Introducing the topic, the research paper looks at different types of rate regulation in Korea (energy companies), the United Kingdom (electricity and gas), Germany (air traffic service), Canada (electricity companies), the United States (gas and electricity) and Brazil (utility companies).

The paper then analyses possible bases for recognition of assets and liabilities from three different angles each: For assets, the Conceptual Framework, revenue recognition, and intangible assets are explored; for liabilities, the paper looks at the Conceptual Framework, provisions under IAS 37, and financial liabilities. However, the paper concludes that no perfect accounting model is available yet and it notes that although the accounting for rate-regulated activities has some similarities with intangible assets, IFRIC 12, provisions, deferred income taxes, and revenue recognition, these are not sufficient enough to support recognition and measurement of rate-regulated assets or liabilities.

Therefore, the KASB concludes in his paper:

We propose to establish a holistic approach to the accounting for rate-regulated activities. Like IFRS 14 Regulatory Deferral Accounts, we need to create brand new items of regulatory assets and liabilities that do not belong to any categories of assets and liabilities beforehand. Further, the requirement of more disclosures in the footnotes to the financial statements may help the readers better understand the accounting for rate-regulated activities.

Generally, the KASB concludes that although the perfect accounting model is not available yet, regulatory assets and liabilities can be recognised the accounting for rate-regulated activities will bring more meaningful information to the stakeholders of the related entities.

The research report is available on the KASB website.