AASB 14 - Regulatory Deferral Accounts - June 2014

AASB 14 permits certain entities that have recognised regulatory deferral account balances under their previous generally accepted accounting principles (previous GAAP) to continue to recognise those balances when they adopt Australian Accounting Standards, but subject to specific presentation and disclosure requirements and limited interaction rules with other Standards. The Standard provides a temporary exemption from one source-of-guidance requirement in AASB 108 (the exemption from paragraph 11 of AASB 108) so that an entity that elects to apply AASB 14 may continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances, while conforming presentation and disclosure to AASB 14 (see paragraphs 9-12, 18-26, and Appendix B).

Mechanically, the Standard does the following (sources cited to the Standard’s paragraphs):

It limits application to entities that conduct rate-regulated activities and that recognised regulatory deferral account balances in their financial statements under previous GAAP (paras 5-6, Appendix A definition). An entity may only elect AASB 14 in its first Australian-Accounting-Standards financial statements if both conditions in paragraph 5 are met; if elected, the entity must apply AASB 14 to subsequent reporting periods (paras 5-6).
It exempts affected entities from applying paragraph 11 of AASB 108 when developing accounting policies for regulatory deferral account balances, allowing continued use of previous GAAP accounting policies for recognition, measurement, impairment and derecognition of those balances (paras 9-11; Appendix B, B4).
It constrains changes to accounting policy: an entity shall not change policy to start recognising regulatory deferral account balances (para 13) and may only change such policies if the change improves relevance without reducing reliability, or improves reliability without reducing relevance, judged under AASB 108 (paras 13-15).

Compiled AASB Standard	AASB 14

Regulatory Deferral Accounts

This compiled Standard applies to annual periods beginning on or after 1 January 2022. Earlier application is permitted for annual periods beginning on or after 1 January 2005 but before 1 January 2022. It incorporates relevant amendments made up to and including 20 December 2021.

Prepared on 7 April 2022 by the staff of the Australian Accounting Standards Board.

Compilation no. 2

Compilation date: 31 December 2021

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Contents

Comparison with IFRS 14

Accounting Standard

AASB 14 Regulatory Deferral Accounts

from paragraph

OBJECTIVE 1

Application Aus4.2

Commencement

Scope 5

Recognition, measurement, impairment and derecognition

Temporary exemption from paragraph 11 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors 9

Continuation of existing accounting policies 11

Changes in accounting policies 13

Interaction with other Standards 16

Presentation

Changes in presentation 18

Classification of regulatory deferral account balances 20

Classification of movements in regulatory deferral account balances 22

Disclosure

Objective 27

Explanation of activities subject to rate regulation 30

Explanation of recognised amounts 32

Appendices

A Defined terms

B Application guidance

C Effective date and transition

COMPILATION DETAILS

DELETED IFRS 14 TEXT

BASIS FOR CONCLUSIONS

DISSENTING OPINION

AVAILABLE ON THE AASB WEBSITE

Illustrative examples

Basis for Conclusions on IFRS 14

Australian Accounting Standard AASB 14 Regulatory Deferral Accounts (as amended) is set out in paragraphs 1 – 36 and Appendices A – C. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the Standard. AASB 14 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

Comparison with IFRS 14

AASB 14 Regulatory Deferral Accounts as amended incorporates IFRS 14 Regulatory Deferral Accounts as issued and amended by the International Accounting Standards Board (IASB). Australian‑specific paragraphs (which are not included in IFRS 14) are identified with the prefix “Aus”. Paragraphs that apply only to not‑for‑profit entities begin by identifying their limited applicability.

Tier 1

For-profit entities complying with AASB 14 also comply with IFRS 14.

Not-for-profit entities’ compliance with IFRS 14 will depend on whether any “Aus” paragraphs that specifically apply to not-for-profit entities provide additional guidance or contain applicable requirements that are inconsistent with IFRS 14.

Tier 2

Entities preparing general purpose financial statements under Australian Accounting Standards – Simplified Disclosures (Tier 2) will not be in compliance with IFRS Standards.

AASB 1053 Application of Tiers of Australian Accounting Standards explains the two tiers of reporting requirements.

Accounting Standard AASB 14

The Australian Accounting Standards Board made Accounting Standard AASB 14 Regulatory Deferral Accounts under section 334 of the Corporations Act 2001 on 4 June 2014.

This compiled version of AASB 14 applies to annual periods beginning on or after 1 January 2022. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 20 December 2021 (see Compilation Details).

Accounting Standard AASB 14

Regulatory Deferral Accounts

Objective

1 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.

AusCF1 AusCF paragraphs and footnotes included in this Standard apply only to:

(a) not-for-profit entities; and
(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

2 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 (previous GAAP) 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.
3 The requirements of this Standard permit an entity within its scope to continue to account for regulatory deferral account balances in its financial statements in accordance with its previous GAAP when it adopts Australian Accounting Standards, subject to the limited changes referred to in paragraph 2 above.
4 In addition, this Standard provides some exceptions to, or exemptions from, the requirements of other Standards. All specified requirements for reporting regulatory deferral account balances, and any exceptions to, or exemptions from, the requirements of other Standards that are related to those balances, are contained within this Standard instead of within those other Standards.

Application

Aus4.1 [Deleted by the AASB]

Aus4.2 This Standard applies to annual reporting periods beginning on or after 1 January 2016.

Aus4.3 This Standard may be applied to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2016. When an entity applies this Standard to such an annual reporting period, it shall disclose that fact.

Commencement

Aus4.4 [Repealed]

Scope

5 An entity is permitted to apply the requirements of this Standard in its first Australian-Accounting-Standards 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.
6 An entity shall apply the requirements of this Standard in its financial statements for subsequent periods if and only if, in its first Australian-Accounting-Standards financial statements, it recognised regulatory deferral account balances by electing to apply the requirements of this Standard.
7 This Standard does not address other aspects of accounting by entities that are engaged in rate-regulated activities. By applying the requirements in this Standard, any amounts that are permitted or required to be recognised as assets or liabilities in accordance with other Standards shall not be included within the amounts classified as regulatory deferral account balances.
8 An entity that is within the scope of, and that elects to apply, this Standard shall apply all of its requirements to all regulatory deferral account balances that arise from all of the entity’s rate-regulated activities.

Recognition, measurement, impairment and derecognition

Temporary exemption from paragraph 11 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors

9 An entity that has rate-regulated activities and that is within the scope of, and elects to apply, this Standard shall apply paragraphs 10 and 12 of AASB 108 when developing its accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances.
10 Paragraphs 11–12 of AASB 108 specify sources of requirements and guidance that management is required or permitted to consider in developing an accounting policy for an item, if no relevant Standard applies specifically to that item. This Standard exempts an entity from applying paragraph 11 of AASB 108 to its accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances. Consequently, entities that recognise regulatory deferral account balances, either as separate items or as part of the carrying value of other assets and liabilities, in accordance with their previous GAAP, are permitted to continue to recognise those balances in accordance with this Standard through the exemption from paragraph 11 of AASB 108, subject to any presentation changes required by paragraphs 18–19 of this Standard.

Continuation of existing accounting policies

11 On initial application of this Standard, an entity shall continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances, except for any changes permitted by paragraphs 13–15. However, the presentation of such amounts shall comply with the presentation requirements of this Standard, which may require changes to the entity’s previous GAAP presentation policies (see paragraphs 18–19).
12 An entity shall apply the policies established in accordance with paragraph 11 consistently in subsequent periods, except for any changes permitted by paragraphs 13–15.

Changes in accounting policies

13 An entity shall not change its accounting policies in order to start to recognise regulatory deferral account balances. An entity may only change its accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances if the change makes the financial statements more relevant to the economic decision-making needs of users and no less  
reliable[\[1\]](#_ftn1), AusCF1, or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in paragraph 10 of AASB 108.
14 This Standard does not exempt entities from applying paragraphs 10 or 14–15 of AASB 108 to changes in accounting policy. To justify changing its accounting policies for regulatory deferral account balances, an entity shall demonstrate that the change brings its financial statements closer to meeting the criteria in paragraph 10 of AASB 108\. However, the change does not need to achieve full compliance with those criteria for the recognition, measurement, impairment and derecognition of regulatory deferral account balances.
15 Paragraphs 13–14 apply both to changes made on initial application of this Standard and to changes made in subsequent reporting periods.

Interaction with other Standards

16 Any specific exception, exemption or additional requirements related to the interaction of this Standard with other Standards are contained within this Standard (see paragraphs B7–B28). In the absence of any such exception, exemption or additional requirements, other Standards shall apply to regulatory deferral account balances in the same way as they apply to assets, liabilities, income and expenses that are recognised in accordance with other Standards.
17 In some situations, another Standard might need to be applied to a regulatory deferral account balance that has been measured in accordance with an entity’s accounting policies that are established in accordance with paragraphs 11–12 in order to reflect that balance appropriately in the financial statements. For example, the entity might have rate-regulated activities in a foreign country for which the transactions and regulatory deferral account balances are denominated in a currency that is not the functional currency of the reporting entity. The regulatory deferral account balances and the movements in those balances are translated by applying AASB 121 The Effects of Changes in Foreign Exchange Rates.

