About
IFRS 14 prescribes special accounting for the effects of rate regulation. Rate regulation is a legal framework for establishing the prices that a public utility or similar entity can charge to customers for regulated goods or services.
Rate regulation can create a regulatory deferral account balance. A regulatory deferral account balance is an amount of expense or income that would not be recognised as an asset or liability in accordance with other Standards, but that qualifies to be deferred in accordance with IFRS 14, because the amount is included, or is expected to be included, by a rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services.
IFRS 14 permits a first-time adopter within its scope to continue to account for regulatory deferral account balances in its IFRS financial statements in accordance with its previous GAAP when it adopts IFRS Standards. However, IFRS 14 introduces limited changes to some previous GAAP accounting practices for regulatory deferral account balances, which are primarily related to the presentation of those balances.
What you should know
- Know and apply the definitions related to regulatory deferral accounts.
- Determine whether an entity is within the scope of IFRS 14.
- Identify regulatory deferral account balances.
- Account for regulatory deferral account balances on first-time adoption of IFRS Standards.
- Present regulatory deferral account balances separately in the financial statements.
- Disclose the nature and financial effects of rate regulation.