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IAS 18, IAS 37 and IAS 39 — Regulatory assets and liabilities

Date recorded:

The Committee received a request to address issues related to rate-regulated activities (i.e. to clarify whether a population of customers can be regarded as a single unit of account, and if so, whether a regulated entity should recognise a regulatory asset or liability when the entity has a right to recover specific costs, or an obligation to refund some amounts of collections irrespective of whether services are rendered in future periods).

Several Committee members noted that the fact pattern that was brought before the Committee did not relate to regulated activities but that rather, if an entity was entitled to receive or pay amounts without the need to provide future services (e.g. if the entity was shut down), that entity should recognise either a receivable or payable within the relevant IFRS standards.

To address the wider issue of rate-regulated activities, the staff noted that the Committee previously reached a conclusion when it discussed whether it would be appropriate to recognise a regulatory asset in 2005. The Committee had then concluded that an entity should recognise only assets that qualify for recognition in accordance with the IASB’s Conceptual Framework and relevant IFRSs such as IAS 11 Construction Contracts, IAS 18, IAS 16 and IAS 38. The Committee tentatively agreed that its past conclusions are still valid because no major changes have been made to these IFRSs since the Committee reached that conclusion.

The staff also noted that in the Board’s project on rate-regulated activities, the Board in 2010 had concluded that the issue could not be resolved quickly, and therefore included requests for views in its Agenda Consultation published in July 2011.

Due to the significance of the issues to those operating in a price-regulated environment, the Committee tentatively decided that it will include this issue on its work-in-progress list and bring the issue to the Board’s attention and ask the Board to address the issue and then based on the Board’s decision, either include a tentative agenda decision or reassess this issue as necessary.

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