The IASB met on 22 February 2024 to redeliberate the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities relating to:
- the boundary of a regulatory agreement (Agenda Paper 9A);
- amendments to IAS 36 Impairment of Assets (Agenda Paper 9B); and
- disclosure requirements (Agenda Paper 9C).
The IASB also discussed new possible disclosure requirements arising from its redeliberations on the Exposure Draft (Agenda Paper 9D).
Agenda Paper 9E is an illustrative draft of the disclosure requirements recommended in Agenda Paper 9C and Agenda Paper 9D. The IASB was not asked to make any decisions on Agenda Paper 9E.
When the IASB completes its redeliberations it will publish an IFRS Accounting Standard on rate-regulated activities (prospective RRA Standard).
Boundary of a regulatory agreement (Agenda Paper 9A)
For the prospective RRA Standard, the IASB tentatively decided:
- to acknowledge that a right to supply goods or services might exist for an undefined period; and
- to include a requirement that an entity that has an enforceable right to supply goods or services include unrecovered or unfulfilled cash flows in the measurement of a regulatory asset or regulatory liability for which the entity has either:
- an enforceable right to recover or enforceable obligation to fulfil by adding amounts to or deducting amounts from future regulated rates charged; or
- an enforceable right to receive or enforceable obligation to pay compensation on termination of the agreement.
All 14 IASB members agreed with these decisions.
Amendments to IAS 36 (Agenda Paper 9B)
For the prospective RRA Standard, the IASB tentatively decided:
- to retain the proposal to exclude regulatory assets from the scope of IAS 36;
- to omit the proposed amendments to paragraphs 43 and 79 of IAS 36; and
- to provide no further guidance on applying IAS 36.
All 14 IASB members agreed with these decisions.
Disclosures proposed in Exposure Draft (Agenda Paper 9C)
For the prospective RRA Standard, the IASB tentatively decided:
- to retain the overall disclosure objective proposed in paragraph 72 of the Exposure Draft;
- to retain the proposals on aggregation and disaggregation of disclosures in paragraphs 75–76 of the Exposure Draft;
- to include examples of the characteristics an entity could use to aggregate or disaggregate disclosures in accordance with the principles in the prospective IFRS Accounting Standard Presentation and Disclosure in Financial Statements (prospective PFS Standard);
- to retain the specific disclosure objective relating to financial performance proposed in paragraph 77 of the Exposure Draft;
- to retain the proposals in paragraph 78(a)–(e) of the Exposure Draft requiring that an entity disclose components of regulatory income or regulatory expense relating to the creation of regulatory assets and regulatory liabilities, recovery of regulatory assets, fulfilment of regulatory liabilities, and to regulatory interest income on regulatory assets and regulatory interest expense on regulatory liabilities;
- to require that an entity apply the aggregation and disaggregation principles in the prospective PFS Standard when disclosing other components of regulatory income or regulatory expense, such as those arising from changes in the carrying amount of a regulatory asset or regulatory liability caused by a change in the boundary of a regulatory agreement, and those arising from remeasurements of regulatory assets and regulatory liabilities;
- to retain the specific disclosure objective relating to financial position proposed in paragraph 79 of the Exposure Draft;
- to retain the proposals in paragraphs 80(a) and 81 of the Exposure Draft requiring that an entity disclose quantitative information, using time bands, about when it expects to recover regulatory assets and fulfil regulatory liabilities;
- to retain the proposal in paragraph 80(b) of the Exposure Draft requiring that an entity disclose the discount rate or ranges of discount rates used in measuring regulatory assets and regulatory liabilities at the end of the reporting period;
- to retain the proposal in paragraph 80(c) of the Exposure Draft requiring that an entity disclose the regulatory interest rate provided by the regulatory agreement for a regulatory asset, if the entity uses the minimum interest rate as the discount rate for that regulatory asset;
- to retain the proposal in paragraph 80(d) of the Exposure Draft requiring that an entity disclose an explanation of how risks and uncertainties affect the recovery of regulatory assets or fulfilment of regulatory liabilities;
- to provide no additional guidance on risks and uncertainties that affect the recovery of regulatory assets or fulfilment of regulatory liabilities;
- to combine the proposed specific disclosure objective relating to changes in regulatory assets and regulatory liabilities in paragraph 82 of the Exposure Draft with the specific disclosure objective in paragraph 79 of the Exposure Draft;
- to retain the proposals in paragraph 83 of the Exposure Draft requiring that an entity disclose a reconciliation from the opening to the closing carrying amounts of regulatory assets and regulatory liabilities;
- to include examples of significant changes in regulatory assets and regulatory liabilities that are not a consequence of regulatory income or regulatory expense;
- to include a requirement that an entity disclose a qualitative explanation of any significant changes in regulatory assets and regulatory liabilities that are not a consequence of regulatory income or regulatory expense;
- to retain the proposal in paragraph 84 of the Exposure Draft relating to the disclosure of regulatory assets and regulatory liabilities measured applying paragraph 61 of the Exposure Draft; and
- to extend the proposals in paragraph 78 of the Exposure Draft to include a requirement that an entity disclose separately the components of regulatory income or regulatory expense included in other comprehensive income.
All 14 IASB members agreed with decisions (a)–(c) and (f),13 of 14 IASB members agreed with decisions (d), (e) and (g)–(q) and 8 of 14 IASB members agreed with decision (r).
New disclosures (Agenda Paper 9D)
For the prospective RRA Standard, the IASB tentatively decided:
- to include a specific disclosure objective that an entity be required to disclose information that enables users of financial statements to understand whether the entity’s regulatory capital base has a direct or no direct relationship with its property, plant and equipment;
- to include—in order to achieve the specific disclosure objective in (a)—a requirement that an entity disclose:
- whether its regulatory capital base has a direct or no direct relationship with its property, plant and equipment; and
- the reasons the entity has concluded its regulatory capital base has a direct or no direct relationship with its property, plant and equipment;
- not to include a requirement that an entity disclose the amount of its regulatory capital base;
- to include a requirement that an entity disclose the nature of unrecognised regulatory assets and unrecognised regulatory liabilities;
- to include a requirement that an entity disclose the regulatory approach (nominal or real) used by the regulator to compensate the entity for inflation;
- not to include a requirement that an entity disclose assumptions used in estimating uncertain future cash flows for the measurement of regulatory assets or regulatory liabilities related to long-term performance incentives beyond those disclosures required by IAS 1 Presentation of Financial Statements;
- to include, for an entity whose regulatory capital base has a direct relationship with its property, plant and equipment and capitalises its borrowing costs, a requirement to disclose whether it receives regulatory returns on an asset not yet available for use; and
- not to include—for an entity whose regulatory capital base has a direct relationship with its property, plant and equipment and capitalises its borrowing costs—a requirement to disclose:
- the composition of the regulatory returns between debt and equity returns, and when these regulatory returns are included in regulated rates charged; and
- the effects of those regulatory returns on changes in the related regulatory assets or regulatory liabilities.
All 14 IASB members agreed with decisions (a), (b), (f) and (h), 13 of 14 IASB members agreed with decisions (c) and (g), 12 of 14 IASB members agreed with decision (d) and 11 of 14 IASB members agreed with decision (e).