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IFRS 14, titled Regulatory Deferral Accounts, is an International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB) in January 2014.^[1] It is an interim standard designed to allow first-time adopters of IFRS to continue to recognize amounts related to rate regulation in accordance with their previous local accounting principles (Local GAAP).^[2]

According to Deloitte's technical analysis, the standard acts as a "bridge," allowing entities in jurisdictions like Canada or Brazil to avoid massive equity volatility during IFRS transition by "grandfathering" regulatory assets that represent future revenue.^[3]

The objective of IFRS 14 is to specify the financial reporting requirements for "regulatory deferral account balances" that arise when an entity provides goods or services at a price or rate subject to regulation by an authorized body.^[4]

The standard is strictly available only to first-time adopters of IFRS who:

1. Conduct rate-regulated activities; and
2. Recognized regulatory deferral account balances in their previous GAAP.^[5]

PwC emphasizes in its global manual that this is a "locked" election; if an entity has already issued IFRS financial statements without adopting IFRS 14, it is prohibited from "re-adopting" the standard to restore regulatory balances later.^[6]

IFRS 14 provides a specific exemption from IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.^[7] Under the standard, an entity continues to apply its previous GAAP accounting policies for the recognition, measurement, impairment, and derecognition of these balances.^[8]

EY technical guidance notes that while the measurement is "grandfathered," any subsequent change in accounting policy must be justified under the "more relevant and no less reliable" criteria of IAS 8.10.^[9]

To prevent these specialized balances from "blurring" the standard IFRS figures, IFRS 14 requires a rigorous segregation of the data.^[10]

Total Assets = Standard IFRS Assets + Total Regulatory Deferral Account Debit Balances Total Liabilities = Standard IFRS Liabilities + Total Regulatory Deferral Account Credit Balances

The net movement in these balances must be presented separately in the statement of profit or loss and other comprehensive income.^[11]

KPMG highlights that this presentation requires the entity to present "Profit or Loss before net movement in regulatory deferral account balances" as a distinct sub-total, ensuring the "commercial" profit is clearly visible to investors apart from the regulatory adjustments.^[12]

Although measurement follows local GAAP, any regulatory deferral account asset must be tested for recoverability. Grant Thornton advises that if a regulatory authority issues a "disallowance" (a ruling that a cost cannot be recovered from customers), the asset must be impaired immediately under IFRS 14.^[13]

Tax effects arising from regulatory balances must be recognized. As a regulatory asset is recovered, it often creates a taxable temporary difference, necessitating a corresponding Deferred tax liability under IAS 12.^[14]

The IASB has explicitly labeled IFRS 14 as "interim" while it completes its permanent Rate-regulated Activities project.^[15] The 2021 Exposure Draft proposes a new model that would require all entities (not just first-time adopters) to recognize "regulatory assets" and "regulatory liabilities," potentially making IFRS 14 obsolete.^[16]