Regulatory Deferral Accounts – Hong Kong

On 30 January 2014, the International Accounting Standards Board (IASB) published IFRS 14 Regulatory Deferral Accounts. IFRS 14 is an interim standard, pending the outcome of the IASB’s more comprehensive Rate-regulated Activities project, which was re-opened in September 2012.

In many countries, industry sectors (including utilities such as gas, electricity and water) are subject to rate regulation where governments regulate the supply and pricing. This can have a significant effect on the amount and timing of an entity’s revenue. Some national GAAPs require entities, that operate in industry sectors subject to rate regulation, to recognise associated assets and liabilities.

The scope of IFRS 14 is narrow, with this extending to cover only those entities that:

  • Are first-time adopters of IFRS; 
  • Conduct rate regulated activities; and 
  • Recognise associated assets and/or liabilities in accordance with their previous local GAAP 
  • (before adopting IFRS). 

Entities within the scope of IFRS 14 would be afforded an option to apply their previous GAAP accounting policies for the recognition, measurement and impairment of assets and liabilities arising from rate regulation, which would be termed regulatory deferral account balances.


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