Rate-regulated activities
Rate regulation is a restriction in the setting of prices that can be charged to customers for services or products. Generally, it is imposed by regulatory bodies or governments when an entity has a monopoly or a dominant market position that gives it excessive market power.
In December 2008, the IASB added a project on rate-regulated activities to its agenda. The project objective is to develop a standard on rate-regulated activities that clarifies whether regulated entities could or should recognise an asset or a liability as a result of rate regulation.
Although a specific standard on accounting for the effects of rate regulation exists in US generally accepted accounting principles (GAAP), it has no counterpart in IFRSs. However, rate regulation is widespread and significantly affects the economic environment of rate-regulated entities. Many billions of dollars of ‘regulatory’ assets and liabilities are currently recognised in jurisdictions that refer to US GAAP. Some of these jurisdictions are already converging to IFRSs. Clarifying the treatment of assets and liabilities arising from rate regulation in IFRSs is therefore important.
Where are we in the project?
The Board published an exposure draft on 23 July 2009.
Comment letters on the invitation to comment are due by 20 November 2009.
Comment letters received during the consultation process will be published on the IASB’s website. The Board will discuss the feedback received in public meetings.
The Exposure Draft can be accessed here.
What will happen next?
The Board plans to start discussing the comments received from the exposure draft in Q1 2010.
Estimated project completion
The current project plan envisages the issue of a new standard in the first half of 2010.