The Board discussed recognition and measurement, presentation and disclosure and the scope of the project.
Recognition and measurement
The Board decided tentatively that specific recognition criteria are not needed. Once an entity has determined its activities are within the scope of the project, the effects of rate regulation, if any, should be recognised in accordance with this standard. Consequently, the Board decided tentatively that assets and liabilities recognised as a result of rate regulation should be excluded from the scope of IAS 38 Intangible Assets and IAS 37 Provisions, Contingent Liabilities and Contingent Assets, respectively.
The Board generally agreed that the primary driver for recognition of assets and liabilities is the existence of future economic benefits or obligations. However, the Board directed the staff to provide further analysis to clarify the interaction of future economic benefits and previously incurred specific costs in the recognition of those assets and liabilities, the appropriate discount rate to be used and other matters.
The Board decided tentatively that a probability-weighted average of possible future cash flows should be used to measure assets and liabilities arising from the effects of rate regulation both on initial recognition and subsequently.
Presentation and disclosures
The Board decided tentatively that regulatory assets and liabilities should not be offset in the statement of financial position. Additionally, when an entity presents a classified statement of financial position, it should distinguish between current and non-current assets and liabilities recognised as a result of rate regulation.
The Board discussed how the effects of assets and liabilities recognised as a result of rate regulation should be presented in the statement of comprehensive income. The Board asked the staff to provide illustrative examples of the recommended presentation and note disclosures.
The Board decided tentatively:
- that the standard should include guidance on the application of the scope criteria.
- not to include in the standard examples illustrating the requirements, but to include examples in the exposure draft to help respondents provide feedback.
The staff will present at a future meeting the additional analyses and examples the Board requested along with remaining issues concerning transition and first-time adoption.