Presentation

Changes in presentation

18 This Standard introduces presentation requirements, outlined in paragraphs 20–26, for regulatory deferral account balances that are recognised in accordance with paragraphs 11–12. When this Standard is applied, the regulatory deferral account balances are recognised in the statement of financial position in addition to the assets and liabilities that are recognised in accordance with other Standards. These presentation requirements separate the impact of recognising regulatory deferral account balances from the financial reporting requirements of other Standards.
19 In addition to the items that are required to be presented in the statement of financial position and in the statement(s) of profit or loss and other comprehensive income in accordance with AASB 101 Presentation of Financial Statements, an entity applying this Standard shall present all regulatory deferral account balances and the movements in those balances in accordance with paragraphs 20–26.

Classification of regulatory deferral account balances

20 An entity shall present separate line items in the statement of financial position for:
(a) the total of all regulatory deferral account debit balances; and
(b) the total of all regulatory deferral account credit balances.
21 When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, it shall not classify the totals of regulatory deferral account balances as current or non-current. Instead, the separate line items required by paragraph 20 shall be distinguished from the assets and liabilities that are presented in accordance with other Standards by the use of sub-totals, which are drawn before the regulatory deferral account balances are presented.

Classification of movements in regulatory deferral account balances

22 An entity shall present, in the other comprehensive income section of the statement of profit or loss and other comprehensive income, the net movement in all regulatory deferral account balances for the reporting period that relate to items recognised in other comprehensive income. Separate line items shall be used for the net movement related to items that, in accordance with other Standards:
(a) will not be reclassified subsequently to profit or loss; and
(b) will be reclassified subsequently to profit or loss when specific conditions are met.
23 An entity shall present a separate line item in the profit or loss section of the statement of profit or loss and other comprehensive income, or in the separate statement of profit or loss, for the remaining net movement in all regulatory deferral account balances for the reporting period, excluding movements that are not reflected in profit or loss, such as amounts acquired. This separate line item shall be distinguished from the income and expenses that are presented in accordance with other Standards by the use of a sub-total, which is drawn before the net movement in regulatory deferral account balances.
24 When an entity recognises a deferred tax asset or a deferred tax liability as a result of recognising regulatory deferral account balances, the entity shall present the resulting deferred tax asset (liability) and the related movement in that deferred tax asset (liability) with the related regulatory deferral account balances and movements in those balances, instead of within the total presented in accordance with AASB 112 Income Taxes for deferred tax assets (liabilities) and the tax expense (income) (see paragraphs B9–B12).
25 When an entity presents a discontinued operation or a disposal group in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations, the entity shall present any related regulatory deferral account balances and the net movement in those balances, as applicable, with the regulatory deferral account balances and movements in those balances, instead of within the disposal groups or discontinued operations (see paragraphs B19–B22).
26 When an entity presents earnings per share in accordance with AASB 133 Earnings per Share, the entity shall present additional basic and diluted earnings per share, which are calculated using the earnings amounts required by AASB 133 but excluding the movements in regulatory deferral account balances (see paragraphs B13–B14).

Disclosure

Objective

27 An entity that elects to apply this Standard shall disclose information that enables users to assess:
(a) 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; and
(b) the effects of that rate regulation on its financial position, financial performance and cash flows.
28 If any of the disclosures set out in paragraphs 30–36 are not considered relevant to meet the objective in paragraph 27, they may be omitted from the financial statements. If the disclosures provided in accordance with paragraphs 30–36 are insufficient to meet the objective in paragraph 27, an entity shall disclose additional information that is necessary to meet that objective.
29 To meet the disclosure objective in paragraph 27, an entity shall consider all of the following:
(a) the level of detail that is necessary to satisfy the disclosure requirements;
(b) how much emphasis to place on each of the various requirements;
(c) how much aggregation or disaggregation to undertake; and
(d) whether users of financial statements need additional information to evaluate the quantitative information disclosed.

Explanation of activities subject to rate regulation

30 To help a user of the financial statements assess the nature of, and the risks associated with, the entity’s rate-regulated activities, an entity shall, for each type of rate-regulated activity, disclose:
(a) a brief description of the nature and extent of the rate-regulated activity and the nature of the regulatory rate-setting process;
(b) the identity of the rate regulator(s). If the rate regulator is a related party (as defined in AASB 124 Related Party Disclosures), the entity shall disclose that fact, together with an explanation of how it is related;
(c) how the future recovery of each class (ie each type of cost or income) of regulatory deferral account debit balance or reversal of each class of regulatory deferral account credit balance is affected by risks and uncertainty, for example:
(i) demand risk (for example, changes in consumer attitudes, the availability of alternative sources of supply or the level of competition);
(ii) regulatory risk (for example, the submission or approval of a rate-setting application or the entity’s assessment of the expected future regulatory actions); and
(iii) other risks (for example, currency or other market risks).
31 The disclosures required by paragraph 30 shall be given in the financial statements either directly in the notes or incorporated by cross-reference from the financial statements to some other statement, such as a management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. If the information is not included in the financial statements directly or incorporated by cross-reference, the financial statements are incomplete.

Explanation of recognised amounts

32 An entity shall disclose the basis on which regulatory deferral account balances are recognised and derecognised, and how they are measured initially and subsequently, including how regulatory deferral account balances are assessed for recoverability and how any impairment loss is allocated.
33 For each type of rate-regulated activity, an entity shall disclose the following information for each class of regulatory deferral account balance:
(a) a reconciliation of the carrying amount at the beginning and the end of the period, in a table unless another format is more appropriate. The entity shall apply judgement in deciding the level of detail necessary (see paragraphs 28–29), but the following components would usually be relevant:
(i) the amounts that have been recognised in the current period in the statement of financial position as regulatory deferral account balances;
(ii) the amounts that have been recognised in the statement(s) of profit or loss and other comprehensive income relating to balances that have been recovered (sometimes described as amortised) or reversed in the current period; and
(iii) other amounts, separately identified, that affected the regulatory deferral account balances, such as impairments, items acquired or assumed in a business combination, items disposed of, or the effects of changes in foreign exchange rates or discount rates;
(b) the rate of return or discount rate (including a zero rate or a range of rates, when applicable) used to reflect the time value of money that is applicable to each class of regulatory deferral account balance; and
(c) the remaining periods over which the entity expects to recover (or amortise) the carrying amount of each class of regulatory deferral account debit balance or to reverse each class of regulatory deferral account credit balance.
34 When rate regulation affects the amount and timing of an entity’s income tax expense (income), the entity shall disclose the impact of the rate regulation on the amounts of current and deferred tax recognised. In addition, the entity shall separately disclose any regulatory deferral account balance that relates to taxation and the related movement in that balance.
35 When an entity provides disclosures in accordance with AASB 12 Disclosure of Interests in Other Entities for an interest in a subsidiary, associate or joint venture that has rate-regulated activities and for which regulatory deferral account balances are recognised in accordance with this Standard, the entity shall disclose the amounts that are included for the regulatory deferral account debit and credit balances and the net movement in those balances for the interests disclosed (see paragraphs B25–B28).
36 When an entity concludes that a regulatory deferral account balance is no longer fully recoverable or reversible, it shall disclose that fact, the reason why it is not recoverable or reversible and the amount by which the regulatory deferral account balance has been reduced.

Appendix A
Defined terms

This appendix is an integral part of AASB 14.

First Australian-Accounting-Standards financial statements	The first annual financial statements in which an entity adopts Australian Accounting Standards, by an explicit and unreserved statement of compliance with Australian Accounting Standards.
First-time adopter	An entity that presents its first Australian-Accounting-Standards financial statements.
Previous GAAP	The basis of accounting that a first-time adopter used immediately before adopting Australian Accounting Standards.
Rate-regulated activities	An entity’s activities that are subject to rate regulation.
Rate regulation	A framework for establishing the prices that can be charged to customers for goods or services and that framework is subject to oversight and/or approval by a rate regulator.
Rate regulator	An authorised body that is empowered by statute or regulation to establish the rate or a range of rates that bind an entity. The rate regulator may be a third-party body or a related party of the entity, including the entity’s own governing board, if that body is required by statute or regulation to set rates both in the interest of the customers and to ensure the overall financial viability of the entity.
Regulatory deferral account balance	The balance of any expense (or income) account that would not be recognised as an asset or a liability in accordance with other Standards, but that qualifies for deferral because it is included, or is expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers.

Appendix B
Application guidance

This appendix is an integral part of AASB 14.

Rate-regulated activities

B1 Historically, rate regulation applied to all activities of an entity. However, with acquisitions, diversification and deregulation, rate regulation may now apply to only a portion of an entity’s activities, resulting in it having both regulated and non-regulated activities. This Standard applies only to the rate-regulated activities that are subject to statutory or regulatory restrictions through the actions of a rate regulator, regardless of the type of entity or the industry to which it belongs.
B2 An entity shall not apply this Standard to activities that are self-regulated, ie activities that are not subject to a pricing framework that is overseen and/or approved by a rate regulator. This does not prevent the entity from being eligible to apply this Standard when:
(a) the entity’s own governing body or a related party establishes rates both in the interest of the customers and to ensure the overall financial viability of the entity within a specified pricing framework; and
(b) the framework is subject to oversight and/or approval by an authorised body that is empowered by statute or regulation.

