ind as 114

COMPILED BY CA MOHIT GOYAL

GUIDANCE NOTE ON ACCOUNTING FOR RATE REGULATED ACTIVITIES AND IND

AS 114 REGULATORY DEFERRAL ACCOUNTS


Regulations

Hybrid Regulati

on

Cost of service Regulati

on

Price Cap

Regulation


Objective

Recognition

Measurement

Initial Subsequent

Disclosure

Regulatory

Asset and

Liability


ApplicableCost to Service

regulation

Different Category

rate regulation

Not Applicab

leOther

Regulation

Reporting to

Regulator


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 Instrume

nt

Financial Instrument means Financial Asset & Financial Liability


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

If there is a

reasonable

assurance that future

economic benefits will flow

recognize regulatory asset


MEASUREMENTBest EstimatesAmount Expected to be recovered or settledUnder regulatory frameworkShould not be discounted.


Factors to be

considered for

making Estimates

written approval from the regulator approving

future recovery in

ratesprevious 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


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


De-recogniti

onNo 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


Disclosures

Information on nature

andthe financial

effects of rate

regulation on its

activitiesAmount 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 measuremen

t


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 ?


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


Continuation of existing accounting

policies

Continue as per previous

GAAP

Except limited

change in accounting policy with regard to

recognition, measuremen

t, impairment

and derecognitio

n

Apply Ind AS 8 For

justification of change in accounting

policy


Presentation

Do Not classify as

current non current

Separate Line Item

Movement- Other

Comprehensive Income as separate

line item


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.


Thanks CA Mohit Goyal

9953754535

ind as 114

Law