the International Accounting Standards Board (IASB) tasked with providing timely guidance on emerging accounting issues. Its role involves interpreting the International Financial Reporting Standards (IFRS) and ensuring uniform application of these standards globally.

Key Functions

  • Developing Interpretations: IFRIC drafts and approves interpretations of existing IFRS to ensure consistent application.
  • Addressing Issues: The committee addresses newly identified financial reporting issues that may arise during the application of existing standards.
  • Ensuring Consistency: By issuing interpretations, IFRIC helps to resolve diversity in financial reporting practices around the world.

Examples

  1. IFRIC 12: Service Concession Arrangements
    • This interpretation deals with how operators recognize and measure service concession arrangements whereby a public sector entity contracts with a private sector operator to develop (or upgrade), operate, and maintain the infrastructure.
  2. IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
    • This interpretation addresses how companies should handle the limit on the amount of surplus in a defined benefit plan that can be recognized as an asset on the balance sheet.

Frequently Asked Questions

What types of issues does IFRIC address?

  • IFRIC addresses issues that may cause substantial divergence in practice under IFRS, including those not specifically covered by existing standards, or where unsatisfactory or conflicting interpretations might occur.

How are IFRIC interpretations developed?

  • Interpretations are developed through a rigorous and consultative process, including the issuance of drafts for public comment, considerations of feedback, and approval by a super-majority of the IFRIC members.

Are IFRIC interpretations mandatory?

  • Yes, once finalized and approved by the IASB, IFRIC interpretations become part of IFRS and are mandatory for companies following IFRS.

Who can submit issues to IFRIC for interpretation?

  • Any individual or organization can submit issues to IFRIC if they believe the matter requires interpretive guidance under the existing IFRS framework.

How often does IFRIC meet?

  • IFRIC meets every two months, but the frequency may vary depending on the volume and complexity of the issues under consideration.

  • International Financial Reporting Standards (IFRS): These are standards and interpretations adopted by the IASB that guide how transactions and other events are reported in financial statements.

  • International Accounting Standards Board (IASB): The IASB is the independent body responsible for developing and issuing IFRS.

Online References

Books for Further Studies

  • “Applying IFRS Standards” by Ruth Picker et al.
  • “International Financial Reporting Standards (IFRS) 2021 by Ernst & Young
  • “Interpretation and Application of IFRS Standards” by PKF International Ltd

Accounting Basics: “IFRIC” Fundamentals Quiz

### What does IFRIC stand for? - [ ] International Finance Reporting and Compliance - [ ] International Fund Restructuring and Investment Commission - [ ] International Financial Reporting Institute - [x] International Financial Reporting Interpretations Committee > **Explanation:** IFRIC stands for the International Financial Reporting Interpretations Committee, tasked with developing and maintaining interpretive guidance on accounting issues. ### What is the primary role of IFRIC? - [x] Developing interpretations of IFRS - [ ] Preparing financial statements - [ ] Auditing businesses - [ ] Managing global investments > **Explanation:** The primary role of IFRIC is to develop interpretations of the International Financial Reporting Standards (IFRS) to ensure their consistent application worldwide. ### Why are IFRIC interpretations important? - [ ] They replace financial statements. - [ ] They facilitate global trade agreements. - [x] They address emerging accounting issues and ensure consistency in reporting. - [ ] They establish new tax rates. > **Explanation:** IFRIC interpretations address emerging accounting issues and ensure consistency in the application of IFRS. ### Who approves the interpretations developed by IFRIC? - [ ] National Governments - [ ] Corporate Boards - [x] International Accounting Standards Board (IASB) - [ ] Auditing Firms > **Explanation:** The International Accounting Standards Board (IASB) approves the interpretations developed by IFRIC. ### Are IFRIC interpretations mandatory for all companies following IFRS? - [ ] No, they are optional. - [x] Yes, once approved. - [ ] Only for large corporations. - [ ] Only if there is industry agreement. > **Explanation:** Yes, once the interpretations are approved by the IASB, they become mandatory for companies following IFRS. ### How can issues be submitted to IFRIC? - [ ] Only by government agencies. - [ ] Issued spontaneously by IFRIC. - [x] Any individual or organization can submit. - [ ] Only the IASB can submit. > **Explanation:** Any individual or organization can submit issues to IFRIC for interpretation. ### Which body is responsible for issuing IFRS? - [ ] European Union - [x] International Accounting Standards Board (IASB) - [ ] World Bank - [ ] United Nations > **Explanation:** The International Accounting Standards Board (IASB) is the body responsible for issuing IFRS. ### How frequently does IFRIC meet? - [ ] Weekly - [x] Every two months - [ ] Annually - [ ] Monthly > **Explanation:** IFRIC typically meets every two months to review and issue new interpretations. ### What does IFRIC 14 deal with? - [ ] Lease Accounting - [ ] Revenue Recognition - [ ] Asset Valuation - [x] Defined Benefit Asset and Minimum Funding Requirements > **Explanation:** IFRIC 14 deals with the limit on a defined benefit asset, minimum funding requirements, and their interaction. ### Which document comprises the interpretations approved by IFRIC? - [ ] IFRIC Handbook - [x] International Financial Reporting Standards (IFRS) - [ ] GAAP Principles - [ ] Corporate Accounting Manual > **Explanation:** The interpretations approved by IFRIC become part of the International Financial Reporting Standards (IFRS).

Thank you for exploring the IFRIC terminology and tackling our comprehensive quiz questions. Continue enhancing your knowledge of international financial reporting!

Tuesday, August 6, 2024
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