Continuation of existing accounting policies

B3 For the purposes of this Standard, a regulatory deferral account balance is defined as the balance of any expense (or income) account that would not be recognised as an asset or a liability in accordance with other Standards, but that qualifies for deferral because it is included, or is expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers. Some items of expense (income) may be outside the regulated rate(s) because, for example, the amounts are not expected to be accepted by the rate regulator or because they are not within the scope of the rate regulation. Consequently, such an item is recognised as income or expense as incurred, unless another Standard permits or requires it to be included in the carrying amount of an asset or liability.
B4 In some cases, other Standards explicitly prohibit an entity from recognising, in the statement of financial position, regulatory deferral account balances that might be recognised, either separately or included within other line items such as property, plant and equipment in accordance with previous GAAP accounting policies. However, in accordance with paragraph 11 of this Standard, an entity that elects to apply this Standard in its first Australian-Accounting-Standards financial statements applies the exemption from paragraph 11 of AASB 108 in order to continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment, and derecognition of regulatory deferral account balances. Such accounting policies may include, for example, the following practices:

(a) recognising a regulatory deferral account debit balance when the entity has the right, as a result of the actual or expected actions of the rate regulator, to increase rates in future periods in order to recover its allowable costs (ie the costs for which the regulated rate(s) is intended to provide recovery);

(b) recognising, as a regulatory deferral account debit or credit balance, an amount that is equivalent to any loss or gain on the disposal or retirement of both items of property, plant and equipment and of intangible assets, which is expected to be recovered or reversed through future rates;
(c) recognising a regulatory deferral account credit balance when the entity is required, as a result of the actual or expected actions of the rate regulator, to decrease rates in future periods in order to reverse over-recoveries of allowable costs (ie amounts in excess of the recoverable amount specified by the rate regulator); and
(d) measuring regulatory deferral account balances on an undiscounted basis or on a discounted basis that uses an interest or discount rate specified by the rate regulator.
B5 The following are examples of the types of costs that rate regulators might allow in rate-setting decisions and that an entity might, therefore, recognise in regulatory deferral account balances:

(i) volume or purchase price variances;

(ii) costs of approved ‘green energy’ initiatives (in excess of amounts that are capitalised as part of the cost of property, plant and equipment in accordance with AASB 116 Property, Plant and Equipment);

(iii) non-directly-attributable overhead costs that are treated as capital costs for rate regulation purposes (but are not permitted, in accordance with AASB 116, to be included in the cost of an item of property, plant and equipment);

(iv) project cancellation costs;

(v) storm damage costs; and

(vi) deemed interest (including amounts allowed for funds that are used during construction that provide the entity with a return on the owner’s equity capital as well as borrowings).

B6 Regulatory deferral account balances usually represent timing differences between the recognition of items of income or expenses for regulatory purposes and the recognition of those items for financial reporting purposes. When an entity changes an accounting policy on the first-time adoption of Australian Accounting Standards or on the initial application of a new or revised Standard, new or revised timing differences may arise that create new or revised regulatory deferral account balances. The prohibition in paragraph 13 that prevents an entity from changing its accounting policy in order to start to recognise regulatory deferral account balances does not prohibit the recognition of the new or revised regulatory deferral account balances that are created because of other changes in accounting policies required by Australian Accounting Standards. This is because the recognition of regulatory deferral account balances for such timing differences would be consistent with the existing recognition policy applied in accordance with paragraph 11 and would not represent the introduction of a new accounting policy. Similarly, paragraph 13 does not prohibit the recognition of regulatory deferral account balances arising from timing differences that did not exist immediately prior to the date of transition to Australian Accounting Standards but are consistent with the entity’s accounting policies established in accordance with paragraph 11 (for example, storm damage costs).

Applicability of other Standards

B7 An entity that is within the scope of, and that elects to apply, the requirements of this Standard shall continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances. However, paragraphs 16–17 state that, in some situations, other Standards might also need to be applied to regulatory deferral account balances in order to reflect them appropriately in the financial statements. The following paragraphs outline how some other Standards interact with the requirements of this Standard. In particular, the following paragraphs clarify specific exceptions to, and exemptions from, other Standards and additional presentation and disclosure requirements that are expected to be applicable.

Application of AASB 110 Events after the Reporting Period

B8 An entity may need to use estimates and assumptions in the recognition and measurement of its regulatory deferral account balances. For events that occur between the end of the reporting period and the date when the financial statements are authorised for issue, the entity shall apply AASB 110 to identify whether those estimates and assumptions should be adjusted to reflect those events.

Application of AASB 112 Income Taxes

B9 AASB 112 requires, with certain limited exceptions, an entity to recognise a deferred tax liability and (subject to certain conditions) a deferred tax asset for all temporary differences. A rate-regulated entity shall apply AASB 112 to all of its activities, including its rate-regulated activities, to identify the amount of income tax that is to be recognised.
B10 In some rate-regulatory schemes, the rate regulator permits or requires an entity to increase its future rates in order to recover some or all of the entity’s income tax expense. In such circumstances, this might result in the entity recognising a regulatory deferral account balance in the statement of financial position related to income tax, in accordance with its accounting policies established in accordance with paragraphs 11–12. The recognition of this regulatory deferral account balance that relates to income tax might itself create an additional temporary difference for which a further deferred tax amount would be recognised.
B11 Notwithstanding the presentation and disclosure requirements of AASB 112, when an entity recognises a deferred tax asset or a deferred tax liability as a result of recognising regulatory deferral account balances, the entity shall not include that deferred tax amount within the total deferred tax asset (liability) balances. Instead, the entity shall present the deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances either:

(a) with the line items that are presented for the regulatory deferral account debit balances and credit balances; or

(b) as a separate line item alongside the related regulatory deferral account debit balances and credit balances.

B12 Similarly, when an entity recognises the movement in a deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances, the entity shall not include the movement in that deferred tax amount within the tax expense (income) line item that is presented in the statement(s) of profit or loss and other comprehensive income in accordance with AASB 112. Instead, the entity shall present the movement in the deferred tax asset (liability) that arises as a result of recognising regulatory deferral account balances either:

(a) with the line items that are presented in the statement(s) of profit or loss and other comprehensive income for the movements in regulatory deferral account balances; or

(b) as a separate line item alongside the related line items that are presented in the statement(s) of profit or loss and other comprehensive income for the movements in regulatory deferral account balances.

Application of AASB 133 Earnings per Share

B13 Paragraph 66 of AASB 133 requires some entities to present, in the statement of profit or loss and other comprehensive income, basic and diluted earnings per share both for profit or loss from continuing operations and profit or loss that is attributable to the ordinary equity holders of the parent entity. In addition, paragraph 68 of AASB 133 requires an entity that reports a discontinued operation to disclose the basic and diluted amounts per share for the discontinued operation, either in the statement of profit or loss and other comprehensive income or in the notes.
B14 For each earnings per share amount presented in accordance with AASB 133, an entity applying this Standard shall present additional basic and diluted earnings per share amounts that are calculated in the same way, except that those amounts shall exclude the net movement in the regulatory deferral account balances. Consistent with the requirement in paragraph 73 of AASB 133, an entity shall present the earnings per share required by paragraph 26 of this Standard with equal prominence to the earnings per share required by AASB 133 for all periods presented.

Application of AASB 136 Impairment of Assets

B15 Paragraphs 11–12 require an entity to continue to apply its previous GAAP accounting policies for the identification, recognition, measurement and reversal of any impairment of its recognised regulatory deferral account balances. Consequently, AASB 136 does not apply to the separate regulatory deferral account balances recognised.
B16 However, AASB 136 might require an entity to perform an impairment test on a cash-generating unit (CGU) that includes regulatory deferral account balances. This test might be required because the CGU contains goodwill, or because one or more of the impairment indicators described in AASB 136 have been identified relating to the CGU. In such situations, paragraphs 74–79 of AASB 136 contain requirements for identifying the recoverable amount and the carrying amount of a CGU. An entity shall apply those requirements to decide whether any of the regulatory deferral account balances recognised are included in the carrying amount of the CGU for the purpose of the impairment test. The remaining requirements of AASB 136 shall then be applied to any impairment loss that is recognised as a result of this test.

Application of AASB 3 Business Combinations

B17 The core principle of AASB 3 is that an acquirer of a business recognises the assets acquired and the liabilities assumed at their acquisition-date fair values. AASB 3 provides limited exceptions to its recognition and measurement principles. Paragraph B18 of this Standard provides an additional exception.
B18 Paragraphs 11–12 require an entity to continue to apply its previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances. Consequently, if an entity acquires a business, it shall apply, in its consolidated financial statements, its accounting policies established in accordance with paragraphs 11–12 for the recognition and measurement of the acquiree’s regulatory deferral account balances at the date of acquisition. The acquiree’s regulatory deferral account balances shall be recognised in the consolidated financial statements of the acquirer in accordance with the acquirer’s policies, irrespective of whether the acquiree recognises those balances in its own financial statements.

Application of AASB 5 Non-current Assets Held for Sale and Discontinued Operations

B19 Paragraphs 11–12 require an entity to continue to apply its previous accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances. Consequently, the measurement requirements of AASB 5 shall not apply to the regulatory deferral account balances recognised.
B20 Paragraph 33 of AASB 5 requires a single amount to be presented for discontinued operations in the statement(s) of profit or loss and other comprehensive income. Notwithstanding the requirements of that paragraph, when an entity that elects to apply this Standard presents a discontinued operation, it shall not include the movement in regulatory deferral account balances that arose from the rate-regulated activities of the discontinued operation within the line items that are required by paragraph 33 of AASB 5. Instead, the entity shall present the movement in regulatory deferral account balances that arose from the rate-regulated activities of the discontinued operation either:

(a) within the line item that is presented for movements in the regulatory deferral account balances related to profit or loss; or

(b) as a separate line item alongside the related line item that is presented for movements in the regulatory deferral account balances related to profit or loss.

