IFRS 14

Basis of Preparation of Financial Statements

Continuation of existing accounting policies

Changes in accounting policies

Interaction with other Standards

PRESENTATION

Changes in presentation

Classification of regulatory deferral account balances

Classification of movements in regulatory deferral account balances

DISCLOSURE

Objective

Explanation of activities subject to rate regulation

Explanation of recognised amounts

APPENDICES

A Defined terms

B Application Guidance

C Effective date and transition

D Consequential amendments to IFRS 1

First-time Adoption of International Financial Reporting Standards

APPROVAL BY THE BOARD OF

IFRS 14

REGULATORY DEFERRAL ACCOUNTS

ISSUED IN JANUARY 2014

FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION

ILLUSTRATIVE EXAMPLES

FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION

BASIS FOR CONCLUSIONS ON

IFRS 14

REGULATORY DEFERRAL ACCOUNTS

DISSENTING OPINIONS

International Financial Reporting Standard 14

Regulatory Deferral Accounts

DISSENTING OPINIONS

International Financial Reporting Standard 14

Regulatory Deferral Accounts

(IFRS 14) is set out in paragraphs 1–36 and Appendices A–D. All the paragraphs have equal authority. Paragraphs in

bold type

state the main principles. Terms defined in Appendix A are in

italics

bold type

state the main principles. Terms defined in Appendix A are in

italics

the first time that they appear in the Standard. Definitions of other terms are given in the Glossary. The Standard should be read in the context of its objective and the Basis for Conclusions, the

Preface to IFRS Accounting Standards

and the

Conceptual Framework for Financial Reporting

Basis of Preparation of Financial Statements

Basis of Preparation of Financial Statements

provides a basis for selecting and applying accounting policies in the absence of explicit guidance.

[

Refer:

IAS 8 paragraphs 10–12

. However, in this case, refer also to

IFRS 14 paragraphs 9

and

13–15

International Financial Reporting Standard 14

Regulatory Deferral Accounts

Objective

[

Refer:

Basis for Conclusions paragraphs BC1–BC21

]

Regulatory Deferral Accounts

Objective

[

Refer:

Basis for Conclusions paragraphs BC1–BC21

]

The objective of this Standard is to specify the financial reporting requirements for

regulatory deferral account balances

that arise when an entity provides goods or services to customers at a price or rate that is subject to

rate regulation

In meeting this objective, the Standard requires:

(a)

rate regulation

In meeting this objective, the Standard requires:

(a)

limited changes to the accounting policies that were applied in accordance with previous generally accepted accounting principles (

previous GAAP

) for

regulatory deferral account balances

, which are primarily related to the presentation of these accounts;

[

Refer:

paragraphs 18–26

]

and

(b)

disclosures that:

(i)

[

Refer:

paragraphs 18–26

]

and

(b)

disclosures that:

(i)

identify and explain the amounts recognised in the entity’s financial statements that arise from rate regulation; and

(ii)

help users of the financial statements to understand the amount, timing and uncertainty of future cash flows from any regulatory deferral account balances that are recognised.

[

Refer:

paragraphs 27–36

]

[

Refer:

paragraphs 27–36

]

The requirements of this Standard permit an entity within its scope

[

Refer:

paragraphs 5 and 6

]

to continue to account for

regulatory deferral account balances

in its financial statements in accordance with its previous GAAP when it adopts IFRS, subject to the limited changes referred to in

paragraph 2

above.

[

Refer:

paragraphs 11, 12

and

B3–B6

]

paragraph 2

above.

[

Refer:

paragraphs 11, 12

and

B3–B6

]

In addition, this Standard provides some exceptions to, or exemptions from, the requirements of other Standards. All specified requirements for reporting regulatory deferral account balances, and any exceptions to, or exemptions from, the requirements of other Standards that are related to those balances, are contained within this Standard instead of within those other Standards.

[

Refer:

paragraphs 9–17

and

B7–B28

]

Scope

[

Refer:

paragraphs 9–17

and

B7–B28

]

Scope

[

Refer:

Basis for Conclusions paragraphs BC25–BC27

]

An entity is permitted to apply the requirements of this Standard in its

first IFRS financial statements

if and only if it:

(a)

conducts

rate-regulated activities

;

[

Refer:

paragraphs B1 and B2

]

and

(b)

recognised amounts that qualify as

regulatory deferral account balances

in its financial statements in accordance with its previous GAAP.

[

Refer:

in its financial statements in accordance with its previous GAAP.

[

Refer:

Basis for Conclusions paragraphs BC15–BC24

BC55–BC58

and

BC65

]

An entity shall apply the requirements of this Standard in its financial statements

[

Refer:

IFRS 18 paragraphs 10

and

]

for subsequent periods if and only if, in its

first IFRS financial statements

, it recognised

regulatory deferral account balances

by electing to apply the requirements of this Standard.

[

by electing to apply the requirements of this Standard.

