IAS 18, IAS 37 and IAS 39 — Regulatory assets and liabilities

Date recorded:

The Committee previously considered a request to clarify whether a regulatory asset or regulatory liability should be recognised when a regulated entity is permitted to recover costs or required to refund some amounts, independently of the delivery of future services. The request for clarification specifically questions whether the population of customers can be regarded as a single unit of account and, if so, whether it is acceptable to recognise an asset or liability.

At its previous meetings, the Committee did not address the two specific questions raised in the submission. Instead, the Committee considered the question of recognition of regulatory assets and liabilities more broadly. The Committee acknowledged a previous conclusion in 2005 on the subject of whether or not it would be appropriate to recognise a regulatory asset; ultimately concluding that an entity should only recognise assets that qualify for recognition in accordance with the IASB’s conceptual framework and with relevant IFRSs such as IAS 11 Construction Contracts, IAS 18, IAS 16 and IAS 38. The Committee noted a lack of consequential amendments to these IFRSs subsequent to reaching is previous conclusion, and thus, concluded that its past conclusion on this issue were still valid.

The Committee also acknowledged a previous IASB project on rate-regulated activities in which the IASB concluded that the issue could not be resolved quickly. (Subsequent to the Committee’s initial consideration of the issue, the IASB decided to develop a discussion paper for a rate-regulated activities project which it expects to publish in the second half of 2013.)

Given the status previously reached by the IASB, the Committee observed that this issue was too broad for the Committee to address within the confines of existing IFRSs and the conceptual framework, and therefore, tentatively decided not to add this issue to its agenda.

At this meeting, the staff noted that two comment letters had been received to the Committee’s tentative agenda decision not to add this issue to its agenda; both of which supported not adding this issue onto the Committee’s agenda for the reasons set out in the tentative agenda decision, although support in one of the letter’s was contingent on the IASB giving priority to developing standards-levels proposals for rate-regulated activities.

Following this feedback, and without additional debate, the Committee reconfirmed its previous agenda decision, subject to minor editorial changes, to not add this issue to its agenda.

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