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Authority of published IFRIC agenda decisions

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29 Nov 2005

The German Accounting Standards Board has published its view on the authority of IFRIC agenda decisions that IFRIC has begun publishing recently in IFRIC Update.

We thought that visitors to IAS Plus might find this guidance of interest:

A few months ago the IFRIC started to publish reasons for not taking an item on its agenda. Some of the items are rejected because they cannot be dealt with in an Interpretation, but potentially imply an amendment of the relevant Standards and are therefore referred to the IASB. Other items are not taken on the IFRIC agenda because they are part of an ongoing Board project and therefore should be dealt with in this project. Finally, some items are rejected because the IFRIC does not see the necessity of an Interpretation, i.e. the relevant Standard is clear and there is no significant diversity in practice. It is common that the accounting treatment suggested by constituents in their request for an IFRIC Interpretation is explicitly declined by the IFRIC in the published agenda decision. Examples for such statements that are sometimes (unofficially) referred to as 'Non-Interpretations' are the three agenda decisions published in the September issue of IFRIC Update 2005, pages 5-6.

This raises the question if these 'Non-Interpretations' have any authoritative character. Since the published final agenda decisions (including the 'Non-Interpretations') are preceded by the explicit statement that 'The following explanations are provided for information only, and do not change existing IFRS requirements' (see the August issue of IFRIC Update 2005, page 5), this seems to imply that the 'Non-Interpretations' do not have to be taken into account by preparers of financial statements. However, this does not seem to reflect the intention of the IFRIC properly. In fact, the Chairman of the IFRIC, Mr. Bob Garnett, said at the 4th Official IFRS Congress that took place on the 8 and 9 September 2005 in Berlin, Germany, that the level of authority of the published agenda decisions is comparable to the level of authority of Implementation Guidance that accompanies several Standards. While the Implementation Guidance is not part of the relevant Standard, it shows however, how the principles of IFRS have to be applied in the Standard. This means that 'Non-Interpretations' cannot be neglected by preparers of IFRS financial statements and it further seems to imply that a deviation from the statements in a 'Non-Interpretation' is only justified if a preparer can demonstrate that there are good reasons for doing so. In this way, the 'Non-Interpretations' can be labelled persuasive, but non-authoritative.

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