[

Refer:

Basis for Conclusions paragraphs BC15–BC21

BC55–BC58

and

BC65

]

This Standard does not address other aspects of accounting by entities that are engaged in

rate-regulated activities

. By applying the requirements in this Standard, any amounts that are permitted or required to be recognised as assets or liabilities in accordance with other Standards shall not be included within the amounts classified as

regulatory deferral account balances

[

Refer:

Basis for Conclusions paragraphs BC19

BC21

BC26

BC27

BC37

and

BC40–BC46

]

An entity that is within the scope of, and that elects to apply, this Standard shall apply all of its requirements to all

regulatory deferral account balances

that arise from all of the entity’s

rate-regulated activities

Recognition, measurement, impairment and derecognition

Temporary exemption from

paragraph 11 of

Temporary exemption from

paragraph 11 of

Basis of Preparation of Financial Statements

[

Refer:

Basis for Conclusions paragraphs BC28–BC32

]

An entity that has

rate-regulated activities

and that is within the scope of, and elects to apply, this Standard shall apply

paragraphs 10

and

12 of IAS 8

when developing its accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

Paragraphs 11–12 of IAS 8 specify sources of requirements and guidance that management is required or permitted to consider in developing an accounting policy for an item, if no relevant Standard applies specifically to that item. This Standard exempts an entity from applying

paragraph 11 of IAS 8

to its accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

. Consequently, entities that recognise regulatory deferral account balances, either as separate items or as part of the carrying value of other assets and liabilities, in accordance with their previous GAAP, are permitted to continue to recognise those balances in accordance with this Standard through the exemption from paragraph 11 of IAS 8, subject to any presentation changes required by

paragraphs 18–19 of this Standard

Continuation of existing accounting policies

[

Refer:

paragraphs B3–B6

Basis for Conclusions paragraphs BC39

BC59(b)

and

BC66

]

On initial application of this Standard, an entity shall continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

, except for any changes permitted by

paragraphs 13–15

regulatory deferral account balances

, except for any changes permitted by

paragraphs 13–15

. However, the presentation of such amounts shall comply with the presentation requirements of this Standard, which may require changes to the entity’s previous GAAP presentation policies (see

paragraphs 18–19

An entity shall apply the policies established in accordance with

paragraph 11

consistently in subsequent periods, except for any changes permitted by

paragraphs 13–15

consistently in subsequent periods, except for any changes permitted by

paragraphs 13–15

Changes in accounting policies

[

Refer:

Basis for Conclusions paragraphs BC33–BC36

]

An entity shall not change its accounting policies in order to start to recognise

regulatory deferral account balances

. An entity may only change its accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable

, or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in

paragraph 10 of IAS 8

[

Refer:

paragraph B6

]

paragraph 10 of IAS 8

[

Refer:

paragraph B6

]

This Standard does not exempt entities from applying

paragraphs 10

14–15 of IAS 8

to changes in accounting policy. To justify changing its accounting policies for

regulatory deferral account balances

, an entity shall demonstrate that the change brings its financial statements closer to meeting the criteria in

paragraph 10 of IAS 8

. However, the change does not need to achieve full compliance with those criteria for the recognition, measurement, impairment and derecognition of regulatory deferral account balances.

Paragraphs 13–14

apply both to changes made on initial application of this Standard and to changes made in subsequent reporting periods.

Interaction with other Standards

[

Refer:

paragraphs B7–B28

Basis for Conclusions paragraphs BC37–BC39

]

[

Refer:

paragraphs B7–B28

Basis for Conclusions paragraphs BC37–BC39

]

Any specific exception, exemption or additional requirements related to the interaction of this Standard with other Standards are contained within this Standard (see

paragraphs B7–B28

). In the absence of any such exception, exemption or additional requirements, other Standards shall apply to

regulatory deferral account balances

in the same way as they apply to assets, liabilities, income and expenses that are recognised in accordance with other Standards.

In some situations, another Standard might need to be applied to a

regulatory deferral account balance

that has been measured in accordance with an entity’s accounting policies that are established in accordance with

paragraphs 11–12

in order to reflect that balance appropriately in the financial statements. For example, the entity might have

rate-regulated activities

in a foreign country for which the transactions and regulatory deferral account balances are denominated in a currency that is not the functional currency

[

Refer:

IAS 21 paragraphs 8 (definition of functional currency)

and

9–14

]

[

Refer:

IAS 21 paragraphs 8 (definition of functional currency)

and

9–14

]

of the reporting entity. The regulatory deferral account balances and the movements in those balances are translated by applying

IAS 21

The Effects of Changes in Foreign Exchange Rates

Presentation

[

Refer:

Basis for Conclusions paragraphs BC19

BC21

BC36

BC40–BC46

BC68–BC71

and

BC73–BC79

Illustrative Examples, example 1 paragraph IE1

and

example 2

]

Changes in presentation

Illustrative Examples, example 1 paragraph IE1

and

example 2

]

Changes in presentation

This Standard introduces presentation requirements, outlined in

paragraphs 20–26

, for

regulatory deferral account balances

that are recognised in accordance with

paragraphs 11–12

regulatory deferral account balances

that are recognised in accordance with

paragraphs 11–12

. When this Standard is applied, the regulatory deferral account balances are recognised in the statement of financial position in addition to the assets and liabilities that are recognised in accordance with other Standards. These presentation requirements separate the impact of recognising regulatory deferral account balances from the financial reporting requirements of other Standards.

Notwithstanding the requirements in

Presentation and Disclosure in Financial Statements

, an entity applying this Standard shall present all

regulatory deferral account balances

and the movements in those balances in accordance with

paragraphs 20–26

Classification of

regulatory deferral account balances

[

Refer:

Illustrative Examples, example 1 Statement of financial position

and

example 2 Statement of financial position

Basis for Conclusions paragraph BC67

]

and

example 2 Statement of financial position

Basis for Conclusions paragraph BC67

]

An entity shall present separate line items in the statement of financial position for:

(a)

the total of all regulatory deferral account debit balances; and

(b)

the total of all regulatory deferral account credit balances.

