IFRS Accounting Taxonomy 2024 – 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.
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XYZ Group—Statement of financial position as at 31 December 20X7(in currency units) |
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31 Dec 20X7 |
31 Dec 20X6 |
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ASSETS |
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| Non-current assets | |||
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Property, plant and equipment |
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Goodwill |
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Other intangible assets |
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Investments in associates |
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Investments in equity instruments |
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Current assets |
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Inventories |
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Trade receivables |
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Other current assets |
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Cash and cash equivalents |
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Total assets |
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Regulatory deferral account debit balances and related deferred tax asset |
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Total assets and regulatory deferral account debit balances |
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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 CU |
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XYZ Group—Statement of financial position as at 31 December 20X7(in currency units) |
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31 Dec 20X7 |
31 Dec 20X6 |
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EQUITY AND LIABILITIES |
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Equity attributable to owners of the parent |
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Share capital |
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Retained earnings |
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Other components of equity |
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Non-controlling interests |
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Total equity |
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Non-current liabilities |
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Long-term borrowings |
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Deferred tax |
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Long-term provisions |
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Current liabilities |
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Trade and other payables |
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Short-term borrowings |
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Current portion of long-term borrowings |
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Current tax payable |
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Short-term provisions |
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Total liabilities |
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Total equity and liabilities |
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Regulatory deferral account credit balances |
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Total equity, liabilities and regulatory deferral account credit balances |
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| 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. | |||
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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) |
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20X7 |
20X6 |
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Revenue |
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Cost of sales |
( |
( |
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Gross profit |
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Other income |
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Distribution costs |
( |
( |
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Administrative expenses |
( |
( |
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Other expenses |
( |
( |
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Finance costs |
( |
( |
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Share of profit of associates |
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Profit before tax |
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| Income tax expense |
( |
( |
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| Profit for the year before net movements in regulatory deferral account balances |
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Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement |
( |
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Profit for the year and net movements in regulatory deferral account balances |
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Other comprehensive income: Items that will not be reclassified to profit or loss |
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Remeasurement of defined benefit pension plans |
( |
( |
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Net movement in regulatory deferral account balances related to other comprehensive income |
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Other comprehensive income for the year, net of income tax |
( |
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TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
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Profit and net movements in regulatory deferral account balances attributable to: |
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Owners of the parent |
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Non-controlling interests |
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Total comprehensive income attributable to |
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Owners of the parent |
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Non-controlling interests |
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Earnings per share (in currency units): |
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Basic and diluted |
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Basic and diluted including net movement in regulatory deferral account balances |
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Notes: |
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| (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 CU |
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.
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Regulatory deferral account balances |
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Regulatory deferral account debit balances |
20X6 |
Balances arising in the period |
Recovery/reversal |
20X7 |
Remaining recovery/ reversal period (years) |
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Electricity distribution |
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| Construction costs |
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( |
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4-10 |
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Storm damage |
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– |
( |
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4 |
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Other regulatory accounts |
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( |
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4-10 |
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Gas distribution |
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Pension costs |
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( |
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N/A |
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Gas cost variances |
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– |
( |
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1 |
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( |
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Regulatory deferral account credit balances |
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Electricity distribution |
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Land disposal |
– |
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– |
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10 |
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Income tax |
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( |
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1-10 |
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Gas distribution |
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Gas cost variances |
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( |
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2-3 |
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Income tax |
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( |
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1-10 |
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Decommissioning costs |
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( |
( |
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3-20 |
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( |
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| (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 CU |
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| (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 CU |
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| (5) | The net movement of CU |
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| Decrease in regulatory deferral account debit balances(CU |
( |
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| Less: increase in pension cost regulatory deferral
account debit balance presented in other comprehensive income(CU |
( |
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( |
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| Increase in regulatory deferral account credit balances(CU |
( |
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| Net movement in regulatory deferral account balances presented in profit or loss |
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