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Regulatory Assets and Regulatory Liabilities

Project Type:

Influencing

Status:

Active

Milestone:

Monitoring

Background

In January 2021 the International Accounting Standards Board (IASB) published the Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities (ED),the IASB’s comment deadline was extended to 30 July 2021. The ED sets out the IASB’s proposals for a model to account for regulatory assets and regulatory liabilities. The objective of this project is to replace IFRS 14 Regulatory Deferral Accounts by introducing a new comprehensive accounting model for regulatory assets and liabilities. The UKEB responded to this ED, see the Final Comment Letter - Regulatory Assets and Regulatory Liabilities below which was published on 4 August 2021.

In December 2021, the IASB published its plan for redeliberations of the ED. For further details of these discussions and further information on the project history.

In September 2023 Accounting Standards Advisory Forum (ASAF) and the IASB project team presented an update on the project. In this update it stated that the standard is expected to be issued in H2 of 2025.

Outreach

Our outreach on the IASB’s Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities project included discussions with preparers and investors and public consultation on our Draft Comment Letter - Regulatory Assets and Regulatory Liabilities published on 14 July 2021. Following a public consultation period on the Draft Comment Letter, the Final Comment Letter was published on 4 August 2021. The comment letter received from a stakeholder during the public consultation is also published below.

Information about UKEB's plans for further outreach activities will be published in due course.

Rate Regulated Activities Economic Study

During 2023, the UKEB commissioned an independent economic assessment of the IASB Exposure Draft 2021/1 Regulatory Assets and Regulatory Liabilities and subsequent accounting re-deliberations (up to December 2023).

In the report, First Economics concluded that the IASB’s accounting proposals in the ED, as amended by tentative decisions up to December 2023, are not expected to lead to any major macroeconomic effects in the UK. Overall, they are expected to lead to some improvement in financial reporting for companies within scope. However, in certain circumstances the proposals may not lead to an improvement in UK companies’ financial reporting, due to: the non-recognition of regulatory assets/liabilities in the absence of a direct relationship between an entity’s property, plant and equipment and its regulatory capital base; the treatment of inflation indexation; and the treatment of deferred tax. As a result:

  • generalist investors may not benefit from the intended improvements in accounting for companies undertaking rate regulated activities;
  • comparability between companies and jurisdictions may be impaired; and
  • any anticipated cost of capital reductions may be smaller than if the proposed accounting fully reflected the underlying economics.

This preliminary assessment is subject to change as the IASB deliberates on additional topics in anticipation of a standard being published in 2025.

See the final report Rate-regulated Activities - Consolidated report on the UKEB Secretariat's top-down approach and Rate-regulated Activities - UKEB letter to the IASB below which were published on 30 July 2024.

Rate Regulated Activities Technical Advisory Group

Access more information about the Rate Regulated Activities Technical Advisory Group.

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Timeline