When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position,

[

Refer:

[

Refer:

IFRS 18 paragraphs 96–102

]

it shall not classify the totals of

regulatory deferral account balances

as current or non-current. Instead, the separate line items required by

paragraph 20

shall be distinguished from the assets and liabilities that are presented in accordance with other Standards by the use of sub-totals, which are drawn before the regulatory deferral account balances are presented.

[

Refer:

Basis for Conclusions paragraph BC47

]

[

Refer:

Basis for Conclusions paragraph BC47

]

Classification of movements in

regulatory deferral account balances

An entity shall present, in the other comprehensive income section of the statement of profit or loss and other comprehensive income, the net movement in all

regulatory deferral account balances

for the reporting period that relate to items recognised in other comprehensive income. Separate line items shall be used for the net movement related to items that, in accordance with other Standards:

(a)

will not be reclassified subsequently to profit or loss; and

(b)

will be reclassified subsequently to profit or loss when specific conditions are met.

[

Refer:

IFRS 18 paragraphs 88-89

[

Refer:

IFRS 18 paragraphs 88-89

Basis for Conclusions paragraphs BC59(c)

and

BC67

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

and

example 2 Statement of profit or loss and other comprehensive income

]

and

example 2 Statement of profit or loss and other comprehensive income

]

An entity shall present a separate line item in the profit or loss section of the statement of profit or loss and other comprehensive income, or in the separate statement of profit or loss, for the remaining net movement in all

regulatory deferral account balances

for the reporting period, excluding movements that are not reflected in profit or loss, such as amounts acquired.

[

Refer:

[

Refer:

Basis for Conclusions paragraph BC44

]

This separate line item shall be distinguished from the income and expenses that are presented in accordance with other Standards by the use of a sub-total, which is drawn before the net movement in regulatory deferral account balances.

[

Refer:

Basis for Conclusions paragraph BC59(c)

and

BC67

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

and

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

and

example 2 Statement of profit or loss and other comprehensive income

]

When an entity recognises a deferred tax asset or a deferred tax liability as a result of recognising

regulatory deferral account balances

, the entity shall present the resulting deferred tax asset (liability) and the related movement in that deferred tax asset (liability) with the related regulatory deferral account balances and movements in those balances, instead of within the total presented in accordance with

Income Taxes

for deferred tax assets (liabilities) and the tax expense (income) (see

paragraphs B9–B12

[

Refer:

Illustrative Examples, example 1 and example 2

]

paragraphs B9–B12

[

Refer:

Illustrative Examples, example 1 and example 2

]

When an entity presents a discontinued operation or a disposal group in accordance with

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

, the entity shall present any related

regulatory deferral account balances

, the entity shall present any related

regulatory deferral account balances

and the net movement in those balances, as applicable, with the regulatory deferral account balances and movements in those balances, instead of within the disposal groups or discontinued operations (see

paragraphs B19–B22

[

Refer:

Illustrative Examples, example 2

]

When an entity presents earnings per share in accordance with

Earnings per Share

]

When an entity presents earnings per share in accordance with

Earnings per Share

, the entity shall present additional basic and diluted earnings per share, which are calculated using the earnings amounts required by IAS 33 but excluding the movements in

regulatory deferral account balances

(see

paragraphs B13–B14

[

Refer:

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

]

Disclosure

[

Refer:

Basis for Conclusions paragraphs BC19

]

Disclosure

[

Refer:

Basis for Conclusions paragraphs BC19

BC21

BC68–BC72

and

BC79

]

Objective

An entity that elects to apply this Standard shall disclose information that enables users

[

Refer:

Conceptual Framework

paragraphs 1.2–1.10

and

2.36

]

to assess:

(a)

the nature of, and the risks associated with, the

rate regulation

that establishes the price(s) that the entity can charge customers for the goods or services it provides; and

(b)

the effects of that rate regulation on its financial position, financial performance and cash flows.

[

Refer:

Basis for Conclusions paragraphs BC48 and BC49

]

If any of the disclosures set out in

paragraphs 30–36

are not considered relevant to meet the objective in

paragraph 27

paragraphs 30–36

are not considered relevant to meet the objective in

paragraph 27

, they may be omitted from the financial statements. If the disclosures provided in accordance with paragraphs 30–36 are insufficient to meet the objective in paragraph 27, an entity shall disclose additional information that is necessary to meet that objective.

[

Refer:

Basis for Conclusions paragraphs BC49

and

BC59(d)

]

To meet the disclosure objective in

paragraph 27

and

BC59(d)

]

To meet the disclosure objective in

paragraph 27

, an entity shall consider all of the following:

(a)

the level of detail that is necessary to satisfy the disclosure requirements;

(b)

how much emphasis to place on each of the various requirements;

(c)

how much aggregation or disaggregation to undertake; and

(d)

whether users

[

Refer:

Conceptual Framework

paragraphs 1.2–1.10

and

2.36

]

(d)

whether users

[

Refer:

Conceptual Framework

paragraphs 1.2–1.10

and

2.36

]

of financial statements need additional information to evaluate the quantitative information disclosed.

