Ind AS 114 Rate regulated activities

1. GUIDANCE NOTE ON ACCOUNTING FOR RATE
REGULATED ACTIVITIES AND IND AS 114
REGULATORY DEFERRAL ACCOUNTS
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2. Regulations
Hybrid
Regulation
Cost of
service
Regulation
Price Cap
Regulation
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3. Objective
Recognition Measurement
Initial Subsequent
Disclosure
Regulato
ry Asset
and
Liability
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4. Applicable
Cost to
Service
regulation
Different
Category rate
regulation
Not
Applicable
Other
Regulation
Reporting to
Regulator
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5. Regulatory
Asset
•Right to recover fixed or determinable amounts of
money towards incurred cost as a result of regulators
action
Whether an
Asset?
•An asset is a resource controlled by the
enterprise as a result of past events from which
future economic benefits are expected to flow to
the enterprise
Whether
Intangible
Asset
•Intangible asset means identifiable non-monetary
asset, without physical substance, held for use in the
production or supply of goods or services, for rental
to others, or for administrative purposes
Whether
Financial
Instrument
Financial Instrument
means Financial Asset
& Financial Liability
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6. Regulator Acts in such a
way that it is probable
that the future
economic benefits
associated with it will
flow to the entity
amount can be
measured reliably
Recognize regulatory
asset/Liability
reasonabl
e
assurance
that
future
economic
benefits
will flow
recognize
regulatory
asset
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7. MEASUREMENT
Best Estimates
Amount Expected to be recovered or settled
Under regulatory framework
Should not be discounted.
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8. Factors to be
considered
for making
Estimates
written approval
from the
regulator
approving future
recovery in rates
previous formal
approvals from
the regulator
formal approvals
from the
regulator
uniform
regulatory
guidance
opinions of
independent
experts
any additional
evidence
provided by
events after the
balance
sheet date
statutes or
regulations that
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9. review the estimates at the end
of each reporting period
expectation differs from
previous estimates
accounted for as a change in an
accounting estimate
entity concludes that it is not
reasonable to assume that it will
be able to collect sufficient
revenues from
its customers to recover its costs
Indicator of impairment
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10. De-
recognition
No Reasonable
Certainty
resulting loss/gain
should be recognized
in the statement of
profit and loss.
Presentation
Separately from other
assets and liabilities
shall not offset rate
regulated assets and
liabilities
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11. Disclosures
Information on
nature and
the financial effects
of rate regulation on
its activities
Amount of
regulatory asset or
liability
act that some or all
of its operating
activities are subject
to rate regulation
break-up of
regulated assets and
regulated liabilities
approval process for
the rate
significant
assumptions used in
measurement
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12. IND AS 114 REGULATORY
DEFERRAL ACCOUNTS
Objective- specify the financial reporting requirements for regulatory
deferral account balances.
What is Regulatory Deferral Account?
Ans- ‘Regulatory Asset’ or a ‘Regulatory Liability
What does it implies ?
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13. Requirement
limited changes to the
accounting policies
with regards to
presentation
disclosures
identify and explain the
amounts recognized
help users understand
amount, timing and
uncertainty of future
cash flows
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14. Continuation of
existing accounting
policies
Continue as per
previous GAAP
Except limited
change in
accounting policy
with regard to
recognition,
measurement,
impairment and
derecognition
Apply Ind AS 8 For
justification of
change in
accounting policy
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15. Presentation
Do Not classify
as current non
current
Separate Line
Item
Movement-
Other
Comprehensive
Income as
separate line
item
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16. Disclosure
the nature of, and the
risks associated with, the
rate regulation that
establishes the price(s)
that the entity can charge
customers for the goods
or services it provides;
he effects of that rate
regulation on its financial
position, financial
performance and cash
flows.
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