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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 May 2022

The IASB met on 26 May 2022 to discuss:

  • the main features of different regulatory schemes (Agenda Paper 9A);
  • the advice from the Consultative Group for Rate Regulation on how the IASB might respond to feedback on its proposals on total allowed compensation in the Exposure Draft Regulatory Assets and Regulatory Liabilities (Agenda Paper 9B); and
  • its plans for redeliberating specific topics relating to the proposals on total allowed compensation (Agenda Paper 9C).

The IASB was not asked to make any decisions.

At this meeting, the IASB also continued to redeliberate the scope of the proposals. In particular, the IASB discussed:

  • application questions relating to the term ‘customers’ in the Exposure Draft (Agenda Paper 9D); and
  • the potential scope exclusion of regulatory assets or regulatory liabilities relating to financial instruments within the scope of IFRS 9 Financial Instruments (Agenda Paper 9E).

Scope—Customers (Agenda Paper 9D)

The IASB tentatively decided to clarify in the Standard that, for a regulatory asset or a regulatory liability to arise, it is necessary that differences in timing originate from, and reverse through, amounts included in the regulated rates that an entity accounts for as revenue in accordance with IFRS 15 Revenue from Contracts with Customers. This is the case even when:

  1. an entity charges the regulated rates to its customers indirectly through another party.
  2. the origination and reversal of differences in timing occur in different revenue streams through regulated rates charged to different groups of customers.

All 10 IASB members agreed with this decision.

Scope—Financial instruments within the scope of IFRS 9 (Agenda Paper 9E)

The IASB tentatively decided:

  1. not to exclude from the scope of the Standard regulatory assets or regulatory liabilities related to financial instruments within the scope of IFRS 9.
  2. to explain in the Basis for Conclusions on the Standard that the regulation of interest rates is typically limited to setting a cap or floor on interest rates. This type of regulation is not expected to give rise to differences in timing.

All 10 IASB members agreed with this decision.

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IFRS Accounting Standard