[

Refer:

Basis for Conclusions paragraphs BC49

and

BC59(d)

]

Explanation of activities subject to

rate regulation

[

Refer:

Basis for Conclusions paragraph BC35

]

To help a user

[

Refer:

Conceptual Framework

paragraphs 1.2–1.10

and

2.36

]

To help a user

[

Refer:

Conceptual Framework

paragraphs 1.2–1.10

and

2.36

]

of the financial statements assess the nature of, and the risks associated with, the entity’s

rate-regulated activities

, an entity shall, for each type of rate-regulated activity, disclose:

(a)

a brief description of the nature and extent of the rate-regulated activity and the nature of the regulatory rate-setting process;

(b)

the identity of the

rate regulator

(s). If the rate regulator is a

(b)

the identity of the

rate regulator

(s). If the rate regulator is a

related party (as defined in

IAS 24

Related Party Disclosures

)

, the entity shall disclose that fact, together with an explanation of how it is related;

(c)

how the future recovery of each class (ie each type of cost or income) of regulatory deferral account debit balance or reversal of each class of regulatory deferral account credit balance is affected by risks and uncertainty, for example:

(i)

demand risk (for example, changes in consumer attitudes, the availability of alternative sources of supply or the level of competition);

(ii)

regulatory risk (for example, the submission or approval of a rate-setting application or the entity’s assessment of the expected future regulatory actions); and

(iii)

other risks (for example, currency or other market risks).

[

Refer:

Basis for Conclusions paragraph BC50

]

The disclosures required by

paragraph 30

[

Refer:

Basis for Conclusions paragraph BC50

]

The disclosures required by

paragraph 30

shall be given in the financial statements

[

Refer:

IFRS 18 paragraphs 10

and

]

and

]

either directly in the notes or incorporated by cross-reference from the financial statements to some other statement, such as a management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. If the information is not included in the financial statements directly or incorporated by cross-reference, the financial statements are incomplete.

[

Refer:

[

Refer:

Basis for Conclusions paragraph BC52

]

Explanation of recognised amounts

[

Refer:

Basis for Conclusions paragraph BC50

]

An entity shall disclose the basis on which

regulatory deferral account balances

are recognised and derecognised, and how they are measured initially and subsequently, including how regulatory deferral account balances are assessed for recoverability and how any impairment loss is allocated.

[

Refer:

paragraphs B15 and B16

]

For each type of

[

Refer:

paragraphs B15 and B16

]

For each type of

rate-regulated activity

, an entity shall disclose the following information for each class of

regulatory deferral account balance

(a)

a reconciliation of the carrying amount at the beginning and the end of the period, in a table unless another format is more appropriate.

[

Refer:

Basis for Conclusions paragraphs BC44

and

BC51

]

The entity shall apply judgement in deciding the level of detail necessary (see

paragraphs 28–29

The entity shall apply judgement in deciding the level of detail necessary (see

paragraphs 28–29

), but the following components would usually be relevant:

(i)

the amounts that have been recognised in the current period in the statement of financial position as regulatory deferral account balances;

(ii)

the amounts that have been recognised in the statement(s) of profit or loss and other comprehensive income relating to balances that have been recovered (sometimes described as amortised) or reversed in the current period; and

(iii)

other amounts, separately identified, that affected the regulatory deferral account balances, such as impairments, items acquired or assumed in a business combination, items disposed of, or the effects of changes in foreign exchange rates or discount rates;

[

Refer:

Illustrative Examples, example 1 paragraph IE2

and

example 2

]

(b)

the rate of return or discount rate (including a zero rate or a range of rates, when applicable) used to reflect the time value of money that is applicable to each class of regulatory deferral account balance; and

(c)

the remaining periods over which the entity expects to recover (or amortise) the carrying amount of each class of regulatory deferral account debit balance or to reverse each class of regulatory deferral account credit balance.

When

rate regulation

affects the amount and timing of an entity’s income tax expense (income), the entity shall disclose the impact of the rate regulation on the amounts of current and deferred tax recognised.

[

Refer:

]

[

Refer:

]

In addition, the entity shall separately disclose any

regulatory deferral account balance

that relates to taxation and the related movement in that balance.

When an entity provides disclosures in accordance with

IFRS 12

Disclosure of Interests in Other Entities

for an interest in a subsidiary, associate or joint venture that has

rate-regulated activities

and for which

regulatory deferral account balances

rate-regulated activities

and for which

regulatory deferral account balances

are recognised in accordance with this Standard, the entity shall disclose the amounts that are included for the regulatory deferral account debit and credit balances and the net movement in those balances for the interests disclosed (see

paragraphs B25–B28

When an entity concludes that a

regulatory deferral account balance

paragraphs B25–B28

When an entity concludes that a

regulatory deferral account balance

is no longer fully recoverable or reversible, it shall disclose that fact, the reason why it is not recoverable or reversible and the amount by which the regulatory deferral account balance has been reduced.

Appendices

Appendix A

Defined terms

This appendix is an integral part of the Standard.

first IFRS financial statements

Defined terms

This appendix is an integral part of the Standard.

first IFRS financial statements

The first annual financial statements in which an entity adopts International Financial Reporting Standards (IFRS), by an explicit and unreserved statement of compliance with IFRS.

[

Refer:

IFRS 1 paragraphs 3–4A

]

first-time adopter

An entity that presents its

first IFRS financial statements

previous GAAP

The basis of accounting that a

first-time adopter

used immediately before adopting IFRS.

