Rate-regulated activities — Agenda Consultation feedback

Date recorded:

Rate-regulated activities – Project update and responses to the Agenda Consultation


In this session, the staff gave an update on the status of the rate-regulated activities project and the planned next steps. Furthermore, the staff presented the feedback that had been given by constituents under the 2015 Agenda Consultation.

The objective of the project is to consider whether or how IFRS Standards should be amended to change how entities report the effects of rate regulation. As part of the project, the IASB has published the Discussion Paper Reporting the Financial Effects of Rate Regulation in September 2014.

The project is currently classified as a Standards-level project although it is unclear which form of Standard-setting activity will be pursued. This will depend on the decision as to whether regulatory deferral account balances should be recognised as assets and liabilities, and, if yes, whether this should be achieved by introducing a new Standard or by amending existing Standards.

The Board decided to develop a second discussion paper to help stakeholders consider a thorough analysis of the issues and possible solutions.

About a fifth of the respondents to the IASB’s Request for Views under the 2015 Agenda Consultation referred to the rate-regulated activities project. Constituents were divided as to whether the project has a high or low priority.

The Board is not asked to make any decision in this session.

Board discussion

The discussion focused on the next steps of the project.

One Board member asked whether a disclosure-only approach was a viable way forward. This approach could be finalised very quickly without a large amount of resources. The Chairman rejected this approach as most constituents were looking for a change in performance reporting which a disclosure-only approach could not provide. A Board member said that disclosures would add cost but not much benefit. The Vice Chairman added that it would have to be decided whether regulatory deferral balances were assets and liabilities.

The Chairman strongly rejected the previous idea of a second discussion paper unless it presented only one approach, i.e. the revenue-based approach. He said another “open” DP would not solve any of the issues. He suggested the staff prepared a paper setting out the fully developed revenue-based approach and the Board would then tentatively decide whether this approach should be pursued and whether the next step would be a second discussion paper or an exposure draft. If the Board would be unable to find an agreement, it would have to decide whether the project should be abandoned. One Board member asked what an abandonment of the project would mean for IFRS 14. The Chairman replied that IFRS 14 would then be withdrawn. The Board member agreed but would still want the Board to issue a statement whether regulatory deferral balances fulfilled the definitions of assets and liabilities.

The Board also discussed which jurisdictions were most affected by rate regulation and which approach they followed. As there was still a degree of uncertainty, the Chairman asked the staff to prepare a paper to give an overview of the effect of rate regulation in certain jurisdictions.

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