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Conceptual framework

Date recorded:

Conceptual Framework - Agenda paper 10

The discussion of the Conceptual Framework exposure draft (the ‘CF ED’) is nearing the final stages. The topics for this meeting were as follows:

  • Applying the amendment to paragraph 11 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to rate-regulated activities (AP 10B); and
  • Due process summary for References to the Conceptual Framework (AP 10C).

In addition, the tentative decisions made to date are summarised in AP 10A.

Conceptual Framework - Applying the amendment to paragraph 11 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to rate-regulated activities - Agenda paper 10B


The Board issued the Exposure Draft Updating References to the Conceptual Framework ('Updating References ED') in May 2015, which proposed to replace references to the Framework in IAS 8 and other affected Standards with references to the Conceptual Framework. Nevertheless, feedback on the ED indicated that the proposal could lead to diversity in practice for entities that conduct rate-regulated activities because the revised definitions and concepts in the CF will not definitively answer:

  • (a) whether regulatory account balances meet the definitions of assets and liabilities;
  • (b) whether those balances should be recognised; and
  • (c) how those balances should be measured and presented.

This is especially problematic for entities that developed accounting policies by reference to the Framework in accordance with IAS 8.11 as they do not recognise any regulatory account balances as assets or liabilities. Furthermore, the proposed amendment could also lead to two rounds of accounting changes in a short period of time: 1) on application of the revised concepts and definitions of the CF, and 2) on application of the future Standard on rate-regulated activities.

Staff recommendation

In view of the above, the Staff recommended that:

  • (a) entities be prohibited from applying the amendment to IAS 8.11 to accounting policies for regulatory account balances that were developed by reference to the Framework. The Staff recommends a prohibition as opposed to a choice of non-application as they believed this would improve comparability across entities and within an entity over time, as well as avoid disruption for both users and preparers of financial statements;
  • (b) the prohibition apply to both existing and new accounting policies for the same reasons as above;
  • (c) entities that develop accounting policies for regulatory account balances by reference to the Framework be required to continue doing so until they apply the future Standard on rate-regulated activities; and
  • (d) a regulatory account balance be defined as the balance of any expense (or income) account that is not recognised as an asset or a liability in accordance with the Standards and is included, or is expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers.


The Board approved the Staff’s recommendations subject to drafting changes.

One Board member asked the Staff to redraft so as not to imply that the Board has confirmed that there is no Standard that applies to rate regulated activities (RRA), as might be misconstrued from the agenda paper. This is because in applying the IAS 8 hierarchy, an entity may conclude that IAS 39/IFRS 9 or IAS 38 (or another Standard) is applicable in accounting for the regulatory account balances. Another Board member understood the Staff’s intention to be to the extent that an entity has applied the existing Framework to develop an accounting policy for RRA, that entity does not need to reassess its position in terms of the revised CF. The Staff agreed with the latter interpretation and will redraft accordingly.

Another Board member was concerned that the Staff’s rationale for prohibiting an entity from using the revised CF to develop new accounting policies might imply that the old and new frameworks would result in significantly different accounting outcomes for RRA, which might not be true given that the revised CF does not fundamentally change the existing one. The Staff confirmed that this was not their intention – they simply did not want entities to have to engage in a new analysis based on the revised CF when that might result in the same outcome as the existing Framework.

Conceptual Framework - Due process summary for References to the Conceptual Framework - Agenda paper 10C


The Board discussed the feedback on the Exposure Draft Updating References to the Conceptual Framework in 2016 and most recently in January 2017. See APs 10E and 10F to the January 2017 Board meeting for details.

The Staff will ask the Board for permission to begin the balloting process for the amendments to update references to, and quotations from, the Framework without re-exposure.


The Board granted permission to ballot without re-exposure. One Board member voiced her intention to dissent for the reasons discussed in AP 10B.

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