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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 December 2023

The IASB met on 14 December 2023:

  • to redeliberate the proposals on the unit of account and on offsetting of regulatory assets and regulatory liabilities for presentation purposes in the Exposure Draft Regulatory Assets and Regulatory Liabilities (Agenda Paper 9A).
  • to redeliberate the presentation proposals set out in paragraphs 67–68 and 70 of the Exposure Draft and the proposed amendments to IAS 1 Presentation of Financial Statements set out in Appendix D of the Exposure Draft (Agenda Paper 9B).
  • to discuss its plan to redeliberate other proposals in the Exposure Draft. Those proposals relate to items affecting regulated rates only when related cash is paid or received (Agenda Paper 9C). The IASB was not asked to make any decisions on the plan.
  • to redeliberate a specific topic included in the plan. This topic relates to the measurement and presentation of items affecting regulated rates only when related cash is paid or received—set out in paragraphs 59–66 and 69 of the Exposure Draft (Agenda Paper 9D).

Unit of account and offsetting (Agenda Paper 9A)

The IASB tentatively decided that the prospective Accounting Standard on Rate-regulated Activities (prospective RRA Standard) would:

  1. clarify that the unit of account is the right or obligation arising from a difference in timing or from a group of differences in timing. The differences in timing included in that group would:
    1. be created by the same regulatory agreement;
    2. have similar expiry patterns; and
    3. be subject to similar risks.
  2. omit the proposal in paragraph 71 of the Exposure Draft that would have permitted an entity to offset regulatory assets and regulatory liabilities in the statement of financial position.

All 14 IASB members agreed with these decisions.

Presentation (Agenda Paper 9B)

The IASB tentatively decided that the prospective RRA Standard would:

  1. require an entity to classify all regulatory income minus all regulatory expense (regulatory income or regulatory expense) as revenue.
  2. require an entity to present regulatory income or regulatory expense as a separate line item in the statement(s) of financial performance.
  3. omit the proposed amendment to paragraph 82 of IAS 1 that would have required an entity to present regulatory income or regulatory expense as a separate line item immediately below revenue.
  4. retain the proposals to require an entity to include regulatory interest income within regulatory income and regulatory interest expense within regulatory expense.
  5. amend the prospective IFRS Accounting Standard Presentation and Disclosure in Financial Statements (prospective PFS Standard) to clarify that regulatory interest is classified in the operating category.
  6. retain the proposal to require an entity to present in its statement of financial position:
    1. line items for regulatory assets and regulatory liabilities; and
    2. current and non-current regulatory assets and current and non-current regulatory liabilities as separate classifications by applying paragraphs 66 and 69 of IAS 1, except when the entity presents all assets and liabilities in order of liquidity.

All 14 IASB members agreed with decisions (a) and (c)–(f) and nine of 14 IASB members agreed with decision (b).

Items affecting regulated rates on a cash basis (Agenda Paper 9D)

The IASB tentatively decided that the prospective RRA Standard would:

  1. retain the proposed concept that differences in timing that arise from differences between regulatory and accounting criteria represent enforceable present rights or enforceable present obligations. Those rights or obligations meet the proposed definitions of regulatory assets and regulatory liabilities.
  2. retain the measurement requirements proposed in paragraph 61 of the Exposure Draft for items that affect regulated rates only when related cash is paid or received.
  3. retain the requirements proposed in paragraph 69 of the Exposure Draft to present specified regulatory income and regulatory expense in other comprehensive income.
  4. clarify that an entity is required to reclassify regulatory income or regulatory expense presented in other comprehensive income to profit or loss if IFRS Accounting Standards require the entity to reclassify the related expense or income to profit or loss.
  5. include no additional presentation requirements for other comprehensive income. An entity would apply the requirements in IAS 1 or the prospective PFS Standard.

Thirteen of 14 IASB members agreed with decision (a), 11 of 14 IASB members agreed with decision (b) and 12 of 14 IASB members agreed with decisions (c)–(e).