IASB: Improved IFRS Standard to Capture Rate-Regulated Companies’ Performance
The International Accounting Standards Board (IASB) has published proposals for a new International Financial Reporting Standards (IFRS) standard that would give investors better information about financial performance of rate-regulated companies.
Rate regulation means that companies – in sectors such as utilities and public transport – are subject to limitations around the amount they may charge their customers and when they may do so. In some cases, the period when a company supplies goods or services differs from the period when it can charge for them, making any given reporting period an incomplete snapshot. Those differences in timing are not covered by current IFRS standards.
Under the proposal, companies would be required to report regulatory assets and regulatory liabilities in their balance sheet, and related regulatory income and regulatory expense in their income statement, allowing investors to assess the contribution of timing to cash flows.