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Deloitte comment letter on IASB DP/2014/2 'Reporting the Financial Effects of Rate Regulation'

Published on: 16 Jan 2015

Deloitte Touche Tohmatsu Limited has responded to the International Accounting Standards Board’s (IASB) Discussion Paper DP/2014/2 Reporting the Financial Effects of Rate Regulation. The purpose of the DP was to solicit feedback from constituents whether, and under which circumstances, financial effects arising from rate regulation should be accommodated in financial reporting.

In our comment letter, we welcome the Board's progress in addressing the issue of rate regulation. We believe it is critical that the output of this project is capable of dealing with the range of regulatory regimes in existence and agree that the hybrid scheme described as 'defined rate regulation' in the discussion paper captures many of the features of regulatory regimes encountered in practice.

We agree that a focus on the rights and obligations arising from rate regulation is necessary to determine whether these give rise to assets and/or liabilities that meet the criteria for recognition per the Conceptual Framework for Financial Reporting. To our mind, such an approach should enable the production of guidance that differentiates between regimes based on differences in economic substance.

Going forward, we believe that a critical element of the Board's considerations will be analysing the unit of account for recognising revenue arising from the provision of rate regulated goods or services. In this context it will be necessary to consider the interaction with the requirements of IFRS 15 Revenue from Contracts with Customers.

Generally, we recommend that the next step in the project be an accounting discussion paper preceding the development of any new Standard or amendment to existing standards.

Download the full comment letter below.


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