Gasb 62 Asc 980 Misunderstanding the Intent

Regulatory accounting changes the timing of recognition of a transaction and its recovery in customer rates — not the underlying transaction itself. For example, deferring operating revenues in the current period and recognizing them in a later period doesn't change the nature of the revenue; it only changes when it hits the income statement. The goal is always to match recognition of an event to recovery from customers in their rates.

ASC 980 and GASB 62 are explicit: the oversight body of the organization must approve a recovery or recognition period for a regulatory asset or liability. The oversight body can be an independent Board, city council, or state or federal regulator. "Someday we'll collect this in rates" is not a valid application. A specific timeline is required.

While storm damage and major maintenance are frequent applications, these accounting standards can be used to recognize the difference between almost any transaction and its recognition in customer rates. Applications include pension obligations, mark-to-market adjustments, asset impairments, contributed capital, debt issuance costs, rate stabilization, and much more — dozens of potential applications exist.

Deferring revenues is actually one of the most beneficial uses of ASC 980/GASB 62. Saving revenues for a "rainy day" — a rate stabilization fund — benefits both the organization and ratepayers. One key to successful revenue deferral: ensure that cash reserves have been deposited in an amount at least equal to the amount deferred, to avoid cash flow issues from unfunded deferrals.

These standards can be used by any organization whose rates are approved by an independent oversight body — including electric cooperatives whose rates are set by their own Board of Directors, and municipal utilities whose rates are approved by a city council. FERC or state commission oversight is not required.