B21 Similarly, notwithstanding the requirements of paragraph 38 of AASB 5, when an entity presents a disposal group, the entity shall not include the total of the regulatory deferral account debit balances and credit balances that are part of the disposal group within the line items that are required by paragraph 38 of AASB 5\. Instead, the entity shall present the total of the regulatory deferral account debit balances and credit balances that are part of the disposal group either:

(a) within the line items that are presented for the regulatory deferral account debit balances and credit balances; or

(b) as separate line items alongside the other regulatory deferral account debit balances and credit balances.

B22 If the entity chooses to include the regulatory deferral account balances and movements in those balances that are related to the disposal group or discontinued operation within the related regulated deferral account line items, it may be necessary to disclose them separately as part of the analysis of the regulatory deferral account line items described by paragraph 33 of this Standard.

Application of AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures

B23 Paragraph 19 of AASB 10 requires that a “parent shall prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances”. Paragraph 8 of this Standard requires that an entity that is within the scope of, and elects to apply, this Standard shall apply all of its requirements to all regulatory deferral account balances arising from all of the entity’s rate-regulated activities. Consequently, if a parent recognises regulatory deferral account balances in its consolidated financial statements in accordance with this Standard, it shall apply the same accounting policies to the regulatory deferral account balances arising in all of its subsidiaries. This shall apply irrespective of whether the subsidiaries recognise those balances in their own financial statements.
B24 Similarly, paragraphs 35–36 of AASB 128 require that, in applying the equity method, an “entity’s financial statements shall be prepared using uniform accounting policies for like transactions and events in similar circumstances”. Consequently, adjustments shall be made to make the associate’s or joint venture’s accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances conform to those of the investing entity in applying the equity method.

Application of AASB 12 Disclosure of Interests in Other Entities

B25 Paragraph 12(e) of AASB 12 requires an entity to disclose, for each of its subsidiaries that have non-controlling interests that are material to the reporting entity, the profit or loss that was allocated to non-controlling interests of the subsidiary during the reporting period. An entity that recognises regulatory deferral account balances in accordance with this Standard shall disclose the net movement in regulatory deferral account balances that is included within the amounts that are required to be disclosed by paragraph 12(e) of AASB 12.
B26 Paragraph 12(g) of AASB 12 requires an entity to disclose, for each of its subsidiaries that have non-controlling interests that are material to the reporting entity, summarised financial information about the subsidiary, as specified in paragraph B10 of AASB 12. Similarly, paragraph 21(b)(ii) of AASB 12 requires an entity to disclose, for each joint venture and associate that is material to the reporting entity, summarised financial information as specified in paragraphs B12–B13 of AASB 12. Paragraph B16 of AASB 12 specifies the summary financial information that an entity is required to disclose for all other associates and joint ventures that are not individually material in accordance with paragraph 21(c) of AASB 12.
B27 In addition to the information specified in paragraphs 12, 21, B10, B12–B13 and B16 of AASB 12, an entity that recognises regulatory deferral account balances in accordance with this Standard shall also disclose the total regulatory deferral account debit balance, the total regulatory deferral account credit balance and the net movements in those balances, split between amounts recognised in profit or loss and amounts recognised in other comprehensive income, for each entity for which those AASB 12 disclosures are required.
B28 Paragraph 19 of AASB 12 specifies the information that an entity is required to disclose when the entity recognises a gain or loss on losing control of a subsidiary, calculated in accordance with paragraph 25 of AASB 10. In addition to the information required by paragraph 19 of AASB 12, an entity that elects to apply this Standard shall disclose the portion of that gain or loss that is attributable to derecognising regulatory deferral account balances in the former subsidiary at the date when control is lost.

Appendix C
Effective date and transition

This appendix is an integral part of AASB 14.

Effective date and transition

Effective date

C1 \[Deleted by the AASB\]

Compilation details
Accounting Standard AASB 14 Regulatory Deferral Accounts (as amended)

Compilation details are not part of AASB 14.

This compiled Standard applies to annual periods beginning on or after 1 January 2022. It takes into account amendments up to and including 20 December 2021 and was prepared on 7 April 2022 by the staff of the Australian Accounting Standards Board (AASB).

This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 14 (June 2014) as amended by other Accounting Standards, which are listed in the table below.

Table of Standards

Standard	Date made	FRL identifier	Commence-ment date	Effective date(annual periods… on or after …)	Application, saving or transitional provisions
AASB 14	4 Jun 2014	F2014L00813	4 Jun 2014	(beginning) 1 Jan 2016	see (a) below
AASB 2019-1	21 May 2019	F2019L00966	31 Dec 2019	(beginning) 1 Jan 2020	see (b) below
AASB 2021-7	20 Dec 2021	F2021L01883	31 Dec 2021	(beginning) 1 Jan 2022	see (c) below

(a) Entities may elect to apply this Standard to annual periods beginning on or after 1 January 2005 but before 1 January 2016.

(b) Entities may elect to apply this Standard to annual periods beginning before 1 January 2020.

Table of amendments

Paragraph affected	How affected	By … [paragraph/page]
AusCF1	added	AASB 2019-1 [page 12]
Aus4.1	deleted	AASB 2019-1 [page 13]
Aus4.4	repealed	Legislation Act 2003, s. 48D
13	amended	AASB 2019-1 [page 13]
31	added	AASB 2021-7 [23]

Deleted IFRS 14 text

Note: Deleted IFRS 14 text is not part of AASB 14.

C1 An entity shall apply this Standard if its first annual IFRS financial statements are for a period beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies this Standard in its first annual IFRS financial statements for an earlier period, it shall disclose that fact.

Basis for Conclusions

Note: This Basis for Conclusions accompanies, but is not part of, AASB 14.

Background

BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s (AASB) considerations in issuing AASB 14 Regulatory Deferral Accounts. Individual Board members gave greater weight to some factors than to others.

Background

BC2 AASB 14 is the result of the AASB’s due process, which began when the AASB issued Exposure Draft ED 240 Regulatory Deferral Accounts (AASB ED 240) in May 2013 (incorporating International Accounting Standards Board \[IASB\] ED/2013/5 Regulatory Deferral Accounts). That Exposure Draft proposed an interim Standard to permit first-time adopters of Australian Accounting Standards \[International Financial Reporting Standards (IFRS)\] to continue to account for regulatory deferral account balances in their financial statements in accordance with their previous GAAP. The proposed interim standard was not intended, in any way, to anticipate the outcome of the IASB’s longer term Rate-regulated Activities project.
BC3 In the Preface to ED 240, the AASB expressed the view that it did not expect the proposed interim standard, if it were to be incorporated into Australian Accounting Standards, would have a significant impact on entities in Australia as the Standard could conceivably only affect entities that adopt Australian Accounting Standards for the first time and have recognised regulatory deferral account balances under their previous GAAP.
BC4 The AASB received two comment letters on ED 240, which expressed broad support for issuing the interim standard, acknowledging that it would be an interim measure while the IASB develops a Discussion Paper under its comprehensive Rate-regulated Activities project. One respondent expressed the view that they were not aware of any entities in Australia whose financial statements would be directly impacted by the proposals in ED 240.
BC5 In its comment letter to the IASB on ED/2013/5, the AASB raised the following key concerns:

(a) the proposals could result in the IASB inappropriately setting a precedent of introducing additional interim standards for first-time adopters of IFRS to encourage transition to IFRS; and

(b) the proposals would reduce comparability between first-time adopters of IFRS that choose to apply the proposals and those that already apply IFRS or first-time adopters of IFRS that do not elect to apply the proposals.

BC6 In January 2014, the IASB issued IFRS 14 Regulatory Deferral Accounts (incorporating the proposals in ED/2013/5 without substantive changes) for annual reporting periods beginning on or after 1 January 2016, with early application permitted. The AASB noted that its concerns with the ED/2013/5 proposals, expressed in its submission to the IASB, were not addressed in IFRS 14.
BC7 After further considering the types of entities that might be affected by the requirements of AASB 14 (including a newly listed rate-regulated entity from a foreign jurisdiction and a foreign rate-regulated entity that ‘back door’ lists in Australia), the AASB expects that the practical impact of adopting AASB 14 in Australia would be minimal.
BC8 The AASB noted that its concerns (see paragraph BC5 above) are not so great as to cause it to make a decision that would be seen as not adopting IFRS more broadly. Accordingly, given the interim nature of IFRS 14 (and therefore AASB 14) and the expected practical impact of AASB 14, consistent with its policy of adopting IFRS in Australia, the AASB decided to issue AASB 14 on the basis that to do so would not be contrary to the best interests of the Australian economy.
BC9 The AASB also noted that, currently under AASB 1 First-time Adoption of Australian Accounting Standards, if a first-time adopter recognises property, plant and equipment or intangible assets used in rate-regulated activities and the carrying amounts of such items include amounts determined under the entity’s previous GAAP that do not qualify for capitalisation in accordance with Australian Accounting Standards, the first-time adopter may elect to use its previous GAAP carrying amount of such items at the date of transition to Australian Accounting Standards as deemed cost (paragraph D8B of AASB 1). A similar exemption is also available to a first-time adopter with oil and gas properties, whereby the entity may elect to account for its exploration and evaluation assets at the amount determined under the entity’s previous GAAP on transition to Australian Accounting Standards (paragraph D8A of AASB 1). The AASB considered that the exemption in AASB 14 that would permit first-time adopters to continue to account for amounts related to rate regulation in accordance with their previous GAAP when they first-time adopt Australian Accounting Standards is somewhat similar to these exemptions in AASB 1. Therefore, AASB 14 would be broadly consistent with the approach taken by the AASB to allowing first-time adopters to ‘grandfather’ previous GAAP when transitioning to Australian Accounting Standards.

Dissenting opinion

Dissent of Peter Gibson and Steve Mitsas

DO1 AASB 14 Regulatory Deferral Accounts is consistent with the AASB’s policy of incorporating IFRSs into Australian Accounting Standards. While we generally support that policy, from a ‘first principles’ basis we do not agree with the key approach in AASB 14 that allows the continuation of accounting policies that are inconsistent with existing recognition and measurement requirements in other Australian Accounting Standards for late first-time adopters of Australian Accounting Standards.
DO2 Despite AASB 14 being described as an interim standard, it risks perpetuating differences in the recognition and measurement of assets and liabilities, and detracts from the comparability of financial statements, across similar entities. On this basis, we do not support adoption of AASB 14.

[1] In 2013, the AASB amended the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards) (the Framework). The term “faithful representation”, which was used in the Framework from 2013 and is also used in the Conceptual Framework for Financial Reporting issued in 2019, encompasses the main characteristics that the Framework called “reliability”. The requirement in paragraph 13 of this Standard is based on the requirements of AASB 108, which retains the term “reliable”.

AusCF1 Notwithstanding footnote 1, in respect of AusCF entities, in December 2013, the AASB amended the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards). The term “faithful representation” encompasses the main characteristics that the previous version of the Framework called “reliability”. The requirement in paragraph 13 of this Standard is based on the requirements of AASB 108, which retains the term “reliable” .

1 AASB 14 - Regulatory Deferral Accounts - June 2014

Compiled AASB Standard	AASB 14

Regulatory Deferral Accounts

Prepared on 7 April 2022 by the staff of the Australian Accounting Standards Board.

Compilation no. 2

Compilation date: 31 December 2021

Obtaining copies of Accounting Standards

Compiled versions of Standards, original Standards and amending Standards (see Compilation Details) are available on the AASB website: www.aasb.gov.au.

Australian Accounting Standards Board

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Contents

Comparison with IFRS 14

Accounting Standard

AASB 14 Regulatory Deferral Accounts

AASB 14 centres on a small set of defined concepts. The Standard’s text and appendices provide the operative definitions and the conceptual boundaries that determine scope and accounting treatment.

Regulatory deferral account balance. Defined in Appendix A as the balance of any expense (or income) account that would not be recognised as an asset or liability in accordance with other Standards but qualifies for deferral because it is included, or is expected to be included, by the rate regulator in establishing the rates that can be charged to customers. The definition is the pivot of the Standard: only balances meeting this definition are within its scope (Appendix A).
Rate regulation and rate-regulated activities. Rate regulation is a framework for establishing prices that is subject to oversight and/or approval by a rate regulator; rate-regulated activities are activities subject to that framework. The rate regulator may be an external body or, in specified circumstances, a related party (Appendix A; B1-B2). The Standard applies only to activities subject to statutory or regulatory restrictions through actions of a rate regulator (B1).
Election and first-time adoption constraint. An entity may apply AASB 14 only in its first Australian-Accounting-Standards financial statements if it both conducts rate-regulated activities and had recognised qualifying regulatory deferral account balances under previous GAAP (para 5). If it elects AASB 14 in that first set of statements, it must continue to apply AASB 14 to subsequent periods (para 6). The election therefore attaches to the transition point to Australian Accounting Standards.
Continuation of previous GAAP accounting policies. Subject to the specific presentation and disclosure requirements of AASB 14, an entity that elects to apply the Standard continues to use its previous GAAP policies for recognition, measurement, impairment and derecognition of regulatory deferral account balances (paras 11-12; B3-B4 set out examples). The Standard provides an exemption from the normal AASB 108 process for identifying other authoritative guidance (para 10).
Restricted policy change. Paragraphs 13-15 limit changes to accounting policy for recognising regulatory deferral account balances. An entity cannot change policy to start recognising such balances; changes are permitted only if they demonstrably improve the financial statements’ relevance without reducing reliability, or improve reliability without reducing relevance, judged against AASB 108 criteria (paras 13-15).
Presentation segregation. The Standard requires separate line items for total regulatory deferral account debit balances and regulatory deferral account credit balances in the statement of financial position (para 20). Where current/non‑current distinction is used for other assets and liabilities, regulatory deferral account totals are not to be classified as current or non‑current; instead, subtotals are drawn prior to presenting the regulatory deferral account balances (para 21). Movements are presented separately in profit or loss and other comprehensive income, with specified segregation for items recognised in other comprehensive income (paras 22-24).
Interaction rules with other Standards. AASB 14 contains explicit application guidance on how it sits alongside AASB 110 (events after reporting period), AASB 112 (income taxes), AASB 133 (earnings per share), AASB 136 (impairment), AASB 3 (business combinations), AASB 5 (non-current assets held for sale) and consolidation/equity method standards (Appendix B, B8-B28). The guidance sometimes disapplies or modifies usual rules (for example, particular presentation of deferred tax amounts that arise because of recognition of regulatory deferral account balances, B11-B12; exclusion of separate regulatory deferral balances from AASB 136 impairment tests, B15).
Disclosure objective and specifics. The disclosure objective is to enable users to assess the nature and risks of the rate regulation and the effects on financial position, performance and cash flows (para 27). Required items include description of rate-regulated activities and regulators, reconciliation of carrying amounts by class, discount rates, remaining recovery periods, and disclosure when balances are no longer fully recoverable (paras 30, 32-36).

The Standard is intended to be interim and to align, for-profit Tier 1 entities, with IFRS 14 (Comparison with IFRS 14); Tier 2 simplified-disclosure entities will not comply with IFRS Standards if they apply AASB 14 (Comparison with IFRS 14). The Basis for Conclusions states the Standard was intended to be limited in impact in Australia and to be temporary while the IASB continued work on rate-regulated activities (BC1-BC9). A dissent records the view that the Standard risks perpetuating differences and reducing comparability (DO1-DO2).

AASB 14 affects a circumscribed population of entities. Its application prerequisites and the Standard’s own limits narrow the practical universe to the following groups, on the text’s terms.

First-time adopters that conduct rate-regulated activities and that recognised regulatory deferral account balances under their previous GAAP. Paragraph 5 makes this the primary gate: an entity is permitted to apply AASB 14 in its first Australian-Accounting-Standards financial statements only if it conducts rate-regulated activities and has regulatory deferral account balances recognised under previous GAAP. Paragraph 6 requires that if an entity elects AASB 14 in its first Australian-Accounting-Standards financial statements it must apply AASB 14 to subsequent periods.
Entities with rate-regulated activities that are existing reporters who elected to apply AASB 14 at the time they first prepared Australian-Accounting-Standards financial statements. The election is not available as a mid‑stream policy switch to start recognising regulatory deferral account balances; paragraph 13 specifically forbids changing accounting policies to start recognising such balances. Therefore only those who already had prior‑GAAP balances at transition can use the regime.
For-profit Tier 1 entities that wish to maintain consistency with IFRS 14. The Standard explicitly says that for-profit entities complying with AASB 14 also comply with IFRS 14 (Comparison with IFRS 14). However, Tier 2 entities that prepare general-purpose financial statements under the Simplified Disclosures are noted as not being in compliance with IFRS Standards if they apply AASB 14 (Comparison with IFRS 14).
Entities that engage in a mixture of regulated and non-regulated activities. Appendix B explains the Standard applies only to rate-regulated activities subject to statutory or regulatory restrictions through actions of a rate regulator; it does not apply to self-regulated activities (B1-B2). Thus entities with mixed operations will need to identify which activities fall inside the Standard’s scope.
Consolidated groups and investors in associates/joint ventures. The Standard affects reporting and consolidation policy. If a parent recognises regulatory deferral account balances in consolidated financial statements, it must apply the same accounting policies across subsidiaries for like transactions (B23). When applying the equity method, the investor is required to align the associate’s or joint venture’s accounting policies on regulatory deferral account balances to the investor’s policies (B24).

Who does not get covered:

Entities that did not have regulatory deferral account balances under previous GAAP cannot use AASB 14 to start recognising those balances (para 13).
Entities with activities that are only self-regulated and not subject to oversight/approval by a rate regulator are outside scope (B2). The Standard permits an exception where the entity’s own governing body sets rates within a framework subject to oversight by an authorised body (B2(a)-(b)).
Entities applying the Conceptual Framework’s reporting-entity approach (AusCF entities vs others). AusCF paragraphs apply only to certain not-for-profit entities and to for‑profit entities not applying the Conceptual Framework for Financial Reporting, as identified in AASB 1048 (AusCF1). The AusCF1 paragraph clarifies applicability to AusCF entities; for-profit entities applying the Conceptual Framework do not apply AusCF paragraphs.

The Basis for Conclusions and Board discussion signals additional practical groups to watch:

Entities listed via “back door” listings from foreign rate-regulated jurisdictions. The AASB considered such entities as potential practical users of the Standard (BC7).
First-time adopters coming from jurisdictions whose previous GAAP recognised such balances: the Standard is targeted at allowing those entities to continue their previous accounting treatment at initial transition (BC2-BC9).

Overall, the Standard’s effect is narrowly focused by its two-step test (conducts rate-regulated activities; recognised qualifying balances under previous GAAP) and by the election/first-time-adopter constraint (paras 5-6, 11-13; Appendix A). Compliance obligations (presentation/disclosure) attach to those who elect, and the Standard’s specific interactions constrain how other Standards apply to those regulatory deferral account balances (Appendix B).