The basis of accounting that a

first-time adopter

used immediately before adopting IFRS.

rate-regulated activities

An entity’s activities that are subject to

rate regulation

[

Refer:

paragraphs B1 and B2

]

rate regulation

A framework for establishing the prices that can be charged to customers for goods or services and that framework is subject to oversight and/or approval by a

rate regulator

[

Refer:

Basis for Conclusions paragraphs BC22–BC24

and

BC55–BC57

]

rate regulator

[

Refer:

Basis for Conclusions paragraphs BC22–BC24

and

BC55–BC57

]

rate regulator

An authorised body that is empowered by statute or regulation to establish the rate or a range of rates that bind an entity. The

rate regulator

may be a third-party body or a related party of the entity, including the entity’s own governing board, if that body is required by statute or regulation to set rates both in the interest of the customers and to ensure the overall financial viability of the entity.

[

Refer:

Basis for Conclusions paragraphs BC22–BC24

and

BC55–BC57

]

regulatory deferral account balance

The balance of any expense (or income) account that would not be recognised as an asset or a liability in accordance with other Standards, but that qualifies for deferral because it is included, or is expected to be included, by the

rate regulator

in establishing the rate(s) that can be charged to customers.

[

Refer:

paragraphs B3–B6

Basis for Conclusions paragraphs BC2

BC11

BC12

[

Refer:

paragraphs B3–B6

Basis for Conclusions paragraphs BC2

BC11

BC12

and

BC21

]

Appendix B

Application Guidance

This appendix is an integral part of the Standard.

Rate-regulated activities

Historically,

rate regulation

Rate-regulated activities

Historically,

rate regulation

applied to all activities of an entity. However, with acquisitions, diversification and deregulation, rate regulation may now apply to only a portion of an entity’s activities, resulting in it having both regulated and non-regulated activities. This Standard applies only to the

rate-regulated activities

that are subject to statutory or regulatory restrictions through the actions of a

rate regulator

that are subject to statutory or regulatory restrictions through the actions of a

rate regulator

, regardless of the type of entity or the industry to which it belongs.

[

Refer:

Basis for Conclusions paragraph BC22

]

An entity shall not apply this Standard to activities that are self-regulated, ie activities that are not subject to a pricing framework that is overseen and/or approved by a

rate regulator

. This does not prevent the entity from being eligible to apply this Standard when:

(a)

. This does not prevent the entity from being eligible to apply this Standard when:

(a)

the entity’s own governing body or a related party establishes rates both in the interest of the customers and to ensure the overall financial viability of the entity within a specified pricing framework; and

(b)

the framework is subject to oversight and/or approval by an authorised body that is empowered by statute or regulation.

[

Refer:

Basis for Conclusions paragraphs BC22–BC24

]

[

Refer:

Basis for Conclusions paragraphs BC22–BC24

]

Continuation of existing accounting policies

[

Refer:

paragraphs 11 and 12

]

For the purposes of this Standard, a regulatory deferral account balance is defined as the balance of any expense (or income) account that would not be recognised as an asset or a liability in accordance with other Standards, but that qualifies for deferral because it is included, or is expected to be included, by the

rate regulator

in establishing the rate(s) that can be charged to customers. Some items of expense (income) may be outside the regulated rate(s) because, for example, the amounts are not expected to be accepted by the rate regulator or because they are not within the scope of the

rate regulation

. Consequently, such an item is recognised as income or expense as incurred, unless another Standard permits or requires it to be included in the carrying amount of an asset or liability.

In some cases, other Standards explicitly prohibit an entity from recognising, in the statement of financial position,

regulatory deferral account balances

that might be recognised, either separately or included within other line items such as property, plant and equipment in accordance with previous GAAP accounting policies. However, in accordance with paragraph 11 of this Standard, an entity that elects to apply this Standard in its

first IFRS financial statements

applies the exemption from

paragraph 11 of IAS 8

in order to continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment, and derecognition of regulatory deferral account balances. Such accounting policies may include, for example, the following practices:

(a)

recognising a regulatory deferral account debit balance when the entity has the right, as a result of the actual or expected actions of the

rate regulator

, to increase rates in future periods in order to recover its allowable costs (ie the costs for which the regulated rate(s) is intended to provide recovery);

(b)

recognising, as a regulatory deferral account debit or credit balance, an amount that is equivalent to any loss or gain on the disposal or retirement of both items of property, plant and equipment and of intangible assets, which is expected to be recovered or reversed through future rates;

(c)

recognising a regulatory deferral account credit balance when the entity is required, as a result of the actual or expected actions of the rate regulator, to decrease rates in future periods in order to reverse over-recoveries of allowable costs (ie amounts in excess of the recoverable amount specified by the rate regulator); and

(d)

measuring regulatory deferral account balances on an undiscounted basis or on a discounted basis that uses an interest or discount rate specified by the rate regulator.

