IND AS 114 Regulatory Deferral Accounts

Transcription

1 IND AS 114 Regulatory Deferral Accounts 1

2 Background Applicable to entities providing rate regulated goods and services. Regulator empowered to determine tariff that binds customers. Through tariff entity recover its cost of providing goods or services + fair return. 2

3 Background Variation in cost incurred gives rise to adjustment of future tariff downward or upward after regulatory approval. E.g. Electricity prices regulated by CERC / SERCs. 3

4 Example Company engaged in power distribution business Amount and period of recovery will be approved by regulator through final tariff order as regulatory assets. 4

5 Objective of IND AS To specify financial reporting requirements; for regulatory deferral account balances; that arise when entity provides goods or services to customers; at a price or rate that is subject to rate regulations. 5

6 Key Definitions Rate regulation is form of regulation for setting an entity s prices (rates) in which there is causeand-effect relationship between the entity s specific costs and its revenues. Regulatory asset is an entity s right to recover fixed or determinable amounts of money towards incurred costs subject to regulatory framework. Regulatory liability is an entity s obligation to refund or adjust fixed or determinable amounts of money. 6

7 What is regulatory deferral account balance? Balance of expense or income; Qualifies for deferral; Because it is included or expected to be included by the rate regulator in establishing the rate that can be charged to customers; Such items are recognized as incurred. 7

8 Scope of IND AS Apply in first Ind AS financial statements if and only if it:- Conducts rate regulated activities; and Recognized amounts that qualify as regulatory deferral account balances as per previous IGAAP. 8

9 Scope of IND AS Entity shall apply this Ind-AS for subsequent periods; If and only if in its; First Ind AS financial statements it recognized; Regulatory deferral account balances. 9

10 Key features of IND AS Allows but does not require an entity whose activities are subject to rate regulation to continue apply existing GAAP. Entity which has not recognized rate regulated assets and liabilities under previous GAAP not allowed to recognize on first time application of Ind AS. 10

11 Classification of regulatory deferral account balances Present separate line items in the Balance Sheet for:- o Total of regulatory deferral assets; and o Total of regulatory deferral liabilities. Shall not classify between current or non-current. Present separate line item in Statement of Profit or Loss. 11

12 Impact on applicability of other IND AS Deferred tax arising on these balances shall be clubbed with related regulatory deferral account balances instead of presenting as per Ind AS - 12 on Income Tax. When discontinued operation or a disposal group as per Ind AS on Noncurrent assets held for sale and discontinued operations, shall present with regulatory deferral account balance only instead of within the disposal group or discontinued operations 12

13 Impact on applicability of other IND AS Present additional basic and diluted EPS excluding movements in regulatory deferral account balances. If parents recognize regulatory deferral account balances, shall apply the same policies in CFS for all of its subsidiaries irrespective of whether subsidiaries recognize those balances in their own financial statements. (Ind AS - 110) 13

14 Disclosures Brief description of nature and extent of rate regulated activity. Nature of regulatory rate-setting process. Identity of rate regulator. How future recovery of regulatory balances is affected by risks and uncertainty. Explanations of recognized amounts. Reconciliation of carrying amount at beginning and movements and end of period. 14

15 Indian GAAP Guidance Note on Accounting for Rate Regulated Activities Issued in February 2012 Not effected applicability date not announced. Revised in February 2015 Applicable for FY

16 Key Differences Between IGAAP and IND AS Current / non-current classification is not required. Not with disposal group in respect of discontinued operations. Present with regulatory deferral account. 16

17 Schedule III Regulatory Deferral Account Balances shall be presented in the Balance Sheet and Statement of Profit and Loss in accordance with Ind AS

18 IFRS 14 Effective for an entity's first annual IFRS financial statements for periods beginning on or after 1 January

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