The International Accounting Standards Board (IASB) has published an interim standard, IFRS 14, Regulatory Deferral Accounts, which is intended to allow entities that are first-time adopters of IFRS, and that currently recognise regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition to IFRS.

IASB says the aim of the interim standard is to enhance the comparability of financial reporting by entities that are engaged in rate-regulated activities in industry sectors such as gas, electricity and water where rate regulation can have a significant impact on the timing and amount of an entity's revenue.

IFRS does not provide any specific guidance for rate-regulated activities. The IASB has a project to consider the broad issues of rate regulation and plans to publish a discussion paper on this subject in 2014, and IFRS 14 is an interim measure pending the outcome of this work.

IFRS 14 permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. An entity that already presents IFRS financial statements is not eligible to apply the standard.

Ian Mackintosh, IASB vice-chairman, said: 'Many different rate-regulatory models are in use around the world. While we are concerned to complete our work in this important area of accounting as expeditiously as possible it is likely to take some time. These interim measures will go some way towards enhancing the comparability of financial reporting by entities with rate-regulated activities until the IASB's comprehensive Rate-regulated Activities project is completed.'

The standard can be applied in an entity's first annual IFRS financial statements for periods beginning on or after 1 January 2016. Earlier application is permitted, and use of the standard is voluntary. However, an entity that elects to apply the standard in its first IFRS financial statements continues to apply it in all its subsequent financial statements.