IFRS Accounting Taxonomy 2023 – Illustrative examples

IFRS 14 Regulatory Deferral Accounts
Illustrative examples - example 17a

These examples accompany, but are not part of, the Standard.

Regulatory deferral account balances

Example 1—Illustrative presentation of financial statements

Paragraphs 20–25 of this Standard require an entity to present regulatory deferral account debit balances and credit balances and any related deferred tax asset (liability) and the net movement in those balances as separate line items in the statement of financial position and the statement(s) of profit or loss and other comprehensive income respectively. Sub-totals are drawn before the regulatory line items are presented. In addition, paragraph 26 requires an entity to present additional basic and diluted earnings per share, which are calculated by excluding the net movement in regulatory deferral account balances, when the entity presents earnings per share in accordance with IAS 33 Earnings per Share. Example 1 illustrates how these requirements might be met, but is not intended to illustrate all aspects of this Standard or IFRS more generally.

XYZ Group—Statement of financial position as at 31 December 20X7(in currency units)
	31 Dec 20X7	31 Dec 20X6
ASSETS
Non-current assets
Property, plant and equipment	350,700	360,020
Goodwill	80,800	91,200
Other intangible assets	227,470	227,470
Investments in associates	100,150	110,770
Investments in equity instruments	129,790	146,460
	888,910	935,920
Current assets
Inventories	135,230	132,500
Trade receivables	91,600	110,800
Other current assets	25,650	12,540
Cash and cash equivalents	212,160	220,570
	464,640	476,410
Total assets	1,353,550	1,412,330
Regulatory deferral account debit balances and related deferred tax asset	112,950	111,870
Total assets and regulatory deferral account debit balances	1,466,500	1,524,200

Note: The aggregated total that is presented for regulatory deferral account debit balances and the related deferred tax asset includes the sum of the regulatory deferral account debit balances of CU100,240 (20X6 – CU102,330) plus the deferred tax asset that is related to the recognition of regulatory deferral account balances of CU12,710 (20X6 – CU9,540). This aggregated presentation is permitted by paragraphs 24 and B11 of this Standard. An alternative disaggregated presentation is illustrated in Example 2.

XYZ Group—Statement of financial position as at 31 December 20X7(in currency units)
	31 Dec 20X7	31 Dec 20X6
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital	650,000	600,000
Retained earnings	243,500	164,500
Other components of equity	10,200	21,200
	903,700	785,700
Non-controlling interests	70,050	45,800
Total equity	973,750	831,500

Non-current liabilities
Long-term borrowings	120,000	160,000
Deferred tax	28,800	26,040
Long-term provisions	28,850	52,240
	177,650	238,280
Current liabilities
Trade and other payables	87,140	111,150
Short-term borrowings	80,000	200,000
Current portion of long-term borrowings	10,000	20,000
Current tax payable	35,000	42,000
Short-term provisions	5,000	4,800
	217,140	377,950
Total liabilities	394,790	616,230
Total equity and liabilities	1,368,540	1,447,730
Regulatory deferral account credit balances	97,960	76,470
Total equity, liabilities and regulatory deferral account credit balances	1,466,500	1,524,200

Note: regulatory deferral account balances are not described as assets or liabilities for the purposes of this Standard. The sub-totals described as “Total assets” and “Total liabilities” are comparable to those that would be presented if the regulatory deferral account balances were not recognised. The difference between these two sub-totals represents the net balance of all regulatory deferral account balances recognised and any related deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances, which would otherwise be recognised within retained earnings or other components of equity.

XYZ Group—Statement of profit or loss and other comprehensive income for the year ended 31 December 20X7(illustrating the presentation of profit or loss and other comprehensive income in one statement and the classification of expenses within profit or loss by function)(in currency units)
		20X7	20X6
Revenue		390,000	358,784
Cost of sales		(237,062)	(230,000)
Gross profit		152,938	128,784
Other income		44,247	16,220
Distribution costs		(9,000)	(13,700)
Administrative expenses		(20,000)	(31,500)
Other expenses		(2,100)	(1,200)
Finance costs		(8,000)	(7,500)
Share of profit of associates		35,100	15,100
Profit before tax		193,185	106,204
Income tax expense		(43,587)	(44,320)
Profit for the year before net movements in regulatory deferral account balances		149,598	61,884
Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement		(27,550)	3,193
Profit for the year and net movements in regulatory deferral account balances		122,048	65,077
Other comprehensive income: Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension plans		(7,938)	(3,784)
Net movement in regulatory deferral account balances related to other comprehensive income		7,140	4,207
Other comprehensive income for the year, net of income tax		(798)	423
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		121,250	65,500
Profit and net movements in regulatory deferral account balances attributable to:
	Owners of the parent	97,798	51,977
	Non-controlling interests	24,250	13,100
		122,048	65,077
Total comprehensive income attributable to
	Owners of the parent	97,000	52,400
	Non-controlling interests	24,250	13,100
		121,250	65,500
Earnings per share (in currency units):
	Basic and diluted	0.61	0.35
	Basic and diluted including net movement in regulatory deferral account balances	0.46	0.30

