Adviser alert—Regulatory deferral accounts

Adviser alert—Regulatory
deferral accounts exposure draft
May 2013
Overview
The International Accounting Standards
Board (IASB) issued Exposure Draft
ED/2013/5 Regulatory Deferral Accounts (ED).
This ED proposes an interim Standard
which is intended to allow entities which
adopt International Financial Reporting
Standards (IFRS) and currently recognize
regulatory deferral accounting in accordance
with previous generally accepted accounting
principles to continue to do so until a final
Standard is completed.
This interim Standard is part of the IASB’s
larger project on rate-regulated activities and
was developed to provide short-term
guidance for first-time adopters of IFRS until
that project is completed and guidance made
available.
Currently, there is no guidance within IFRS
that specifically addresses the accounting for
rate-regulated activities. One of the larger
issues is that “regulatory deferral account
balances,” the term used in the interim
standard to describe regulatory assets and
liabilities, do not meet the definition of assets
and liabilities within the Conceptual
Framework. As a consequence, adoption of
IFRS is being deferred in various
jurisdictions until adequate guidance is
developed. This is the case in Canada where
the Accounting Standards Board (AcSB) has
most recently deferred the mandatory date of
adoption of IFRS to January 1, 2015.
The IASB’s main objectives for issuing the
interim Standard are to
• increase comparability of financial
reporting by allowing those entities with
rate-regulated activities that have not
adopted IFRS, due to lack of guidance, the
ability to adopt IFRS; and
• ensure that regulatory deferral account
balances and movements in those balances
are clearly identified to allow
comparability between those entities who
have these balances and those who do not.
Summary of proposals
The ED proposes to
• allow entities that adopt IFRS to continue
to use the previous GAAP accounting
policies for recognition, measurement and
impairment of regulatory deferral account
balances;
• require entities to present regulatory
deferral account balances as separate line
items in the statement of financial position
and to present movements in those
account balances as a separate line item in
the statement of profit or loss and other
comprehensive income; and
• require specific disclosures to clearly
identify the nature and risks associated
with the rate-regulation that has resulted
in the recognition of regulatory deferral
account balances in accordance with the
proposals.
Audit • Tax • Advisory
© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd. All rights reserved.
Transition
The IASB has not included any specific
transition relief within the interim standard
itself since existing recognition and
measurement policies will continue.
Entities applying IFRS 1 First-time Adoption of
International Financial Reporting Standards are
permitted to elect to apply the fair value as
deemed cost exemption for property, plant
and equipment and intangible assets. As a
consequence only the presentation policies
for property, plant and equipment and
intangible assets will need to change to
isolate the regulatory deferral account
amounts on a prospective basis from the
date of transition.
Resources
• Exposure Draft ED/2013/5 Regulatory
Deferral Accounts
• Adviser alert – Most recent deferral for
adoption of IFRS by entities with rateregulated activities
The deadline for comments is September 4,
2013. The effective date has not yet been
determined.
This publication does not outline all aspects
of the proposed interim Standard, for more
information, see the full ED here.
Audit • Tax • Advisory
© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd. All rights reserved.
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