The IASB considered an analysis of comment letter responses to the Exposure Draft Regulatory Deferral Accounts; the deadline for comments was 4 September 2013. The Exposure Draft (interim ED) sets out proposals to allow first-time adopters of IFRS to continue to apply their existing policies for the recognition and measurement of regulatory balances, with enhanced presentation and disclosure requirements. These proposals are intended to be an interim solution until the IASB completes its comprehensive project on rate-regulated activities.
Publication of an interim IFRS for first-time adopters of IFRS
The IASB tentatively decided to proceed with the interim IFRS project. Eleven IASB members agreed.
The IASB tentatively decided to retain the proposal in the interim ED to restrict the scope of the interim IFRS only to first-time adopters of IFRS that recognised regulatory deferral account balances in their financial statements in accordance with their previous GAAP (as defined in IFRS 1 First-time Adoption of International Financial Reporting Standards). Fifteen IASB members agreed.
Changes from the Exposure Draft
The IASB tentatively agreed to retain the other proposals the interim ED, with the following amendments:
a. clarify that the scope criterion in paragraph 7(a) of the interim ED excludes self-regulated entities but permits some flexibility in the prices to be charged, within a range of prices established by the rate regulator. Fifteen IASB members agreed.
b. delete the scope criterion in paragraph 7(b) of the interim ED, which requires that the price established by regulation (the rate) is designed to recover the entity's allowable costs of providing the regulated goods or services. Fifteen IASB members agreed.
c. add application guidance to clarify some group accounting issues. Fourteen IASB members agreed.
d. introduce a limited exception to IFRS 3 Business Combinations to permit the continuation of the previous GAAP accounting policy for the recognition and measurement of regulatory account balances acquired in a business combination. Thirteen IASB members agreed.
e. specify that an entity should continue to apply its previous GAAP policies for the derecognition of regulatory account balances. Fourteen IASB members agreed.
f. clarify that an entity is not prohibited from recognising new regulatory balances that are created as a consequence of a change in an accounting policy for other items required by IFRS. Fourteen IASB members agreed.
g. split the net movement in regulatory balances presented in the statement of profit or loss and other comprehensive income (OCI) between amounts related to items reported in profit or loss and those reported in OCI. All IASB members agreed.
h. delete the specific reference to materiality as a factor to consider in deciding the level of detail to disclose. All IASB members agreed.
The staff will bring to the November meeting a paper discussing the effective date of the interim IFRS and a summary of the due process steps undertaken on the project. In addition, the staff will begin drafting the interim IFRS for balloting.