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Important Stuff on Ind AS 114, Regulatory Deferral Accounts

Indian Accounting Standard (Ind AS) 114, Regulatory Deferral Accounts, Important Material

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Ind AS 114: Regulatory Deferral Accounts

Some entities provide goods or services to customers at a price, subject to regulation by the government. For example, supply of gas etc. Rate regulations ensure that specified cost are recovered by the supply, simultaneously the prices charged to customer are fair and reasonable. These twin objectives mean that prices charged to customers at a particular time do not necessarily cover the cost incurred by the supplier at that time. In this case the recovery of such cost is deferred. Similarly these rate regulated entities are permitted to defer income that non-rate-regulated entities would recognise the income in profit or loss.


The objective of this Standard is to specify the financial reporting requirements for regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation.

In meeting this objective, the Standard requires:

(a) limited changes to the accounting policies that were applied in accordance with previous generally accepted accounting principles for regulatory deferral account balances, which are primarily related to the presentation of these accounts; and

(b) disclosures that:

(i) identify and explain the amounts recognised in the entity’s financial statements that arise from rate regulation; and

(ii) help users of the financial statements to understand the amount, timing and uncertainty of future cash flows from any regulatory deferral account balances that are recognised.


An entity is permitted to apply the requirements of this Standard in its first Ind AS financial statements if and only if it:
(a) conducts rate-regulated activities; and
(b) recognised amounts that qualify as regulatory deferral account balances in its financial statements in accordance with its previous GAAP.

An entity shall apply the requirements of this Standard in its financial statements for subsequent periods if and only if, in its first Ind AS financial statements, it recognised regulatory deferral account balances by electing to apply the requirements of this Standard.


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