The following are examples of the types of costs that

rate regulators

might allow in rate-setting decisions and that an entity might, therefore, recognise in

regulatory deferral account balances

(i)

volume or purchase price variances;

(ii)

regulatory deferral account balances

(i)

volume or purchase price variances;

(ii)

costs of approved ‘green energy’ initiatives (in excess of amounts that are capitalised as part of the cost of property, plant and equipment in accordance with

IAS 16

Property, Plant and Equipment

);

(iii)

non-directly-attributable overhead costs that are treated as capital costs for

rate regulation

non-directly-attributable overhead costs that are treated as capital costs for

rate regulation

purposes (but are not permitted, in accordance with IAS 16, to be included in the cost of an item of property, plant and equipment);

(iv)

project cancellation costs;

(v)

storm damage costs; and

(vi)

deemed interest (including amounts allowed for funds that are used during construction that provide the entity with a return on the owner’s equity capital as well as borrowings).

Regulatory deferral account balances

usually represent timing differences between the recognition of items of income or expenses for regulatory purposes and the recognition of those items for financial reporting purposes. When an entity changes an accounting policy on the first-time adoption of IFRS or on the initial application of a new or revised Standard, new or revised timing differences may arise that create new or revised regulatory deferral account balances. The prohibition in

paragraph 13

that prevents an entity from changing its accounting policy in order to start to recognise regulatory deferral account balances does not prohibit the recognition of the new or revised regulatory deferral account balances that are created because of other changes in accounting policies required by IFRS. This is because the recognition of regulatory deferral account balances for such timing differences would be consistent with the existing recognition policy applied in accordance with

paragraph 11

and would not represent the introduction of a new accounting policy. Similarly, paragraph 13 does not prohibit the recognition of regulatory deferral account balances arising from timing differences that did not exist immediately prior to the date of transition to IFRS but are consistent with the entity’s accounting policies established in accordance with paragraph 11 (for example, storm damage costs).

[

Refer:

Basis for Conclusions paragraph BC59(a)(iii)

]

[

Refer:

Basis for Conclusions paragraph BC59(a)(iii)

]

Applicability of other Standards

[

Refer:

Basis for Conclusions paragraphs BC37 and BC38

]

An entity that is within the scope of, and that elects to apply, the requirements of this Standard shall continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

. However,

paragraphs 16–17

state that, in some situations, other Standards might also need to be applied to regulatory deferral account balances in order to reflect them appropriately in the financial statements. The following paragraphs outline how some other Standards interact with the requirements of this Standard. In particular, the following paragraphs clarify specific exceptions to, and exemptions from, other Standards and additional presentation and disclosure requirements that are expected to be applicable.

Application of

IAS 10

Events after the Reporting Period

An entity may need to use estimates and assumptions in the recognition and measurement of its

regulatory deferral account balances

. For events that occur between the end of the reporting period and the date when the financial statements are authorised for issue,

[

Refer:

IAS 10 paragraphs 4–7

]

the entity shall apply IAS 10 to identify whether those estimates and assumptions should be adjusted to reflect those events.

[

Refer:

[

Refer:

IAS 10 paragraphs 8–11

]

Application of

Income Taxes

IAS 12 requires, with certain limited exceptions, an entity to recognise a deferred tax liability and (subject to certain conditions) a deferred tax asset for all temporary differences.

[

Refer:

IAS 12 paragraphs 15–44

]

A rate-regulated entity shall apply IAS 12 to all of its activities, including its

rate-regulated activities

, to identify the amount of income tax that is to be recognised.

B10

rate-regulated activities

, to identify the amount of income tax that is to be recognised.

B10

In some rate-regulatory schemes, the

rate regulator

permits or requires an entity to increase its future rates in order to recover some or all of the entity’s income tax expense. In such circumstances, this might result in the entity recognising a

regulatory deferral account balance

in the statement of financial position related to income tax, in accordance with its accounting policies established in accordance with

paragraphs 11–12

. The recognition of this regulatory deferral account balance that relates to income tax might itself create an additional temporary difference

[

Refer:

IAS 12 paragraph 5 (definition of temporary differences)

]

for which a further deferred tax amount would be recognised.

B11

]

for which a further deferred tax amount would be recognised.

B11

Notwithstanding the presentation and disclosure requirements of IAS 12, when an entity recognises a deferred tax asset or a deferred tax liability as a result of recognising

regulatory deferral account balances

, the entity shall not include that deferred tax amount within the total deferred tax asset (liability) balances. Instead, the entity shall present the deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances either:

(a)

with the line items that are presented for the regulatory deferral account debit balances and credit balances;

[

Refer:

Illustrative Examples, example 1 Statement of financial position

]

[

Refer:

Illustrative Examples, example 1 Statement of financial position

]

(b)

as a separate line item alongside the related regulatory deferral account debit balances and credit balances.

[

Refer:

Illustrative Examples, example 2 Statement of financial position

]

[

Refer:

paragraphs 22

and

]

B12

Similarly, when an entity recognises the movement in a deferred tax asset (liability) that arises as a result of recognising

regulatory deferral account balances

, the entity shall not include the movement in that deferred tax amount within the tax expense (income) line item that is presented in the statement(s) of profit or loss and other comprehensive income in accordance with IAS 12. Instead, the entity shall present the movement in the deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances either:

(a)

with the line items that are presented in the statement(s) of profit or loss and other comprehensive income for the movements in regulatory deferral account balances;

[

Refer:

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

]

(b)

as a separate line item alongside the related line items that are presented in the statement(s) of profit or loss and other comprehensive income for the movements in regulatory deferral account balances.

