A method and system including an improved generalized reference decoder that operates according to any number of sets of rate and buffer parameters for a given bit stream. Each set characterizes a leaky bucket model and contains three parameters representing the transmission bit rate, buffer size, and initial decoder buffer fullness. An encoder provides at least two sets of these parameters, whereby the decoder selects one or interpolates between them to operate at any desired peak bit rate, buffer size or delay. The generalized reference decoder may select the smallest buffer size and corresponding delay that decodes the bit stream without buffer underflow or overflow, or alternatively may select and operate at the minimum required peak transmission rate, or something between both. In practice, the buffer size, delay and/or the peak transmission rate can be reduced by significant factors, and/or the signal-to-noise ratio (SNR) can be increased.