IFRS 14

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]

Objective and Scope

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]

Recognition and Measurement

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]

Financial Statement Structure

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

Net Movement and Income Statement

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]

Technical Nuances and Impairment

Impairment and Recoverability

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]

Interaction with IAS 12

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]

Future of the Standard

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]

References

1. IFRS 14 Regulatory Deferral Accounts, Issued January 2014, Paragraph IN1.
2. IFRS 14.1; IFRS 14.BC1.
3. "IFRS 14 — Regulatory Deferral Accounts". Deloitte IAS Plus. Retrieved 25 December 2025.
4. IFRS 14.1; IFRS 14 Appendix A (Defined terms).
5. IFRS 14.5; IFRS 14.BC11.
6. PwC (2024). Manual of Accounting: IFRS. Oxford University Press. ISBN   978-0198884354.
7. IFRS 14.7; IFRS 14.BC25.
8. IFRS 14.9.
9. EY (2024). Applying IFRS. John Wiley & Sons. ISBN   978-1394248544.
10. IFRS 14.20; IFRS 14.BC44.
11. IFRS 14.22.
12. KPMG (2023). "Insights into IFRS: Regulatory deferral accounts".
13. Grant Thornton (2022). "IFRS 14: An interim solution for rate-regulated entities".
14. IFRS 14.18; IAS 12 Income Taxes.
15. IFRS 14.BC1-BC2.
16. IASB Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities.