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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 ..... tements to understand the amount, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognition, 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). 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial reporting requirements of other Standards. 19 In addition to the items that are required to be presented in the balance 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 balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amounts required by Ind AS 33 but excluding the movements in regulatory deferral account balances (see paragraphs B13 B14). Disclosure Objective 27 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. 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 variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adopting Ind ASs for its reporting requirements in India. For instance, for companies preparing their financial statements in accordance with the existing Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 2 shall consider those financial statements as previous GAAP financial statements. Explanation: Guidance Note on Accounting 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 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. B5 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B7 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. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted in the statement of profit and loss 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 of profit and loss for the movements in regulatory deferral account balances. Application of Ind AS 33 Earnings per Share B13 Paragraph 66 of Ind AS 33 requires some entities to present, in the statement of profit and loss , 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 Ind 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 accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lances 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. Application of Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations B19 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 Ind AS 105 shall not apply to the regulatory deferral account balances recognised. B20 Paragraph 33 of Ind AS 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 regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries. This shall apply irrespective of whether the subsidiaries recognise those balances in their own financial statements. B24 Similarly, paragraphs 35 36 of Ind AS 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. Application of Ind AS 112 Disclosure of Interests 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Activities would be considered as the previous GAAP for the purpose of Ind AS 114. 2. Under paragraph 6 of Ind AS 114, a footnote has been added to clarify the application of requirements of previous GAAP in the case of an entity subject to rate regulation coming into existence after Ind AS coming into force or an entity whose activities become subject to rate regulation as defined in this Ind AS subsequent to preparation and presentation of its first Ind AS financial statements. 3. Different terminology is used in this standard, e.g., the term balance sheet is used instead of Statement of financial position , and Statement of profit and loss is used instead of Statement of Profit and Loss and comprehensive income . Also see in PDF Indian Accounting Standard (Ind AS) 114 Regulatory Deferral Accounts ************* NOTES:- 1. Substituted vide NOTIFICATION NO. G.S.R. 419(E) dated 18-06-2021 before it was read as 13 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, measuremen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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