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Rate-regulated Activities – International Accounting Standards Board

Date recorded:

At its meeting on September 22-23, 2020, the IASB met to discuss sweep issues identified in drafting the Exposure Draft, Regulatory Assets and Regulatory Liabilities, as follows:

  1. definitions of a regulatory asset and a regulatory liability;
  2. regulatory returns on assets not yet available for use;
  3. effective date; and
  4. comment period.

The Board tentatively decided that:

  1. a regulatory asset is ‘an enforceable present right, created by a regulatory agreement, to add an amount in determining a regulated rate to be charged to customers in future periods because part of the total allowed compensation for goods or services already supplied will be included in revenue in the future’.
  2. a regulatory liability is ‘an enforceable present obligation, created by a regulatory agreement, to deduct an amount in determining a regulated rate to be charged to customers in future periods because the revenue already recognized includes an amount that will provide part of the total allowed compensation for goods or services to be supplied in the future’.
  3. the regulatory return on a balance relating to an asset not yet available for use forms part of the total allowed compensation for goods or services supplied once the asset is available for use and over the remaining periods in which an entity recovers the carrying amount of the asset through the regulated rates. The entity shall use a reasonable and consistent basis in determining how to allocate the return on that balance over those remaining periods.
  4. an entity be required to apply the final Standard for annual reporting periods beginning on or after a date 18–24 months from the date of its publication.
  5. the comment period for the Exposure Draft be extended from 120 days to 150 days. This meeting completes the public discussions for this project.

The Board expects to publish its Exposure Draft in January 2021.

Review the IASB Update and podcast on the Board's Web site.

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