Table of Contents
In January 2014 the International Accounting Standards Board issued IFRS 14 Regulatory
Deferral Accounts. IFRS 14 permits a first-time adopter of IFRS Standards that is within its
scope to continue to recognise and measure its regulatory deferral account balances in its
first and subsequent IFRS financial statements in accordance with its previous GAAP.
Other Standards have made minor consequential amendments to IFRS 14, including
IFRS 17 Insurance Contracts (issued May 2017) and Amendments to References to the Conceptual
Framework in IFRS Standards (issued March 2018).
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 the first time that they appear in the Standard. Definitions of
other terms are given in the Glossary for International Financial Reporting Standards.
The Standard should be read in the context of its objective and the Basis for
Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial
Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a
basis for selecting and applying accounting policies in the absence of explicit guidance.
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) 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; 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.
The requirements of this Standard permit an entity within its scope 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.
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.
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; and
(b) recognised amounts that qualify as regulatory deferral account
balances in its financial statements in accordance with its previous
GAAP.
An entity shall apply the requirements of this Standard in its financial
statements 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.
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.
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.
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.
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. 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.
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 reliable1
, 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.
This Standard does not exempt entities from applying paragraphs 10 or 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.
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 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.
This Standard introduces presentation requirements, outlined in paragraphs
20–26, for 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.
In addition to the items that are required to be presented in the statement of
financial position and in the statement(s) of profit or loss and other
comprehensive income in accordance with IAS 1 Presentation of 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.
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, 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.
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.
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. 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.
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 IAS 12 Income Taxes for deferred tax assets
(liabilities) and the tax expense (income) (see paragraphs B9–B12).
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 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).
When an entity presents earnings per share in accordance
with IAS 33 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).
An entity that elects to apply this Standard shall disclose information that
enables users 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.
If any of the disclosures set out in 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.
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 of financial statements need additional information to
evaluate the quantitative information disclosed.
To help a user 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 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).
The disclosures required by paragraph 30 shall be given in the financial
statements 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.
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.
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.
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;
(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. 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 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 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.
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.
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.
rate-regulated
activities
An entity’s activities that are subject to rate regulation.
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.
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.
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.
This appendix is an integral part of the Standard.
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, regardless of the type of entity or the industry to
which it belongs.
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) 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.
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) 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 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).
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.
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, the entity shall apply IAS 10 to identify
whether those estimates and assumptions should be adjusted to reflect those
events.
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. 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.
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 for which a further deferred tax
amount would be recognised.
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; or
(b) as a separate line item alongside the related regulatory deferral
account debit balances and credit balances.
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; or
(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.
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 disclose the basic and diluted amounts per share for the
discontinued operation, either in the statement of profit or loss and other
comprehensive income or in the notes.
For each earnings per share amount presented in accordance with IAS 33, 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. Consistent with the requirement in paragraph 73 of IAS 33,
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.
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.
However, IAS 36 might require an entity to perform an impairment test on a
cash-generating unit (CGU) that includes regulatory deferral account balances.
This test might be required because the CGU contains goodwill, or because one
or more of the impairment indicators described in IAS 36 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.
The core principle of IFRS 3 is that an acquirer of a business 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.
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, 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. 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.
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 shall not apply to the regulatory deferral
account balances recognised.
Paragraph 33 of IFRS 5 requires a single amount to be presented for
discontinued operations 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 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.
Similarly, notwithstanding the requirements of paragraph 38 of IFRS 5, when
an entity presents a 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.
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.
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. 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.
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.
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.
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.
In addition to the information specified in paragraphs 12, 21, 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.
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.
This appendix is an integral part of the Standard.
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.
This appendix sets out an amendment to IFRS 1 First-time Adoption of International Financial
Reporting Standards that is a consequence of the IASB issuing IFRS 14. An entity shall apply the
amendment for annual periods beginning on or after 1 January 2016. Earlier application is
permitted. If an entity applies IFRS 14 for an earlier period, the amendment shall be applied for that
earlier period.
* * * * *
The amendment contained in this appendix when this IFRS was issued in 2014 has been incorporated
into the text of IFRS 1 published in this volume.
International Financial Reporting Standard 14 Regulatory Deferral Accounts was approved
for issue by thirteen of the sixteen members of the International Accounting Standards
Board. Messrs Edelmann, Gomes and Zhang voted against its publication. Their dissenting
opinions are set out after the Basis for Conclusions.
Hans Hoogervorst Chairman
Ian Mackintosh Vice-Chairman
Stephen Cooper
Philippe Danjou
Martin Edelmann
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Gary Kabureck
Prabhakar Kalavacherla
Patricia McConnell
Takatsugu Ochi
Darrel Scott
Chungwoo Suh
Mary Tokar
Wei-Guo Zhang