AASB 14 specifies duties (obligations) on entities that elect to apply it and recognises certain rights (exemptions) relative to otherwise applicable Australian Accounting Standards. The duties and rights are both substantive and procedural.

Rights (exemptions, elections)

Exemption from paragraph 11 of AASB 108. An entity that elects to apply AASB 14 is exempted from applying paragraph 11 of AASB 108 when developing accounting policies for recognition, measurement, impairment and derecognition of regulatory deferral account balances (para 10). The practical effect is a right to continue previous GAAP policies for those balances (paras 11-12; B3-B4).
Election to apply AASB 14 at first-time adoption. A first-time adopter that meets the two-step criterion (rate-regulated activities and previous-GAAP recognition of regulatory deferral account balances) has the right to elect to apply AASB 14 in its first Australian-Accounting-Standards financial statements (para 5). If elected, AASB 14 must be applied in subsequent periods (para 6).
Right to present regulatory deferral account balances separately. The Standard gives entities a right to separate presentation of regulatory deferral account balances in the statement of financial position and to segregate movements in profit or loss and other comprehensive income in the ways prescribed (paras 18-26). This is not optional for electing entities; it is a prescriptive presentation approach.

Duties (obligations)

Duty to apply previous GAAP policies for recognition, measurement and impairment, subject to limited permitted changes. On election, the entity shall continue to apply its previous GAAP accounting policies for regulatory deferral account balances (paras 11-12). Changes are restricted: an entity shall not change accounting policies in order to start recognising regulatory deferral account balances and may only change them if the change meets the relevance/reliability criteria in paragraph 10 of AASB 108 (paras 13-15).
Duty to apply AASB 14 to all regulatory deferral account balances arising from all of the entity’s rate-regulated activities. The entity cannot pick and choose; paragraph 8 requires all regulatory deferral account balances from all rate-regulated activities to be treated under the Standard if the entity elects to apply it.
Duty to present and disclose. The Standard mandates specific presentation (paras 18-26) and disclosure (paras 27-36) requirements. Disclosures must enable users to assess the nature and risks of the rate regulation and the effects on position, performance and cash flows (para 27). Required disclosures include descriptions of regulatory activities and regulators (para 30), reconciliations and discount rates (para 33), tax impacts (para 34), and impairment disclosures if balances are no longer recoverable (para 36).
Duty to maintain consistent policies. Paragraph 12 requires the policies established for regulatory deferral account balances to be applied consistently in subsequent periods, except for permitted changes under paragraphs 13-15.
Duty to follow specified interactions with other Standards. Appendix B sets out how the entity must reconcile the Standard with other Standards. Notable duties include special presentation of deferred tax arising from regulatory deferral account balances (B11-B12), presentation adjustments for discontinued operations/disposal groups (B19-B22), uniform accounting policy application in consolidation and equity method (B23-B24), and producing additional EPS amounts excluding regulatory deferral account movements (B13-B14).
Duty to consider events after reporting period and apply AASB 110 when deciding whether to adjust estimates used in recognition and measurement of regulatory deferral account balances (B8).

Enforcement rights are not instantiated in AASB 14 itself; the Standard sets accounting rules and presentation/disclosure duties. The Standard’s Basis for Conclusions records the Board’s intention that the Standard be interim and limited in practical application (BC1-BC9), but dissenting members objected to allowing continuation of policies inconsistent with other recognition and measurement requirements (DO1-DO2), signalling internal governance tension.

In short, electing entities gain the right to grandfather previous-GAAP recognition and measurement for regulatory deferral account balances (exemption from AASB 108 paragraph 11), but accept duties to present, disclose and apply consistent policies across all rate-regulated activities and to interact with other Standards following the specified guidance in Appendix B. These trade-offs are the core operational contract created by the Standard (paras 9-15; 18-36; B7-B28).

AASB 14 itself does not create statutory penalties or criminal sanctions. It is an Accounting Standard made by the Australian Accounting Standards Board under section 334 of the Corporations Act 2001 (Accounting Standard AASB 14 preamble). Enforcement of accounting standards is typically achieved through statutory and regulatory mechanisms outside the Standard’s text, including corporate law obligations to prepare true and fair financial statements, and oversight by regulators, auditors and professional disciplinary bodies. The Standard’s text, however, indicates the following enforcement-relevant and compliance-monitoring features which practitioners should note.

Mandatory application and required disclosures. Paragraphs 5-6, 8, 11 and 18-26 use mandatory language: an entity “shall” do X or Y. Non‑compliance with “shall” requirements in adopted Accounting Standards can give rise to audit qualifications, regulator scrutiny, and potential contraventions of continuous disclosure or reporting obligations under the Corporations Act if the financial statements are not prepared in accordance with Australian Accounting Standards (see the Standard’s preamble that it was made under s 334 of the Corporations Act 2001). Therefore, while AASB 14 does not itself prescribe penalties, failure to comply with its mandatory requirements is likely to be actionable through the standard regulatory and audit enforcement channels.
Auditor expectations. Because AASB 14 changes the applicable accounting framework for regulatory deferral account balances by providing an exemption from AASB 108 paragraph 11 (para 10), auditors must evaluate whether the entity validly meets the election criteria (paras 5-6), properly continues previous GAAP accounting policies as permitted (paras 11-12), and correctly applies presentation and disclosure requirements (paras 18-36). Audit reports and audit adjustments are the primary ex post enforcement mechanisms in practice.
Regulatory oversight and market consequences. Entities that are public companies or have reporting obligations are subject to oversight by the Australian Securities and Investments Commission and market scrutiny. If AASB 14 is applied inconsistently with its provisions (for example, by recognising balances without prior‑GAAP basis or by failing to present required line items), that could trigger regulatory review, requirement for restatement, or market reactions. The Standard’s Basis for Conclusions also records the AASB’s concerns about comparability (BC5, BC6) and the dissent highlights potential interpretive disputes (DO1-DO2), indicating that regulators and auditors may be attentive to divergent practices.
Interaction with other Standards that carry their own enforcement implications. For example, AASB 112’s tax presentation rules are modified in part by AASB 14 (B9-B12). Incorrect application of these interaction rules could lead to misstatement of tax assets/liabilities and thus to audit issues or tax authority queries. Similarly, misapplication of consolidation or equity method uniformity requirements (B23-B24) could cause inconsistent group reporting which auditors are required to address.
No special sanctioning regime is embedded. The Standard does not create a distinct penalty or enforcement procedure specific to regulatory deferral account balances. Compliance therefore falls under the ordinary audit and corporate reporting enforcement framework, rather than creating a bespoke sanction regime.

Practically, enforcement will proceed via the usual channels: auditor reports and qualifications, regulator reviews, investor and market scrutiny, and any legal consequences that flow from misstatements in financial reports prepared under the Corporations Act. The Standard’s mandatory language and specified disclosures are the levers that allow these oversight mechanisms to function; the Standard itself does not prescribe fines or criminal penalties.

AASB 14 is an Accounting Standard and is designed to sit within the existing architecture of Australian Accounting Standards and corporate reporting law. The Standard explicitly addresses interactions with a number of other AASB Standards; those interactions are the operative cross‑law mechanisms rather than interactions with substantive regulatory or competition law. Key interactions set out in the Standard’s body and Appendix B are as follows.

Interaction with AASB 108 (Accounting Policies, Changes in Accounting Estimates and Errors). AASB 14 grants a temporary and specific exemption from paragraph 11 of AASB 108 for developing accounting policies for regulatory deferral account balances (paras 9-10). Paragraphs 11-15 then require continuation of previous GAAP policies subject to strict limits on policy changes. The exemption alters the usual hierarchy for determining applicable guidance for those specific balances.
Interaction with AASB 112 (Income Taxes). AASB 14 requires entities to apply AASB 112 across all activities (B9), but specifies that deferred tax assets/liabilities that arise as a result of recognising regulatory deferral account balances must be presented with, or alongside, the regulatory deferral account line items instead of included in AASB 112 totals (B11-B12). Movement in such deferred tax amounts is similarly to be presented with regulatory deferral-account movements, rather than within the AASB 112 tax expense line (B12). This modifies the presentation that would otherwise be required under AASB 112 and has implications for tax reporting and user understanding of tax effects.
Interaction with AASB 136 (Impairment of Assets). Regulatory deferral account balances recognised as separate line items are not subject to AASB 136’s separate requirements (B15). However, AASB 136 will apply if an impairment test for a cash-generating unit (CGU) is required and that CGU includes regulatory deferral account balances; in that case, the entity must decide whether the balances are included in the carrying amount of the CGU and apply normal impairment principles (B16). The Standard therefore creates a carve‑out for standalone impairment accounting, but preserves impairment testing within broader CGU assessments.
Interaction with AASB 3 (Business Combinations). The default fair-value approach in AASB 3 would usually require assets and liabilities to be measured at acquisition-date fair value (B17). AASB 14 instructs that acquiree regulatory deferral account balances recognised under previous GAAP must be included in the acquirer’s consolidated financial statements using the acquirer’s policies established under paragraphs 11-12 (B18). This is a specific exception to normal AASB 3 application within consolidations for regulatory deferral account balances recognised under previous GAAP.
Interaction with AASB 5 (Non-current Assets Held for Sale and Discontinued Operations). AASB 14 specifies that measurement requirements of AASB 5 do not apply to regulatory deferral account balances (B19). It provides specific presentation directions when discontinued operations or disposal groups involve rate-regulated activities: regulatory deferral account balances and their movements should be presented with regulatory deferral account line items, not within AASB 5 line items (B20-B22).
Interaction with AASB 133 (Earnings per Share). Entities applying AASB 14 must present additional basic and diluted EPS amounts that exclude net movements in regulatory deferral account balances; those EPS figures must be given equal prominence with the EPS calculated under AASB 133 (B13-B14). This creates an additional reporting obligation and seeks to assist users in understanding earnings excluding regulatory timing effects.
Interaction with consolidation and equity-method standards (AASB 10 and AASB 128). Consolidated financial statements must use uniform accounting policies for like transactions; therefore, a parent that recognises regulatory deferral account balances in consolidated statements must apply the same policies to subsidiary balances, even if subsidiaries do not themselves recognise the balances (B23). The equity method requires adjustments to make associates’ or joint ventures’ policies conform to the investing entity’s policies regarding regulatory deferral account balances (B24). These directions enforce group-level uniformity in treatment of regulatory deferral balances.
Interaction with AASB 110 (Events After the Reporting Period). Estimates and assumptions used in recognition and measurement of regulatory deferral account balances must be adjusted for subsequent events in accordance with AASB 110 where appropriate (B8). This interaction preserves normal post-reporting-period judgement.
Interaction with disclosure standard AASB 12. When interests in subsidiaries, associates or joint ventures involve rate-regulated activities with recognised regulatory deferral account balances, AASB 14 mandates additional disclosure of those balances and movements in the AASB 12 disclosures required for those interests (B25-B28).
Interaction with Corporations Act reporting regime. Although AASB 14 does not itself change statutory law, it was made under s 334 of the Corporations Act 2001 and therefore forms part of the Australian Accounting Standards that underpin statutory reporting obligations. Entities preparing financial statements must therefore ensure AASB 14 compliance to meet statutory reporting obligations under the Act (Accounting Standard preamble).

