Question 1

Rate regulation refers to
A) The control over prices that an entity is allowed to charge its customers for goods and services.
B) The petition an entity makes to a regulatory body to get permission to provide goods and services to customers.
C) The oversight a regulatory body has on an entity's activities.
D) The body of law that governs granting business licenses.

Accepted Answer

Rate regulation involves controlling the prices that an entity can charge its customers for goods and services, typically to ensure fairness and prevent exploitation.

Question 2

Examples of costs the recognition of which rate-regulated entities may defer to future periods include all of the following EXCEPT:
A) volume or purchase price variances.
B) costs of approved green energy initiatives in excess of the amount to be capitalized as cost of PPE.
C) difference in the amount paid by customers for goods or services provided and the unregulated or market price for the goods or services.
D) non-directly attributable overhead costs included in the cost of PPE.

Accepted Answer

The correct answer is C because the difference in the amount paid by customers for goods or services provided and the unregulated or market price for the goods or services is not typically a cost that rate-regulated entities defer to future periods. This difference does not represent a cost incurred by the entity but rather a pricing discrepancy between regulated prices and market prices.

Question 3

The term, "rate regulator" refers to:
A) The inspector sent by a regulatory body to examine and report on the operations of an entity.
B) The members of a legislative body that enacts laws and regulations.
C) Civil employees who have oversight responsibility for fair trade.
D) An authorized body that is empowered by law to establish rates that bind an entity.

Accepted Answer

Rate regulators are authorized bodies empowered by law to establish rates for services or goods that entities must adhere to. This ensures that prices remain fair and competitive within the market.

Question 4

Which of the following statements is false concerning IFRS 14?
A) An entity following IFRS 14 must prepare comparative rate regulated financial statements.
B) An entity is allowed to voluntarily adopt IFRS 14.
C) The choice to follow IFRS 14 is an irrevocable election.
D) The choice to follow IFRS 14 must be made in an entity's first IFRS financial statements.

Accepted Answer

IFRS 14 does not require an entity to prepare comparative rate regulated financial statements. Entities are permitted, but not required, to present comparative information in accordance with IFRS 14.

Question 5

An entity that conducts rate-regulated activities can elect to use regulatory deferral accounting at any time in the entity's life as long as it is consistently applied.

Accepted Answer

According to IFRS 14, an entity can only apply regulatory deferral account balances if it is a first-time adopter of International Financial Reporting Standards (IFRS). This means it cannot elect to use regulatory deferral accounting at any time in its life; it is specifically related to the transition period to IFRS.

Question 6

IFRS is an interim (not final) standard.

Accepted Answer

IFRS is a final standard, not an interim one.

Question 7

Regulatory deferral account balances usually represent timing differences between the recognition of items of income or expenses for regulatory purposes and the recognition of those items for financial reporting purposes.

Accepted Answer

Regulatory deferral account balances are used by entities that are subject to rate regulation, allowing them to defer certain costs or revenues on their financial statements to match the timing of when those costs or revenues are recovered or charged to customers through regulated rates, thus representing timing differences between regulatory and financial reporting recognition.

Question 8

Existing IFRS preparers are not allowed to adopt this IFRS.

Accepted Answer

Existing IFRS preparers are not allowed to adopt this IFRS because it is a new standard that has not yet been incorporated into IFRS.

Question 9

Regulatory deferral account balances should not be presented as separate line items on the statement of financial position.

Accepted Answer

Regulatory deferral account balances can be presented as separate line items on the statement of financial position if they arise from rate-regulated activities and meet specific criteria outlined in accounting standards such as IFRS 14 Regulatory Deferral Accounts.

Question 10

Define "regulatory deferral account balance."

Accepted Answer

The answer of Define "regulatory deferral account balance."...

Question 11

What information does an entity that has adopted IFRS 14 need to disclose?

Accepted Answer

The answer of What information does an entity that has...

Quiz 35: Regulatory Deferral Accounts

Rate regulation refers to

Examples of costs the recognition of which rate-regulated entities may defer to future periods include all of the following EXCEPT:

The term, "rate regulator" refers to:

Which of the following statements is false concerning IFRS 14?