At its meeting on April 25-27, 2023, the IASB redeliberated the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities relating to (i) the recognition and measurement of regulatory assets and regulatory liabilities arising from performance incentives that relate to an entity’s performance over several periods (long-term performance incentives); and (ii) the derecognition of regulatory assets and regulatory liabilities. The IASB tentatively decided to retain the proposal to require an entity to estimate the amount of a long-term performance incentive, and to determine the portion of that estimated amount that relates to the reporting period using a reasonable and supportable basis. The IASB tentatively decided that the prospective Standard would (i) require an entity to derecognize (a) a regulatory asset as it recovers part or all of the regulatory asset by adding amounts to future regulated rates charged to customers; and (b) a regulatory liability as it fulfils part or all of the regulatory liability by deducting amounts from future regulated rates charged to customers; (ii) explain that the derecognition of regulatory assets and regulatory liabilities, as described in paragraph (i), is the most common way in which regulatory assets and regulatory liabilities would be derecognized. Therefore, in applying the recognition and measurement requirements at the end of each reporting period, an entity would not be required to consider explicitly when and how its regulatory assets and regulatory liabilities should be derecognized; (iii) clarify that an entity would derecognize a regulatory asset or a regulatory liability if the asset or liability ceased to meet the ‘more likely than not’ recognition threshold; (iv) include guidance on the derecognition of regulatory assets and regulatory liabilities settled by a regulator or another designated body. The guidance would also require an entity to recognize the difference between the derecognized regulatory asset or regulatory liability and any new asset or liability in profit or loss; (v) specify that if a regulatory asset or a regulatory liability is added to or deducted from an entity’s regulatory capital base and the entity’s regulatory capital base has no direct relationship with its property, plant and equipment, the entity would derecognize (a) the regulatory asset and recognize any associated regulatory expense in profit or loss; and (b) the regulatory liability and recognize any associated regulatory income in profit or loss. The IASB also tentatively decided not to include in the prospective Standard any guidance on the securitization of regulatory assets.

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