Accounting Interpretation

DEFINITION of 'Accounting Interpretation'

A statement clarifying how accounting standards should be applied. Accounting interpretations are issued by accounting standards groups, such as the Financial Accounting Standards Board (FASB), American Institute of CPAs (AICPA) or International Accounting Standards Board (IASB). Interpretations are generally not requirements, but rather outline best practices and give further explanation. By contrast, accountants are required to follow the accounting standards that are in place.

BREAKING DOWN 'Accounting Interpretation'

As financial transactions continue to evolve, new situations develop that may not have been foreseen by the existing accounting standards. In this case, accounting boards may choose to issue an interpretation outlining the recommended practices for accounting as questions arise. If new changes are particularly significant, the standards themselves may be adjusted so that compliance is required.