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The International Accounting Standards Board (IASB) is redeliberating proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities.

The Exposure Draft, published in January 2021, sets out the IASB’s proposals for a model to account for regulatory assets and regulatory liabilities. If issued as a new IFRS Accounting Standard, the proposals would replace IFRS 14 Regulatory Deferral Accounts. 

The IASB discussed feedback on the Exposure Draft in October and November 2021. 

IASB® Update June 2023

The IASB met on 20 June 2023:

  • to discuss its plan to redeliberate the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities on the measurement basis, the cash-flow-based measurement technique and the estimation of uncertain future cash flows (Agenda Paper 9A). The IASB was not asked to make any decisions on the plan.
  • to start the redeliberation of specific topics relating to the proposals on estimating uncertain future cash flows (Agenda Paper 9B).

Estimating uncertain future cash flows (Agenda Paper 9B)

The IASB tentatively decided that the prospective Accounting Standard would:

  1. retain the requirement proposed in the Exposure Draft that an entity estimate uncertain future cash flows using whichever of the two methods—the ‘most likely amount’ method or the ‘expected value’ method—the entity expects would better predict the cash flows;
  2. require an entity to reassess the method of estimating uncertain future cash flows only if there is a significant change in facts and circumstances such that the entity no longer expects the method to better predict the cash flows;
  3. clarify that when an entity uses the ‘expected value’ method to estimate uncertain future cash flows the entity should consider the entire range of outcomes, including those outcomes in which a regulatory asset or a regulatory liability would not exist, or would exist but produce no future cash flows; and
  4. retain the proposal in the Exposure Draft not to require a separate impairment test for regulatory assets.

All 14 IASB members agreed with the decisions in (a) and (d). Thirteen of 14 IASB members agreed with the decisions in (b) and (c).

The IASB also tentatively decided that the prospective Accounting Standard would not provide additional guidance on circumstances in which the ‘most likely amount’ method might better predict uncertain future cash flows.

Twelve of 14 IASB members agreed with this decision.

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IFRS Accounting Standard