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We comment on the IASB's regulatory deferral accounts proposals

  • Deloitte Comment Letter Image

05 Sep 2013

We have published our comment letter on the International Accounting Standards Board’s Exposure Draft, ED/2013/5 'Regulatory Deferral Accounts'. We believe that the interim solution proposed in the exposure draft is an appropriate tool for jurisdictions experiencing delays in adoption of IFRSs as a result of concerns about accounting for rate regulation and, as such, concur with the proposal as a means of facilitating further global adoption of IFRSs. However, we stress the importance of the IASB committing to pursuing the completion of its comprehensive project on rate regulation as a matter of priority and within a reasonable time frame.

The points made in the comment letter include:

  • We agree with the proposal to limit the scope of the interim Standard to first-time adopters of IFRSs as including entities currently using IFRSs could create unnecessary diversity in practice amongst those entities
  • We agree that adoption of the interim Standard should be optional
  • In terms of the scope of the proposed interim Standard, we agree the scope criterion that price must be restricted by an authorised body, but believe the second scope criterion could better be incorporated through a requirement to recognise an asset only when recovery is probable
  • We recommend that the IASB clarify the interaction of any interim Standard with the following:
    • IFRS 3 Business Combinations, in respect of situations such as an entity that does not recognise regulatory deferral account balances acquires an entity that is subject to rate regulation and recognises regulatory deferral accounts
    • paragraph D17 of IFRS 1 First-time Adoption of International Financial Reporting Standards: specifically, whether a parent should continue to recognise regulatory deferral account balances if its regulated subsidiary has adopted IFRSs at an earlier date and has not recognised such balances
  • We agree that regulatory deferral account balances, and the effect of movements thereof on profit or loss, should be presented separately, and agree with the requirement to present earnings per share figures before and after movements in regulatory account balances.

Click for the full comment letter.

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