The Financial Reporting Council (FRC) has issued a strongly worded statement opposing the International Accounting Standards Board's (IASB's) proposed interim standard covering rate regulation.

Responding to exposure draft, ED2013/5 Regulatory Deferral Accounts, the FRC said the proposals did not provide a level playing field for all users of IFRS and could disadvantage those jurisdictions that already use IFRS.

The FRC says the standard is not principles-based, and that the IASB should start by determining whether regulatory deferral account balances are assets and liabilities in accordance with the conceptual framework. If they are not, then the FRC says the IASB should be wary of including them in financial statements. >

The regulator also has concerns that as different jurisdictions will be permitted to carry forward previous practices, the result could be two or more versions of IASB-sanctioned IFRS, rather than a single standard. Since users will need to determine whether financial statements have applied existing IFRS or an 'alternative' form of IFRS, this would erode confidence in the financial statements themselves and the quality of accounting standards.

The FRC maintains that the effects of the proposed interim standard are likely to be more wide-ranging and last longer than existing transitional arrangements found in IFRS 1, i>First-time Adoption of International Financial Reporting Standards. This is because completion of the conceptual framework project may be necessary before a comprehensive review of rate regulation can resolve the question of whether regulatory deferral account balances are assets or liabilities.

Despite its opposition FRC says it accepts that the standard will be developed into an IFRS.