Ind AS 114: Regulatory Deferral Accounts#
Scope#
Applies to entities with rate-regulated activities:
- Power distribution companies
- Water supply utilities
- Oil and gas pipeline operators
- Other regulated industries
Rate Regulation#
A regulatory framework that:
- Establishes prices that can be charged
- Approves costs that can be recovered
- Sets performance standards
Key Concept#
Allowed revenues = Expenses + Return on Investment
Differences between allowed and actual revenue deferred for future recovery.
Recognition#
Regulatory deferral account debits (assets):#
- Costs expected to be recovered in future periods
- Temporary shortfall in allowed revenue
Regulatory deferral account credits (liabilities):#
- Revenue expected to be returned in future periods
- Excess revenue over allowed amount
Presentation#
- Separate line items in balance sheet
- Related tax expense shown separately
- Movement in deferral accounts disclosed
Disclosure Requirements#
- Description of rate regulation
- Basis for recognizing deferred costs
- Effect on financial statements
- Cash flow implications