On 23 July 2009, the IASB issued an Exposure Draft, Rate-regulated Activities, which would require the recognition of assets and liabilities resulting from certain rate-regulated activities and would provide guidance on the measurement of those asset and liabilities.

The IASB added the project to its agenda after receiving ongoing requests for guidance and because of the importance of rate regulation in many jurisdictions that are in the process of adopting IFRSs. The Exposure Draft’s comment period ends on 20 November 2009, and the IASB plans to issue a final standard in 2010.

Rate regulation is designed to ensure that customers are charged a reasonable rate for services or products while giving entities an opportunity to earn a fair return on their investments. This is generally achieved through price setting by a governmental regulator on the basis of the regulated entity’s cost of providing the product or service. Requirements already exist in some jurisdictions addressing this issue. For example, under U.S. GAAP, Statement 711 (codified in ASC 9802) provides guidance on the recognition of regulatory assets and liabilities that result from the actions of regulatory bodies that direct the rate-making process of the entity.

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