Indian Accounting Standard (Ind AS) 114 Summary
Indian Accounting Standard (Ind AS) 114, Regulatory Deferral Accounts specifies 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.
The entity is eligible to apply the standard only if it:
– Is subject to oversight and/or approval from an authorised body (the rate regulator),
– Accounted for regulatory deferral account balances in its financial statements under its previous GAAP immediately before adopting Ind AS, and
– Elects to apply the requirements of the standard in its first Ind AS financial statements.
Adoption of the standard is optional for eligible entities, but the decision to apply it has to be taken in the entity’s first Ind AS financial statements.
The standard permits an eligible entity to continue to recognise and measure regulatory deferral account balances in accordance with its previous GAAP when it adopts Ind AS. Under Ind AS 114, Guidance Note on Accounting for Rate Regulated Activities issued by The Institute of Chartered Accountants of India (ICAI) would be considered as previous GAAP.
Regulatory deferral account balances are presented separately from assets, liabilities, income and expenses that are recognised in accordance with other Ind ASs.
The normal requirements of other Ind ASs apply to regulatory deferral account balances, subject to some exceptions, exemptions and additional requirements that are specified in the standard, including:
- Presentation of earnings per share both including and excluding the net movement in regulatory deferral account balances,
- Application of the requirements of the impairment standard to a cash-generating unit that includes regulatory deferral account balances,
- Exclusion from the measurement requirements of the standard on non-current assets held for sale and discontinued operations,
- Application of uniform accounting policies to the regulatory deferral account balances of all of an entity’s subsidiaries, associates and joint ventures in its consolidated financial statements, regardless of whether those investees account for those balances,
- Application of business combinations guidance, with an exception for the recognition and measurement of an acquiree’s regulatory deferral account balances,
- Additional disclosure requirements if an entity’s interests in its subsidiaries, associates or joint ventures contain regulatory deferral account balances, and
- The option to use the deemed cost exemption on transition to Ind AS for items of property, plant and equipment or intangible assets that are, or were previously, used in operations that are subject to rate regulation.
The entity shall provide disclosures that enable users of the financial statements to evaluate the nature of risks associated with and effects of rate regulation.