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TMI BlogRegulatory Deferral AccountsX X X X Extracts X X X X X X X X Extracts X X X X ..... timing and uncertainty of future cash flows from any regulatory deferral account balances that are recognised. 3 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 Ind ASs, subject to the limited changes referred to in paragraph 2 above. 4 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. Scope 5 An entity is permitted to apply the requirements of this Standard in its first Ind AS 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. 6 An entity shall apply the requirements of this Standard in its financial stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alances, 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). 12 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. Changes in accounting policies 1[13 An entity shall not change its accounting policies in order to start to recognize 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 reliable**, or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in paragraph 10 of Ind AS 8.] 14 This Standard does not exempt entities from applying paragraphs 10 or 14-15 of Ind AS 8 to changes in accounting policy. To justify changing its accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance sheet and in the statement of profit and loss in accordance with Ind AS 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. Classification of regulatory deferral account balances 20 An entity shall present separate line items in the balance sheet for: (a) the total of all regulatory deferral account debit balances; and (b) the total of all regulatory deferral account credit balances. 21 When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its balance sheet, 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. Classification of movements in regulatory deferral account balances 22 An entity shall present, in the other comprehensiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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. 28 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. 29 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 balance sheet as regulatory deferral account balances; (ii) the amounts that have been recognised in the statement of profit and loss 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Rate Regulated Activities, issued by the Institute of Chartered Accountants of India (ICAI) shall be considered to be the previous GAAP. Rate-regulated Activities An entity's activities that are subject to rate regulation. Rate regulation 'Cost of Service Regulation' as defined in the Guidance Note on Accounting for Rate Regulated Activities. Rate regulator 'Regulator' as defined in the Guidance Note on Accounting for Rate Regulated Activities. Regulatory deferral account balance A 'Regulatory Asset' or a 'Regulatory Liability' as defined in the Guidance Note on Accounting for Rate Regulated Activities. Appendix B Application Guidance This appendix is an integral part of the Standard. Rate-regulated activities B1 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 ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets, 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. B5 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 Ind AS 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 Ind AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraphs clarify specific exceptions to, and exemptions from, other Standards and additional presentation and disclosure requirements that are expected to be applicable. Application of Ind AS 10 Events after the Reporting Period B8 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 Ind AS 10 to identify whether those estimates and assumptions should be adjusted to reflect those events. Application of Ind AS 12 Income Taxes B9 Ind AS 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 Ind AS 12 to all of its activities, including its rateregulated activities, to identify the amount of income tax that is to be recognised. B10 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AS 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. B14 For each earnings per share amount presented in accordance with Ind AS 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 Ind AS 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 Ind AS 33 for all periods presented. Application of Ind AS 36 Impairment of Assets B15 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, Ind AS 36 does not apply to the separate regulatory deferral account balances recognised. B16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 105 requires a single amount to be presented for discontinued operations in the statement of profit and loss. 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 Ind AS 105. 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 B21 Similarly, notwithstanding the requirements of paragraph 38 of Ind AS 105, 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 gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Other Entities B25 Paragraph 12(e) of Ind AS 112 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 noncontrolling 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 Ind AS 112. B26 Paragraph 12(g) of Ind AS 112 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 Ind AS 112. Similarly, paragraph 21(b)(ii) of Ind AS 112 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 Ind AS 112. Paragraph B16 of Ind AS 112 specifies the summary financial information that an entity is required to disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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