Rate-regulated Activities

Date recorded:

Cover note (Agenda Paper 9)

At this meeting, the staff continued to redeliberate the proposals in the Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities.

Scope—Interaction with IFRIC 12 (Agenda Paper 9A)

Many respondents to the ED said that it is unclear how the proposals in the ED interact with IFRIC 12 Service Concession Arrangements. To address respondents’ concerns, the staff developed some examples that illustrate the interaction between the proposed model and IFRIC 12 and used them to discuss the interaction with different types of stakeholders in different jurisdictions.

This paper:

  • Summarised feedback from these stakeholders
  • Analysed the feedback
  • Recommended how the final Accounting Standard could clarify the interaction between the model and IFRIC 12

Staff recommendation

The staff recommended that the final Accounting Standard:

  • Clarifies the intended interaction between the model and IFRIC 12. That is, an entity would apply IFRIC 12 first and then, apply the requirements of the final Accounting Standard to any remaining rights and obligations to determine if the entity has regulatory assets or regulatory liabilities
  • Includes examples to illustrate the interaction between the model and IFRIC 12

IASB discussion

IASB members generally agreed that IFRIC 12 should be applied before the new Standard, however there were mixed views about how to achieve this. Some IASB members preferred Illustrative Examples, while others preferred to add a clear statement to the Standard. One IASB member said that instead of a statement, the rationale should be explained in the Standard as to why IFRIC 12 should apply first. The staff responded that such rationale would be better suited for the Basis for Conclusions to the Standard, which could then be accompanied by Application Guidance or Illustrative Examples. It was noted that any statement should be generic, i.e. other Standards apply first, rather than making explicit reference to IFRIC 12.

One IASB member cautioned that examples should not affect accounting requirements in IFRIC 12 as preparers could read examples as application guidance of IFRIC 12.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.