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As the project progresses, EFRAG believes the IASB will need to consider in which circumstances an entity’s right to recover an agreed amount of revenue and obligations to perform certain activities creates enforceable rights and obligations that should be recognised in financial statements. Whilst EFRAG broadly supports the description of 'defined rate regulation', EFRAG believes that any enforceable rights and obligations that stem from the rate-regulation mechanism are the most important elements for distinguishing the types of rate regulation that require recognition in the financial statements.
In EFRAG´s view, the other features listed in the DP should be used as 'indicators' to assess whether an entity operates within 'defined rate regulation'.
The IASB may also need to consider whether it should widen the scope of a potential future Standard to require disclosures of the effects of rate regulation other than those where assets and liabilities are recognised.
EFRAG generally supports the accounting approach in the DP that considers deferring or accelerating the recognition of a combination of costs and revenue. EFRAG believes that the 'revenue approach' has an important role to play when an entity has ‘performed’ to its customers. EFRAG remains open to the 'cost deferral approach' described in the DP, and recommends the IASB to explore in more detail cases where it might produce relevant information.
Responses to the draft comment letter are requested by 31 December 2014.