The Standard modifies presentation and disclosure within the existing legal framework for financial reporting but does not itself override other legislative regimes (for example, tax law or competition/regulatory law governing rate setting). The Standard is procedural and financial-reporting-focused; any substantive legal entitlements created by a rate regulator remain governed by the relevant statutory or regulatory instruments outside AASB 14. The Standard does, however, require entities to disclose the identity of the rate regulator, the nature of the rate-setting process, and the risks to recovery (para 30), which can reveal regulatory dependencies and affect market assessment.

AASB 14’s compiled text includes amendments incorporated up to 20 December 2021. The Compilation Details and Table of Standards and Amendments in Appendix C set out the legislative history and specific amending standards. The following timeline and changes are drawn from the Standard’s compilation information and table of amendments.

Original Standard: AASB 14 was made by the Australian Accounting Standards Board on 4 June 2014 under section 334 of the Corporations Act 2001 (Accounting Standard AASB 14 preamble). It incorporated IFRS 14 as issued by the IASB.
Effective dates: The compiled Standard states it applies to annual reporting periods beginning on or after 1 January 2022 for this compiled version, but earlier application is permitted in accordance with Aus4.2 and related compilation notes (Compilation details; Aus4.2-Aus4.3). The original IFRS 14 set an effective date (see Compilation’s deleted IFRS 14 text), and AASB 14 aligns with those effective/transition provisions while adding Australian-specific Aus paragraphs.
Amending Standards listed in the Compilation table:
- AASB 2019-1 (dated 21 May 2019) is listed as an amending Standard, with commencement date 31 December 2019 and effective date beginning 1 January 2020; it includes changes that affected AusCF1 (added) and deleted Aus4.1 (see Table of amendments).
- AASB 2021-7 (dated 20 December 2021) is listed with commencement date 31 December 2021 and effective date beginning 1 January 2022; it added paragraph 31 (see Table of amendments).
Specific paragraph amendments recorded in the compilation table:
- AusCF1 was added by AASB 2019-1 (see Table of amendments).
- Aus4.1 was deleted by AASB 2019-1.
- Aus4.4 was repealed by Legislation Act 2003, s. 48D (see Table).
- Paragraph 13 was amended by AASB 2019-1 (the table notes amendment at page 13).
- Paragraph 31 was added by AASB 2021-7 (noted in the table at [23]).
Compilation and preparation: The compiled Standard was prepared on 7 April 2022 by AASB staff and reflects amendments made up to and including 20 December 2021 (Compilation details). The compilation is explicitly not a new Accounting Standard; it is a representation of AASB 14 as amended by other Standards.
Deleted IFRS 14 text: The compilation includes a “Deleted IFRS 14 text” section that is not part of AASB 14; this shows that some IFRS text that previously formed part of IFRS 14 is removed in the AASB compilation (Appendix C, Deleted IFRS 14 text). The Basis for Conclusions that accompanies the Standard is included but is not part of the Standard itself.
Basis for Conclusions and dissent: The Basis for Conclusions (BC1-BC9) documents the AASB’s reasoning and notes AASB 14 was intended as an interim measure consistent with IFRS 14; it also records the AASB’s view that practical impact in Australia would be minimal. Two Board members dissented (DO1-DO2), disagreeing with the continuation-of-previous-GAAP approach and citing comparability concerns.
Transitional application choices: Aus4.3 confirms entities may elect to apply AASB 14 to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2016, and the compilation table records options allowing earlier application of some amendments (C table notes (a), (b), (c)). The practical effect is that some entities have choices about earlier adoption depending on circumstances.
Administrative deletions/repeals: Aus4.1 is deleted and Aus4.4 repealed per the compilation notes, reflecting housekeeping and alignment with other legislative instruments (Compilation details).

Practitioners should rely on the Compilation Details and the Table of Amendments in Appendix C for authoritative amendment history. The State of the Standard at the time of this compilation reflects the amendments up to 20 December 2021 and the preparation date of 7 April 2022. Any later amendments are not reflected in this compiled text.

The compiled AASB 14 text supplied contains no case law, judicial decisions, or litigation history. The Standard itself includes a Basis for Conclusions and records two dissenting opinions from Board members (DO1-DO2), but it does not cite any court rulings or show that the Standard has been the subject of litigation. Absent any cases mentioned in the Standard, there is no statutory or judicial interpretation history recorded in the source.

Implications of the lack of litigation history in the provided material:

Interpretive uncertainty may persist. With no reported court or tribunal decisions interpreting the Standard’s provisions, certain areas , for example, the boundary between rate-regulated and self-regulated activities (B1-B2), or the application of the “previous GAAP” continuation when other Standards explicitly prohibit recognition (B4) , may be subject to diversity of practice until clarified by regulators, auditors, or future precedent.
Reliance on auditors and regulators for enforcement. In the absence of judicial clarifications, auditors, the AASB’s guidance, and regulatory reviews (for example, by ASIC where applicable) will be the primary mechanisms for resolving disputes over application. Audit firms’ interpretations and rulings by professional bodies will drive practice in the near term.
The Basis for Conclusions and dissent are the primary interpretive aids in the document. BC1-BC9 explain the Board’s thinking and rationale, and DO1-DO2 record countervailing views on comparability. Practitioners must therefore pay attention to the Board’s reasons and to the dissent where assessing judgement‑heavy areas.
Potential for future litigation or regulatory challenge. Because AASB 14 permits continuation of practices that may be inconsistent with other Standards, disputes could arise in the future , for example, over whether an entity validly met the election criteria in paragraph 5, or whether the continuation of previous GAAP for a particular balance is consistent with paragraphs 11-15. Any such disputes would likely be resolved first through audit and regulator processes, and potentially escalate to litigation if restatements or enforcement actions follow.

For now, the absence of litigation in the text means there are no court-developed doctrines or precedents to rely upon; interpretation will depend on the Standard’s text, Appendix B application guidance, AASB pronouncements and auditors’ professional judgement.

Several practical pitfalls and traps for the unwary arise directly from the Standard’s prescribed structure, language and interaction rules. The following points compile those “gotchas” grounded in the Standard’s text and appendices.

