FORMATION OF THE SIC

At its meeting in September 1996, the Board of the International Accounting Standards Committee (IASC) decided to establish a committee to review on a timely basis, within the context of existing International Accounting Standards and IASC's Framework, accounting issues that are likely to receive divergent treatment in the absence of authoritative guidance. Like the Emerging Issues Task Force of FASB, the objective of the review is to reach consensus as to the appropriate accounting treatment.

At the board meeting in January 1997, the Standing Interpretations Committee (SIC) was formed and its members were appointed. At its meeting in Beijing in July, the board approved IAS 1, Presentation of Financial Statements (revised), which confirms in the authority attaching to the SIC Interpretations.

SIC Operating Procedures

At its July meeting, the IASC Board approved SIC's operating procedures.

* It has 12 voting members (representing users, preparers, and auditors of financial statements) and four nonvoting observers (representing the EC, IOSCO, and two board liaison members), appointed for a term of two and a half years (currently the voting members come from 10 countries);

* It meets in private four times a year, usually in London for two days; and

* Eight voting members represent a quorum, a consensus is achieved when no more than three members of the SIC have voted against the proposal.

FORMATION OF THE SIC

The major steps of the SIC due process will be the following:

* Suggestions for consideration by SIC may be put forward by any individual or organization, taking into account the criteria that have been agreed to by the committee (topics pertain to an existing standard, have practical and widespread relevance, relate to a specific fact pattern, and significantly divergent interpretations are emerging or exist already in practice);

* When a subject is added to the agenda, nominated national committees will be informed and asked to put forward their comments;

* After having achieved consensus, a draft interpretation will be issued to the public and any comments received within two months will be considered before a final interpretation is concluded;

* A final interpretation will be put to the board before being issued. Approval by the board requires three-quarters of board members to vote in favor; and

* Interpretations approved by the board will be published for distribution as authoritative guidance.

The published interpretation will contain a description of the issue, the consensus, and the basis of its conclusions.

Proposed Interpretations

The SIC achieved consensus on whether all inventories of a group should be measured applying only one cost formula, whether an enterprise that chooses an alternative treatment for capitalization of borrowing must apply this policy to all qualifying, and to what extent intercompany gains and losses resulting from transactions with associates should be eliminated. The draft interpretations on these three topics are expected to be published for public comment at the beginning of August 1997. *