BDO releases IFR Bulletin 2021/04 – IASB publishes Exposure Draft – Regulatory Assets & Regulatory Liabilities

BDO has released IFR Bulletin 2021/04 summarising the requirements of the Exposure Draft of a new standard Regulatory Assets & Regulatory Liabilities published by the IASB. This standard would be intended to replace IFRS 14 Regulatory Deferral Accounts.

The ED proposes that the ‘total allowed compensation’ to which an entity conducting rate regulated activities is entitled for the goods and services supplied in a period should be reflected in the financial performance in the same period. This would be achieved by recognising regulatory assets and regulatory liabilities in the statement of financial position and regulatory income and regulatory expense in the statement of financial performance.

The proposed standard is expected to have a significant effect on entities in rate regulated sectors such as power, telecommunication, public infrastructure, public transport. Particularly for entities that are currently not accounting for regulatory deferral account balances as permitted by IFRS 14 in limited circumstances, the proposed standard may significantly affect financial performance metrics and ratios.

The publication may be accessed here.