Notes:
(1)	To simplify the example, it is assumed that all regulatory deferral account balances relate to activities that are carried out in wholly-owned subsidiaries and thus no amounts are attributable to non-controlling interests.
(2)	The aggregated total that is presented for the net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement includes the net movement in regulatory deferral account balances of CU30,720 (20X6 – CU9,127) and the movement in the related deferred tax asset that is related to the recognition of regulatory deferral account balances, which is CU3,170 (20X6 – CU12,320). This aggregated presentation is permitted by paragraphs 24 and B12 of this Standard. An alternative disaggregated presentation is illustrated in Example 2.

For each type of rate-regulated activity, paragraph 33 requires an entity to present, for each class of regulatory deferral account balance, a reconciliation of the carrying amount at the beginning and the end of the period. This example illustrates how that requirement may be met for an entity with two types of rate-regulated activity (electricity distribution and gas distribution), but is not intended to illustrate all aspects of this Standard or IFRS more generally.

Regulatory deferral account balances
Regulatory deferral account debit balances	20X6	Balances arising in the period	Recovery/reversal	20X7	Remaining recovery/ reversal period (years)
Electricity distribution
Construction costs	18,720	5,440	(80)	24,080	4-10
Storm damage	64,410	–	(12,060)	52,350	4
Other regulatory accounts	6,270	2,320	(950)	7,640	4-10
Gas distribution
Pension costs	5,130	10,120	(2,980)	12,270	N/A
Gas cost variances	7,800	–	(3,900)	3,900	1
	102,330	17,880	(19,970)	100,240
Regulatory deferral account credit balances
Electricity distribution
Land disposal	–	19,000	–	19,000	10
Income tax	6,360	3,207	(1,093)	8,474	1-10
Gas distribution
Gas cost variances	600	4,000	(200)	4,400	2-3
Income tax	3,180	1,603	(547)	4,236	1-10
Decommissioning costs	66,330	(2,030)	(2,450)	61,850	3-20
	76,470	25,780	(4,290)	97,960

Notes:
(1)	Construction costs consist of costs that are not permitted to be included in the cost of property, plant and equipment in accordance with IAS 16 Property, Plant and Equipment.
(2)	Other regulatory accounts include regulatory deferral account debit balances that are individually immaterial.
(3)	The net movement in the pension costs regulatory deferral account balance of CU7,140 (CU12,270 – CU5,130) relates to the remeasurement of the defined benefit pension plan, which is presented in other comprehensive income in accordance with IAS 19 Employee Benefits. In accordance with paragraph 22 of this Standard, the related movement in the regulatory deferral account balance is also presented in other comprehensive income.
(4)	The recovery from, or refund to, customers of future income taxes through future rates is recognised as a regulatory deferral account balance. The company has recognised a deferred tax asset of CU12,710 (20X6 – CU9,540) arising from the recognition of regulatory deferral account balances and a corresponding regulatory deferral account credit balance of CU12,710 (20X6 – CU9,540). The deferred tax asset balance is presented within the total regulatory deferral account debit balances presented in the statement of financial position.
(5)	The net movement of CU30,720 in the remaining regulatory deferral account balances is presented in the profit or loss section of the statement of profit or loss and other comprehensive income, net of the movement in the deferred tax asset related to the regulatory deferral account balances of CU3,170 [CU (8,474 – 6,360) + CU (4,236 – 3,180)]. The remaining net movement of CU30,720 consists of:
		Decrease in regulatory deferral account debit balances(CU100,240 – CU102,330)	(2,090)
		Less: increase in pension cost regulatory deferral account debit balance presented in other comprehensive income(CU12,270 – CU5,130)	(7,140)
			(9,230)
		Increase in regulatory deferral account credit balances(CU97,960 – CU76,470)	(21,490)
		Net movement in regulatory deferral account balances presented in profit or loss	30,720

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IFRS Accounting Taxonomy 2023 – Illustrative examples

IFRS 14 Regulatory Deferral Accounts Illustrative examples - example 17a

IFRS 14 Regulatory Deferral Accounts
Illustrative examples - example 17a