Standard Interpretations Committee (SIC)

Definition

The Standard Interpretations Committee (SIC), which has been replaced and is now known as the International Financial Reporting Interpretations Committee (IFRIC), serves an important role within the framework of international financial reporting. Its primary function is to provide coherent guidance on the application of International Financial Reporting Standards (IFRS) in areas where matters are not explicitly covered by existing standards or where diverse interpretations have arisen. This ensures consistency and clarity in financial reporting practices across different jurisdictions.

The IFRIC operates under the auspices of the International Accounting Standards Board (IASB), which means the interpretations it issues are authoritative and must be followed. Although the SIC and IFRIC are terms that refer to organizations at different times, they cumulatively represent the continuous effort to address accounting issues through interpretations.

Examples

Example 1: SIC-32 Intangible Assets—Web Site Costs

This SIC interpretation helps clarify the capitalization of costs associated with website development. It addresses the differentiation between expenditure to maintain a website and expenditure to develop a new part of a website that meets certain criteria of asset recognition.

Example 2: IFRIC 13 Customer Loyalty Programmes

IFRIC 13 addresses the accounting treatment of customer loyalty programs operated by entities, explaining how to recognize and measure the obligation to provide free or discounted goods or services when customers redeem reward points.

Example 3: IFRIC 12 Service Concession Arrangements

This interpretation covers arrangements where private sector entities participate in the development, financing, operation, and maintenance of public infrastructure such as roads or schools, providing guidance on how such arrangements should be reflected in financial statements.

Frequently Asked Questions (FAQs)

What is the role of the Standard Interpretations Committee (SIC)?

The SIC, now known as the IFRIC, develops and publishes interpretations to clarify issues concerning the application of IFRS in scenarios that are ambiguous or not explicitly covered by the standards.

How do SIC interpretations relate to IFRS?

SIC (and IFRIC) interpretations are integral to IFRS because they ensure the standards are applied consistently and effectively address issues in financial reporting that might lead to diverse practices.

Are SIC interpretations still valid?

Even though the SIC has been succeeded by the IFRIC, the interpretations issued by the SIC remain valid unless they have been superseded or withdrawn.

How does IFRIC come up with interpretations?

IFRIC follows a due process that involves consultations, exposure drafts, and consideration of feedback from stakeholders to develop interpretations that are clear, consistent, and universally applicable.

Where can I find the interpretations issued by IFRIC?

Interpretations issued by IFRIC are available on the official IFRS website and can also be found in the IFRS Foundation publications.

IFRS (International Financial Reporting Standards): A set of accounting standards developed by the IASB to ensure consistency, transparency, and comparability of financial statements globally.
IASB (International Accounting Standards Board): The independent standard-setting body responsible for developing IFRS.
IFRIC (International Financial Reporting Interpretations Committee): The modern equivalent of SIC, providing interpretations to ensure consistent and clear application of IFRS.

Online References

Suggested Books for Further Studies

“International Financial Reporting Standards (IFRS) - 2021” by the IFRS Foundation
“Wiley IFRS 2021: Interpretation and Application of International Financial Reporting Standards” by PKF International Ltd
“A Guide Through IFRS Standards” by the IFRS Foundation
“International Financial Reporting: A Practical Guide” by Alan Melville

Accounting Basics: “Standard Interpretations Committee” Fundamentals Quiz

### What is the primary purpose of the Standard Interpretations Committee (SIC)? - [ ] To develop new IFRS standards. - [x] To provide interpretations for issues not specifically covered by IFRS. - [ ] To audit financial statements. - [ ] To train accountants globally. > **Explanation:** The SIC's main role is to develop interpretations for issues that are not specifically addressed in existing IFRS standards. ### What does IFRIC stand for? - [ ] International Finance Regulations Interpretations Committee - [ ] International Financial Reforms Interpretations Committee - [x] International Financial Reporting Interpretations Committee - [ ] International Financial Registration Interpretations Committee > **Explanation:** IFRIC stands for International Financial Reporting Interpretations Committee. ### Which organization oversees the activities of IFRIC? - [x] International Accounting Standards Board (IASB) - [ ] Financial Accounting Standards Board (FASB) - [ ] Securities and Exchange Commission (SEC) - [ ] Public Company Accounting Oversight Board (PCAOB) > **Explanation:** The IASB oversees IFRIC, ensuring its interpretations align with IFRS standards. ### Are SIC interpretations still valid? - [x] Yes, unless they have been superseded or withdrawn. - [ ] No, they were invalidated by IFRIC. - [ ] They were never valid in the first place. - [ ] They are only valid for historical financial periods. > **Explanation:** SIC interpretations remain valid unless explicitly superseded or withdrawn by subsequent IFRIC guidance. ### What is the relationship between SIC interpretations and IFRS? - [ ] SIC interpretations override IFRS. - [ ] SIC interpretations are separate and optional guidelines. - [x] SIC interpretations clarify the application of IFRS where ambiguity exists. - [ ] SIC interpretations contradict IFRS standards. > **Explanation:** SIC interpretations exist to clarify how to apply IFRS in ambiguous or unspecified situations, promoting consistency. ### What major functional change occurred when SIC became IFRIC? - [ ] Interpretations had to be approved by local accounting bodies. - [ ] Interpretations were abolished. - [x] A seamless transition with a continued focus on providing accounting guidance. - [ ] Interpretations became suggestions rather than requirements. > **Explanation:** The transition from SIC to IFRIC represented continuity in the function to provide interpretations and guidance; the core focus remained on clarity and consistency. ### What kind of topics does IFRIC Issue interpretations on? - [ ] Only tax-related issues. - [ ] Personal finance matters. - [x] Various matters where IFRS lacks specific guidance. - [ ] Matters unrelated to accounting standards. > **Explanation:** IFRIC issues interpretations on various topics where specific guidance is lacking within IFRS. ### Which publication typically contains IFRIC interpretations? - [ ] Personal finance magazines - [ ] Local newspapers - [x] IFRS Foundation publications - [ ] Business school textbooks > **Explanation:** IFRIC interpretations can be found in IFRS Foundation publications, ensuring thorough and official documentation. ### Who might benefit from understanding SIC/IFRIC interpretations? - [x] Accountants and financial reporters - [ ] Consumers making purchase decisions - [ ] Sports coaches - [ ] Medical researchers > **Explanation:** Accountants and financial reporters greatly benefit from understanding SIC/IFRIC interpretations for accurate and consistent financial reporting. ### How does IFRIC gather feedback before finalizing interpretations? - [ ] Through secret internal meetings - [ ] By issuing surprise promulgations - [ ] By asking for opinions from only one stakeholder group - [x] Through consultations and exposure drafts > **Explanation:** IFRIC follows a due process involving consultations and exposure drafts to consider feedback comprehensively before finalizing interpretations.

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