EFRAG publishes final Comment Letter on Regulatory Assets and Regulatory Liabilities
17 September 2021
EFRAG has published its final Comment Letter on the IASB Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities. EFRAG supports the overall objective of the ED, but identifies some concerns with the proposals.
EFRAG generally supports the proposed elements of total allowed compensation. However, EFRAG disagrees with the proposal that regulatory returns earned on assets not yet available for use would not form part of total allowed compensation during construction and hence would require the recognition of a regulatory liability. EFRAG recommends that the accounting for these regulatory returns should depend on the economic substance of the regulatory agreement.
On recognition and measurement, EFRAG generally supports the proposed recognition criteria. However, it recommends that the IASB considers a higher recognition threshold for cases of high existence uncertainty.
Regarding transition provisions, EFRAG recommends a modified retrospective application with exemptions or practical expedients for assets with long useful lives.
The final Comment Letter may be accessed here.