Many governments regulate the supply and pricing of particular types of activity by entities. These activities usually involve providing goods or services that are considered in that jurisdiction to be essential to customers, including transport services, some types of insurance policies, and utilities such as gas, electricity and water.
On 17 September 2014, the IASB published a Discussion Paper to identify what information about the financial effects of rate regulation is most relevant to users of financial statements in making investment and lending decisions and to determine how best to reflect that information in IFRS financial statements.
Rate regulation is widespread and some types of rate regulation significantly affect the economic environment of rate-regulated entities. Generally accepted accounting principles (GAAP) in some jurisdictions provide specific guidance on this matter, but there is no equivalent guidance in IFRS. Deciding whether and, if so, how IFRS should be amended to recognise the financial effects of rate regulation is therefore important.