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Review of the efficiency and effectiveness of the IFRS Interpretations Committee

Date recorded:

The Trustee’s review of the effectiveness and efficiency of the IFRIC commenced in October 2010 with the launch of two questionnaires; one for members of IFRIC and one for others, which was made publicly available on the IASB website for all interested parties to complete. This review coincides with the on-going Trustee’s Strategy Review, which addresses the need for consistent application of IFRSs. The summary of these responses have been presented previously to IFRIC and IFRS Advisory Council. The discussions by IFRIC and the IASB members have also been presented to the Trustee’s Due Process Oversight Committee.

The staff set out proposed changes to the agenda criteria for the Committee’s work and asked for the Board’s views and comments which will be incorporated with the IFRIC comments into the report to the Trustees in April 2012.

The Board tentatively agreed with the proposed revised agenda criteria for the IFRIC (set out as follows) but tentatively suggested supplementing the criteria with a statement of the overall objective of the IFRIC:

  1. The proposed single set of criteria for adding any issue to the Committee’s agenda are:
    1. Prevalence and significance
      1. The issue is widespread and has practical relevance; and
      2. The issue is significant to those entities that it affects.

        The Committee will address issues that have widespread effect and have, or are expected to have, a significant impact on those affected.
    2. Diversity in practice
      1. There is significant diversity in practice in the application of IFRSs in respect of the issue (either emerging or already existing in practice).

        The Committee will pursue opportunities to significantly reduce diversity in practice which will improve financial reporting.
    3. Feasibility and efficiency
      1. The issue can be resolved efficiently within the confines of existing IFRSs and the Conceptual Framework.

        The issue should be sufficiently narrow in scope to be capable of addressing in an efficient manner by the Committee, but not so narrow that it is not cost-effective for the Committee and its constituents to undertake the due process associated with the changes to IFRSs that would be required.
    4. Timeliness
      1. The solution developed by the Committee will be effective for a reasonable period of time.

        If the issue relates to a current or planned IASB project, the Committee will assess its ability to develop guidance that will be effective sooner than the corresponding IASB project, taking account of the necessary due process requirements.
  2. The supplementary criteria to be included in Annual Improvements:
    1. Clarifying – the proposed amendment would improve IFRSs by:
      1. Clarifying unclear wording in existing IFRSs, or
      2. Providing guidance where an absence of guidance is causing concern.

        A clarifying amendment maintains consistency with the existing principles within the applicable IFRSs. It does not propose a new principle or a change to an existing principle.
    2. Correcting – the proposed amendment would improve IFRSs by:
      1. Resolving a conflict between existing IFRSs and providing a straight-forward rationale for which existing requirements should be applied, or
      2. Addressing an oversight or relatively minor unintended consequence of the existing requirements of IFRSs<

        A correcting amendment does not propose a new principle or a change to an existing principle, but may create an exception from a principle.

The Board tentative agreed with the application of the revised agenda with a broader range of tools for the Committee to provide guidance through:

  1. Mandatory requirements:
    1. IFRIC Interpretations
    2. Amendments to standards through:
      1. Annual Improvements;
      2. Proposals to the Board for targeted, narrow scope amendments that are beyond the scope of an Annual Improvement; or
      3. Proposals for additional Application Guidance
  2. Non-mandatory solutions:
    1. Proposals for additional Illustrative Examples;
    2. Explanations via Agenda Decisions; or
    3. Referral to the Education Initiative, including proposals for inclusion in occasional staff articles