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Regulatory assets and liabilities

Date recorded:

The staff presented the IFRIC with its recommendation on regulatory assets and liabilities based on the background information research it undertook. The staff's proposal was not to add the item to the IFRIC's agenda, but to refer it to the Board with a recommendation to add it to the agenda.

It was acknowledged that this issue was of particular relevance for jurisdictions moving towards IFRS that, under local GAAP, recognised regulatory assets and liabilities.

The IFRIC had some discussion on whether such assets and liabilities exist at all or only in very rare circumstances. Some IFRIC members had strong views on this issue. It was noted that the ability to charge favourable prices in the future does not create an asset as their realisation depended on future revenues; nor does the requirement to charge a lower price in the future create a liability (unless the contract is made onerous thereby).

Many IFRIC members disagreed with the staff analysis while agreeing with the staff's recommendation not to add the item to the agenda.

It was noted that this issue can be addressed using existing Standards, but there was no divergence in practice under IFRS as such items are only rarely recognised by entities using IFRS.

Ultimately, the IFRIC agreed by a majority vote tentatively not to add the item to the agenda and not to recommend that the item be referred to the IASB.

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