[

Refer:

[

Refer:

Illustrative Examples, example 2 Statement of profit or loss and other comprehensive income

]

[

Refer:

paragraphs 23

and

]

Application of

Earnings per Share

B13

Paragraph 66 of IAS 33

[

Refer:

paragraphs 23

and

]

Application of

Earnings per Share

B13

Paragraph 66 of IAS 33

requires some entities to present, in the statement of profit or loss and other comprehensive income, basic and diluted earnings per share both for profit or loss from continuing operations and profit or loss that is attributable to the ordinary equity holders of the parent entity. In addition,

paragraph 68 of IAS 33

requires an entity that reports a discontinued operation to either present in the statement of profit or loss and other comprehensive income or disclose in the notes the basic and diluted amounts per share for the discontinued operation.

B14

For each earnings per share amount presented in accordance with

B14

For each earnings per share amount presented in accordance with

, an entity applying this Standard shall present additional basic and diluted earnings per share amounts that are calculated in the same way, except that those amounts shall exclude the net movement in the regulatory deferral account balances. Notwithstanding the requirements in

paragraph 73C(c) of

, an entity shall present the earnings per share required by

paragraph 26

, an entity shall present the earnings per share required by

paragraph 26

of this Standard with equal prominence to the earnings per share required by IAS 33 for all periods presented.

[

Refer:

paragraph 26

Illustrative Examples, example 1 Statement of profit or loss and other comprehensive income

]

Application of

IAS 36

Impairment of Assets

B15

Paragraphs 11–12

]

Application of

IAS 36

Impairment of Assets

B15

Paragraphs 11–12

require an entity to continue to apply its previous GAAP accounting policies for the identification, recognition, measurement and reversal of any impairment of its recognised

regulatory deferral account balances

. Consequently, IAS 36 does not apply to the separate regulatory deferral account balances recognised.

[

Refer:

Basis for Conclusions paragraph BC39

]

B16

[

Refer:

Basis for Conclusions paragraph BC39

]

B16

However, IAS 36 might require an entity to perform an impairment test on a cash-generating unit (CGU)

[

Refer:

IAS 36 paragraph 6

(definition of cash-generating unit)]

that includes

regulatory deferral account balances

. This test might be required because the CGU contains goodwill,

[

Refer:

IAS 36 paragraph 10(b)

]

or because one or more of the impairment indicators described in IAS 36

[

Refer:

IAS 36 paragraphs 8, 9

and

12–14

]

[

Refer:

IAS 36 paragraphs 8, 9

and

12–14

]

have been identified relating to the CGU. In such situations,

paragraphs 74–79 of IAS 36

contain requirements for identifying the recoverable amount and the carrying amount of a CGU. An entity shall apply those requirements to decide whether any of the regulatory deferral account balances recognised are included in the carrying amount of the CGU for the purpose of the impairment test. The remaining requirements of IAS 36 shall then be applied to any impairment loss that is recognised as a result of this test.

Application of

IFRS 3

Business Combinations

Application of

IFRS 3

Business Combinations

[

Refer:

Basis for Conclusions paragraph BC59(a)(ii)

]

B17

The core principle of IFRS 3 is that an acquirer of a business

[

Refer:

IFRS 3 Appendix A (definitions of acquirer and business

) and, for business,

paragraphs B7–B12

]

recognises the assets acquired and the liabilities assumed at their acquisition-date fair values. IFRS 3 provides limited exceptions to its recognition and measurement principles.

Paragraph B18

of this Standard provides an additional exception.

B18

Paragraphs 11–12

require an entity to continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

. Consequently, if an entity acquires a business

[

Refer:

IFRS 3 Appendix A (definition of a business)

and

paragraphs B7–B12

]

[

Refer:

IFRS 3 Appendix A (definition of a business)

and

paragraphs B7–B12

]

, it shall apply, in its consolidated financial statements, its accounting policies established in accordance with paragraphs 11–12 for the recognition and measurement of the acquiree’s regulatory deferral account balances at the date of acquisition.

[

Refer:

IFRS 3 Appendix A (definition of acquisition date)

]

[

Refer:

IFRS 3 Appendix A (definition of acquisition date)

]

The acquiree’s regulatory deferral account balances shall be recognised in the consolidated financial statements of the acquirer in accordance with the acquirer’s policies, irrespective of whether the acquiree recognises those balances in its own financial statements.

Application of

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

[

Refer:

paragraph 25

]

B19

Paragraphs 11–12

[

Refer:

paragraph 25

]

B19

Paragraphs 11–12

require an entity to continue to apply its previous accounting policies for the recognition, measurement, impairment and derecognition of

regulatory deferral account balances

. Consequently, the measurement requirements of IFRS 5

[

Refer:

IFRS 5 paragraphs 15–29

]

shall not apply to the regulatory deferral account balances recognised.

B20

Paragraph 33 of IFRS 5

requires a single amount to be presented for discontinued operations

[

Refer:

requires a single amount to be presented for discontinued operations

[

Refer:

IFRS 5 Appendix A (definition of discontinued operation)

]

in the statement(s) of profit or loss and other comprehensive income. Notwithstanding the requirements of that paragraph, when an entity that elects to apply this Standard presents a discontinued operation, it shall not include the movement in

regulatory deferral account balances

that arose from the

rate-regulated activities

regulatory deferral account balances

that arose from the

rate-regulated activities

of the discontinued operation within the line items that are required by paragraph 33 of IFRS 5. Instead, the entity shall present the movement in regulatory deferral account balances that arose from the rate-regulated activities of the discontinued operation either:

(a)

within the line item that is presented for movements in the regulatory deferral account balances related to profit or loss; or

(b)

as a separate line item alongside the related line item that is presented for movements in the regulatory deferral account balances related to profit or loss.

