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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 November 2022

The IASB met on 23 November 2022 to discuss the accounting for regulatory returns on an asset not yet available for use when an entity capitalises borrowing costs to construct that asset (Agenda Papers 9A and 9C). In particular, the IASB discussed the implications of applying its previous tentative decision on such regulatory returns in this situation.

The IASB also discussed advice from the Consultative Group for Rate Regulation on this topic (Agenda Paper 9B). The IASB was not asked to make any decisions on Agenda Paper 9B.

Capitalised borrowing costs (Agenda Paper 9A) and Capitalised borrowing costs (Addendum) (Agenda Paper 9C)

The IASB tentatively decided that when an entity’s regulatory capital base and its property, plant and equipment have a direct relationship and the entity capitalises its borrowing costs:

  1. if the regulatory agreement provides the entity with both a debt and an equity return on an asset not yet available for use—to require the entity to reflect only those returns in excess of the entity’s capitalised borrowing costs in the statement of financial performance during the construction period; and
  2. if the regulatory agreement provides the entity with only a debt return on such an asset—to prohibit the entity from reflecting the return in the statement of financial performance during the construction period.

All 11 IASB members agreed with these decisions.

Next milestone

IFRS Accounting Standard