The IASB has issued an exposure draft (ED) ‘regulatory deferral accounts’. The ED uses the term ‘regulatory deferral account balances’ to describe certain balances that arise from the accounting for rate-regulated activities.
The proposals are only applicable to entities applying IFRS 1 as first-time adopters of IFRS that currently recognize regulatory deferral balances and meet certain criteria. This is common in the utilities industry but the proposals might affect other industries where prices are regulated.
The ED proposes that such entities can continue to apply their previous GAAP accounting policies for the recognition, measurement and impairment of regulatory deferral accounts when IFRS is adopted. The ED proposes additional presentation and disclosure requirements.
There is currently no standard that specifically addresses rate-regulated activities. The objective of the interim standard is to allow entities adopting IFRS to avoid major changes in accounting policy until the IASB project to develop an IFRS on rate-regulated activities is completed.
The rate-regulated activities project was restarted last year in response to feedback on the IASB’s 2011 Agenda consultation. The project was originally suspended in 2010 because the IASB could not quickly resolve the question of whether assets and liabilities arising from regulation should be recognized. A discussion paper on the project is expected later in 2013.
The deadline for comment is 4 September 2013. The ED does not propose an effective date, but early adoption is permitted.