B21

Similarly, notwithstanding the requirements of

paragraph 38 of IFRS 5

, when an entity presents a disposal group,

[

Refer:

IFRS 5 Appendix A (definition of disposal group)

]

[

Refer:

IFRS 5 Appendix A (definition of disposal group)

]

the entity shall not include the total of the regulatory deferral account debit balances and credit balances that are part of the disposal group within the line items that are required by paragraph 38 of IFRS 5. Instead, the entity shall present the total of the regulatory deferral account debit balances and credit balances that are part of the disposal group either:

(a)

within the line items that are presented for the regulatory deferral account debit balances and credit balances; or

(b)

as separate line items alongside the other regulatory deferral account debit balances and credit balances.

B22

If the entity chooses to include the

regulatory deferral account balances

B22

If the entity chooses to include the

regulatory deferral account balances

and movements in those balances that are related to the disposal group or discontinued operation within the related regulated deferral account line items, it may be necessary to disclose them separately as part of the analysis of the regulatory deferral account line items described by

paragraph 33

of this Standard.

Application of

IFRS 10

Consolidated Financial Statements

and

IAS 28

paragraph 33

of this Standard.

Application of

IFRS 10

Consolidated Financial Statements

and

IAS 28

Investments in Associates and Joint Ventures

[

Refer:

Basis for Conclusions paragraph BC59(a)(i)

]

B23

Paragraph 19 of IFRS 10

requires that a “parent shall prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances”.

Paragraph 8

of this Standard requires that an entity that is within the scope of, and elects to apply, this Standard shall apply all of its requirements to all

regulatory deferral account balances

arising from all of the entity’s

rate-regulated activities

regulatory deferral account balances

arising from all of the entity’s

rate-regulated activities

. Consequently, if a parent recognises regulatory deferral account balances in its consolidated financial statements in accordance with this Standard, it shall apply the same accounting policies to the regulatory deferral account balances arising in all of its subsidiaries. This shall apply irrespective of whether the subsidiaries recognise those balances in their own financial statements.

B24

Similarly,

paragraphs 35–36 of IAS 28

require that, in applying the equity method, an “entity’s financial statements shall be prepared using uniform accounting policies for like transactions and events in similar circumstances”. Consequently, adjustments shall be made to make the associate’s or joint venture’s accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances conform to those of the investing entity in applying the equity method.

Application of

IFRS 12

Disclosure of Interests in Other Entities

B25

Paragraph 12(e) of IFRS 12

requires an entity to disclose, for each of its subsidiaries that have non-controlling interests that are material to the reporting entity, the profit or loss that was allocated to non-controlling interests of the subsidiary during the reporting period. An entity that recognises

regulatory deferral account balances

in accordance with this Standard shall disclose the net movement in regulatory deferral account balances that is included within the amounts that are required to be disclosed by paragraph 12(e) of IFRS 12.

B26

Paragraph 12(g) of IFRS 12

requires an entity to disclose, for each of its subsidiaries that have non-controlling interests that are material to the reporting entity, summarised financial information about the subsidiary, as specified in

paragraph B10 of IFRS 12

. Similarly,

paragraph 21(b)(ii) of IFRS 12

requires an entity to disclose, for each joint venture and associate that is material to the reporting entity, summarised financial information as specified in

paragraphs B12–B13 of IFRS 12

Paragraph B16 of IFRS 12

specifies the summary financial information that an entity is required to disclose for all other associates and joint ventures that are not individually material in accordance with

paragraph 21(c) of IFRS 12

B27

In addition to the information specified in

paragraphs 12

B10

B12–B13

and

B16 of IFRS 12

, an entity that recognises

regulatory deferral account balances

B10

B12–B13

and

B16 of IFRS 12

, an entity that recognises

regulatory deferral account balances

in accordance with this Standard shall also disclose the total regulatory deferral account debit balance, the total regulatory deferral account credit balance and the net movements in those balances, split between amounts recognised in profit or loss and amounts recognised in other comprehensive income, for each entity for which those IFRS 12 disclosures are required.

B28

Paragraph 19 of IFRS 12

B28

Paragraph 19 of IFRS 12

specifies the information that an entity is required to disclose when the entity recognises a gain or loss on losing control of a subsidiary calculated in accordance with

paragraph 25 of IFRS 10

. In addition to the information required by paragraph 19 of IFRS 12, an entity that elects to apply this Standard shall disclose the portion of that gain or loss that is attributable to derecognising regulatory deferral account balances in the former subsidiary at the date when control is lost.

Appendix C

Effective date and transition

This appendix is an integral part of the Standard.

Effective date and transition

Effective date

This appendix is an integral part of the Standard.

Effective date and transition

Effective date

An entity shall apply this Standard if its

first annual IFRS financial statements

are for a period beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies this Standard in its first annual IFRS financial statements for an earlier period, it shall disclose that fact.

[

Refer:

Basis for Conclusions paragraphs BC53 and BC54

]

[

Refer:

Basis for Conclusions paragraphs BC53 and BC54

]

issued in April 2024 amended

paragraphs 19

B13

and

B14

and the subheading before

paragraph 9

. An entity shall apply those amendments when it applies