Election timing and pre‑existing recognition requirement (paras 5-6).
- Gotcha: An entity cannot use AASB 14 to start recognising regulatory deferral account balances simply by changing accounting policy. Paragraph 13 explicitly prohibits changing policy to start recognising such balances. The right to apply AASB 14 is limited to a first-time adopter that already recognised qualifying balances under previous GAAP (para 5). Failure to appreciate this constraint could lead to improper recognition or an audit qualification.
All-or-nothing application across the entity (para 8).
- Gotcha: If an entity elects AASB 14, it must apply the Standard’s requirements to all regulatory deferral account balances arising from all of its rate-regulated activities, not just selected balances or activities (para 8). Piecemeal application (eg applying to one regulated business line but not another) is not permitted.
Interaction with other Standards may require presentation or measurement adjustments (B7-B28).
- Gotcha: The Standard contains carve-outs and interaction rules (B9-B12 for tax, B15-B16 for impairment, B18 for business combinations, B19-B22 for disposal groups/discontinued operations). Failure to follow the specific directions can produce misstatements , for example, presenting deferred tax arising from regulatory deferral account balances in the AASB 112 totals rather than with the regulatory lines (B11-B12).
Presentation constraints: no current/non-current split of regulatory totals (paras 20-21).
- Gotcha: Even where an entity splits other items as current/non-current, the totals of regulatory deferral account debit and credit balances must be presented as separate line items and not classified current/non‑current. Auditors may query inconsistent presentation.
EPS adjustments and prominence requirement (B13-B14).
- Gotcha: The entity must present additional basic and diluted EPS figures that exclude the net movement in regulatory deferral account balances, with equal prominence to the EPS required by AASB 133. This is an extra computation and disclosure that can be missed in earnings reports prepared under time pressure.
Deferred tax presentation linked to regulatory balances (B11-B12, para 24).
- Gotcha: Deferred tax amounts that arise because of recognition of regulatory deferral account balances must be presented with the related regulatory deferral account balances and movements. If deferred tax is material and is presented only in the AASB 112 totals, the financial statements may omit required linkage.
Impairment testing complexities (B15-B16, para 36).
- Gotcha: AASB 136 does not apply to separate regulatory deferral account balances (B15), but a CGU impairment test that includes regulatory deferral account balances may require those balances to be part of the carrying amount under the test (B16). Determining whether to include regulatory balances in the CGU carrying amount and allocating impairment losses raises judgement and may be contentious.
Consolidation and equity-method uniformity (B23-B24).
- Gotcha: Parents must apply uniform policies across subsidiaries for regulatory deferral account balances in consolidated statements. A parent could therefore be required to recognise regulatory balances for subsidiaries that did not recognise them individually, or to adjust associates/joint ventures under the equity method. This can create significant consolidation adjustments and surprises for group reporting.
Presentation of discontinued operations and disposal groups (B19-B22).
- Gotcha: Movements in regulatory deferral account balances associated with discontinued operations or disposal groups must be presented with regulatory deferral account movement line items rather than within the AASB 5 discontinued operations lines. This can make comparative disclosures and segment reporting onerous.
Prior GAAP ambiguity and documentation burden (paras 11-12, B3-B4).
- Gotcha: “Previous GAAP” means the accounting basis used immediately before transition. Entities must document prior policies and the justification for continuing them under AASB 14, including recoverability assessments and discount-rate choices (para 33(b)). Auditors will expect clear documentation linking prior GAAP treatments to the continuing policy under AASB 14.
Disclosure scope and judgement (paras 27-29, 30-36).
- Gotcha: The disclosure objective requires entities to judge the level of detail necessary (para 29) and to include incorporated information by cross-reference only if it is available on the same terms as the financial statements (para 31). Entities may underestimate the need to explain the nature of the regulatory rate-setting process and the risks to recovery, which are necessary to meet paragraph 27.
Potential comparability concerns highlighted in dissent (DO1-DO2; BC5).
- Gotcha: The Standard’s grandfathering approach can result in continued diversity in measurement and recognition across similar entities. Users and regulators may press for reconciliations and explanations , AASB 14’s disclosure requirements attempt to address this (paras 27-36), but the underlying comparability risk remains.
Tier 2 reporting and IFRS compliance tension (Comparison with IFRS 14).
- Gotcha: Entities applying Tier 2 (Simplified Disclosures) that adopt AASB 14 will not be in compliance with IFRS Standards (Comparison with IFRS 14). Entities intending to claim IFRS compliance must be alert to their tier and compliance status.

In practice, these “gotchas” mean controlled implementation is essential: clear transition documentation, disciplined consolidation adjustments, explicit EPS computations, careful deferred-tax presentation, and rigorous disclosure of regulatory processes and risks. Many of the traps turn on presentation and disclosure rather than initial recognition, reflecting the Standard’s core objective of permitting previous-GAAP recognition while increasing transparency.

Compliance with AASB 14 entails a sequence of diagnostic, governance, accounting and disclosure steps tied to the Standard’s election condition and ongoing requirements. The following is a practical compliance roadmap directly grounded in the Standard’s paragraphs and appendices.

Determine eligibility and election (paras 5-6, Appendix A).
- Confirm the entity conducts rate-regulated activities as defined in Appendix A and Appendix B (B1-B2).
- Confirm the entity recognised regulatory deferral account balances in its financial statements under previous GAAP immediately before adopting Australian Accounting Standards (para 5; Appendix A definition of “Previous GAAP”).
- If the entity is a first-time adopter, document an explicit election to apply AASB 14 in the first Australian-Accounting-Standards financial statements (para 5) and disclose that election if applying to a period before Aus4.2 (Aus4.3).
Preserve and document previous GAAP accounting policies (paras 9-12, B3-B4).
- Identify and catalogue the previous GAAP recognition, measurement, impairment and derecognition policies applied to regulatory deferral account balances.
- Document the rationale that these policies continue to apply under the AASB 14 exemption from AASB 108 paragraph 11 (para 10), including any examples such as the right to recover costs via future rates or methods of measuring balances undiscounted or on regulator-specified discount rates (B4-B5).
- Ensure policy consistency in subsequent periods (para 12).
Confirm constraints on policy change (paras 13-15).
- Do not change accounting policy for the purpose of commencing recognition of regulatory deferral account balances.
- If considering a policy change, prepare demonstrable analysis showing the change improves relevance without reducing reliability (or vice versa) judged against paragraph 10 of AASB 108 (paras 13-14). Document the judgement process.
Apply presentation requirements (paras 18-26).
- Add separate line items in the statement of financial position for: (a) the total of all regulatory deferral account debit balances; and (b) the total of all regulatory deferral account credit balances (para 20).
- Where the entity presents current and non-current classifications, present these regulatory totals separately from current/non-current subtotals and do not split them into current/non-current (para 21).
- Ensure movements are shown in the statement(s) of profit or loss and other comprehensive income as required: OCI movements related to items recognised in OCI must be presented in the OCI section with separate line items for those that will or will not be reclassified to profit or loss (para 22); remaining net movements must be presented in profit or loss or in a separate statement of profit or loss, distinguished via a subtotal (para 23).
- When recognising deferred tax arising from regulatory balances, present the deferred tax with the regulatory deferral account balances and movements (para 24; B11-B12).
- Adjust discontinued operation and EPS presentations per paras 25-26 and B19-B22, B13-B14.
Implement disclosure regime (paras 27-36).
- Prepare disclosures that satisfy paragraph 27’s objective: nature and risks of rate regulation and effects on financial position, performance and cash flows.
- For each type of rate-regulated activity, include a brief description of the activity and rate-setting process, the identity of rate regulator(s), and an analysis of how recovery of each class of debit/credit balance is affected by demand, regulatory and other risks (para 30).
- Provide a reconciliation of carrying amounts for each class of regulatory deferral account balance (para 33(a)), disclose applicable discount or rate of return assumptions (para 33(b)), and remaining recovery/amortisation periods (para 33(c)).
- Disclose tax impacts and any regulatory deferral account balances related to taxation (para 34).
- Disclose regulatory deferral account amounts for subsidiaries/associates/joint ventures where AASB 12 applies (para 35; B25-B28).
- If a balance is no longer recoverable, disclose the fact, the reason and the amount of reduction (para 36).
Address interactions with other Standards (Appendix B).
- Apply AASB 110 for events after the reporting period that affect estimates used in regulatory balances (B8).
- For income-tax related balances and resulting deferred tax, follow B9-B12 for recognition and presentation with regulatory lines.
- Calculate additional EPS figures excluding net movements in regulatory deferral account balances and present them with equal prominence to AASB 133 EPS (B13-B14).
- Consider AASB 136 CGU impairment tests that include regulatory balances and determine whether those balances are part of the carrying amount for CGU testing (B15-B16).
- For business combinations, derecognition and consolidation, ensure acquisition-date and consolidation treatments follow B17-B18 and B23-B24.
Governance, audit and documentation.
- Prepare clear transition documentation explaining the election, the qualifying previous GAAP treatments, the rationale for continuing policies, and a reconciliation of balances at transition.
- Ensure audit trail for all judgements: recoverability assessments, discount‑rate choices, amortisation periods, and any policy changes subject to paragraph 13 justification.
- Engage with auditors early on presentation (line items, subtotals), EPS computations, and tax presentation to avoid late restatements.
Group reporting considerations.
- If consolidated group reporting applies, ensure parents and subsidiaries apply uniform accounting policies for regulatory deferral account balances in consolidated financial statements (B23). If subsidiaries did not previously recognise balances but consolidation requires it, prepare the required consolidation adjustments and disclosures.
- For equity-accounted investees, adjust their financial statements as necessary to conform to the investor’s policies for recognition and measurement (B24).
Consider disclosure cross-references correctly (para 31).
- If incorporating disclosures by cross-reference to management commentary or a risk report, ensure that the cross-referenced material is available on the same terms as the financial statements and at the same time (para 31). Otherwise, include the disclosures directly in the financial statements.
Monitor AASB guidance and regulatory developments.
- The Basis for Conclusions records that AASB 14 is interim (BC1-BC9). Keep track of any future AASB or IASB guidance on rate-regulated activities or amendments to AASB 14 that may alter the regime. Document readiness to transition away from AASB 14 if and when a permanent IFRS solution is released.

This compliance roadmap follows the Standard’s mandatory language: “shall” requirements must be met, and disclosures should be tailored to meet the objective in paragraph 27 (paras 27-29). Early coordination among accounting, tax, legal and audit teams is essential given the breadth of presentation and disclosure impacts, and the Standard’s group-level consolidation consequences (B23-B24).

AASB 14 - Regulatory Deferral Accounts - June 2014

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AASB 14 - Regulatory Deferral Accounts - June 2014

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1 AASB 14 - Regulatory Deferral Accounts - June 2014

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Penalties and enforcement

How it interacts with other laws

Amendment history

Litigation history

Gotchas

How to comply