IASB proposes new standard on rate regulated activities

The IASB has released Exposure Draft (ED) of a new standard – Regulatory Assets and Regulatory Liabilities that would replace IFRS 14 Regulatory Deferral Accounts.

The proposed standard is intended to give investors better information about the financial performance of companies subject to rate regulation.

In rate regulated activities, in some cases, the period when a company supplies goods or services differs from the period when the company can charge customers for those goods or services and consequently differs from the period when the company reports revenue in its income statement. The current IFRSs do not require companies to give information about these timing differences in the financial statements.

The proposed standard introduces a requirement of reporting regulatory assets and regulatory liabilities in the balance sheet, and related regulatory income and regulatory expense in the income statement; thereby providing a more complete picture to the investors.

The ED can be accessed here. It is open for comments until 30 June 2021.

The IASB has also provided a snapshot of the proposals and a debrief video that introduces the proposed requirements.