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Reporting the Financial Effects of Rate Regulation [ED]

Comment period ends on July 30, 2021 (extended from June 30, 2021)

Next steps:

The IASB plans to review the Exposure Draft Feedback in Q4/2021

Last updated:

May 2021

Overview

The IASB is developing an accounting model that will require rate-regulated companies to provide information about their incremental rights to add amounts, and incremental obligations to deduct amounts, in determining the future rates to be charged to customers as a result of goods or services already supplied.

Currently, there is no specific guidance in IFRSs addressing the accounting for rate‑regulated activities and companies use different accounting models to report the effects of rate regulation. Consequently, comparing and understanding the effects of rate regulation across different countries and companies is difficult.

On January 28, 2021, the IASB published an Exposure Draft of a new standard "Regulatory Assets and Regulatory Liabilities" that is intended to replace IFRS 14, "Regulatory Deferral Accounts".

 The main proposals in the Exposure Draft are the following:

  • Objective: The new standard would replace IFRS 14 by introducing a new comprehensive accounting model for regulatory assets and liabilities.
  • Scope: The standard would apply when the entity is party to a regulatory agreement that determines the regulated rate the entity can charge for the goods or services it supplies to customers.
  • Recognition: Regulatory assets and liabilities arise when the regulated rate is determined in such a way that some or all of the total allowed compensation for goods or services supplied in one period is charged to customers in a different past or future period. Recognizing regulatory assets and liabilities leads to regulatory income and expense.
  • Measurement: Regulatory assets and liabilities would be measured at historical cost, modified for subsequent measurement by using updated estimates of the amount and timing of future cash flows. The estimated future cash flows of a regulatory asset or liability would be discounted to their present value by using the regulatory interest rate. After initial recognition, the carrying amount of the regulatory asset or liability would be updated at the end of each reporting period to reflect conditions existing at that date.
  • Presentation: In the statement(s) of financial performance, an entity would present all regulatory income and expense as a separate line item immediately below revenue. In the statement of financial position, an entity would present line items for regulatory assets and liabilities.
  • Disclosure: The exposure draft includes several proposed disclosure objectives and detailed requirements to achieve these objectives.
  • Effective date and transition: The exposure draft does not contain a proposed effective date as the IASB will decide on the effective date only upon completion of its redeliberations. The expectation is currently that the standard will become effective approximately 18-24 months after being published in its finalized form. The standard would be applied retrospectively with one transitional provision and early adoption would be permitted.

 

Other developments

May 2021

On May 28, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to review the Discussion Paper Feedback in Q4/2021.

April 2021

On April 6, 2021, the AcSB updated its Exposure Draft that corresponds to the IASB’s Exposure Draft to reflect the extended deadline. Comments are now due by July 30, 2021.

March 2021

On March 26, 2021, the IASB announced that it has decided to extend the comment period of Exposure Draft, Regulatory Assets and Regulatory Liabilities by 30 days. Comments are now due by July 30, 2021.

On March 15, 2021, the AcSB issued its exposure draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by June 30, 2021.

January 2021

On January 29, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in H2/2021.

On January 28, 2021, the IASB published the exposure draft of a new standard "Regulatory Assets and Regulatory Liabilities" that is intended to replace IFRS 14, "Regulatory Deferral Accounts". The deadline for submitting comments is June 30, 2021.

October 2020

On October 30, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in January 2021.   

September 2020

On September 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in Q1/2021.

August 2020

On August 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in Q4 2020.

July 2020

On July 23, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in the second half of 2021.

January 2020

On January 31, 2020, the IASB staff updated the Work Plan to indicate that the IASB expects to issue an Exposure Draft in the second half of 2020.

July 2019

On July 29, 2019, the IASB® staff updated the work plan to indicate that the Board expects issue an Exposure Draft in the first half of 2020.

June 2019

On June 21, 2019, the IASB® staff updated the work plan to indicate that the Board now plans to issue a Discussion Paper or Exposure Draft in the 1st half of 2020.

July 2018

On July 18, 2018, the IASB® staff updated the work plan to indicate that the Board plans to issue a Discussion Paper or Exposure Draft in the 2nd half of 2019.

January 2018

On January 26, 2018, the IASB Staff updated this project to indicate that the IASB now expects to issue a Discussion Paper or Exposure Draft in the first half of 2019. ​

December 2017 

On December 18, 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue a Discussion Paper or Exposure Draft in 2019. 

June 2017

In June 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue a Discussion Paper or an Exposure Draft for comment in the 1st  half of 2018.

March 2017

On March 23, 2017, the IASB staff issued an updated Work Plan which indicates that the IASB expects to publish a Discussion Paper in respect of this project for comment after September 2017.

December 2016

On December 15, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Discussion Paper for comment after June 2017.

September 2016

On September 23, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Discussion Paper for comment sometime after March 31, 2017.

July 2016

On July 20, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to issue a Discussion Paper sometime after January 31, 2017.

May 2016

On May 20, 2016, the staff updated the IASB Work Plan to indicate that the Board expects to issue a Discussion Paper after November 2016.

February 2015

On February 12, 2015, the European Financial Reporting Advisory Group has published a feedback statement on input received during outreach activities conducted with European users on the IASB’s Discussion Paper,

September 2014

On September 17, 2014, the IASB issued for public comment a Discussion Paper, Reporting the Financial Effects of Rate Regulation.

 

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