What is a regulatory asset?

The regulatory asset is an asset that is owned by usefulness but is controlled or regulated by a government regulatory agency. In most cases, the agency grants the usefulness of the privilege to postpone the costs or income associated with the asset into the balance sheet of the company. This creates a situation in which the asset may not be published in a profit and loss statement and charged against income or expenditure for the period to which this statement applies. One of the advantages of this type of asset reporting is that businesses keep the asset in the balance sheet for as long as necessary. Only if the costs associated with asset incur or when recovery from customers who are relevant to the asset are realized is the value of the asset considered recognizable and recorded in the profit and loss statement. This creates a situation where value assets may not be considered to be income or tax purposes until there is actually any activity with this asset.

By recording the regulatory asset in the balance sheet of the company, there is no opportunity for the asset to be overlooked or omitted from the total accounting process. This asset remains somehow taken into account, which puts practice in accordance with generally recognized accounting principles, as they are understood in countries such as the United Kingdom, the United States and Canada. One of the practical advantages associated with reporting the regulatory asset in the balance sheet is that the items necessary to accurately declare from customers or costs related to asset, if and as they happen, are maintained at a minimum.

In nations where the regulatory asset can be transmitted by an instrument, most often by an electric or energy company, regulators Agency for this country determines criteria that must meet the asset to qualify for this type of liberation to the profit and loss statement. Since these criteria may differ slightly from one country to another, it is importantLive to cooperate with a regulatory agency where the company is established to ensure that any asset stated in this way adhere to all relevant regulations. If you do, it will help ensure that the accounting books are considered accurate and that the income that is reported for tax purposes is in line with the prevailing instructions.