ASC

ASC 250-980

Regulated Operations

250 Accounting Changes and Error Corrections

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In brief

IntermediateIndustry-specificPresentationDisclosureRecognition

This Subtopic applies the general accounting change and error correction rules of Topic 250 to entities with regulated operations that meet the criteria of paragraph 980-10-15-2 (so that costs designated for future recovery by the regulator are probable of recovery). Its core rule is that a change in accounting method that does not affect costs allowable for rate-making purposes is reported the same way an unregulated entity would report it, whereas a change that does affect allowable costs is generally implemented the way it is implemented for regulatory purposes. It also confirms that prior period adjustments are limited to error corrections and prior interim period adjustments of the current fiscal year, and that previously unaccrued estimated refunds are charged to income when the accrual criteria are first met.

Key points (7)
  • All guidance in this Subtopic assumes the entity meets the criteria in paragraph 980-10-15-2, so recovery of any cost designated for future recovery by the regulator is probable (250-980-55-1).
  • A change in accounting method that does not affect costs allowable for rate-making purposes is applied in the same manner as by an unregulated entity (250-980-55-3).
  • A change in accounting method that does affect allowable costs for rate-making purposes is generally implemented in the way it is implemented for regulatory purposes; changing between capitalization/amortization and expensing of research and development costs is cited as an example (250-980-55-3).
  • Paragraphs 250-10-45-25 through 45-26 limit prior period adjustments (other than those resulting from reporting accounting changes) to corrections of errors and adjustments related to prior interim periods of the current fiscal year (250-980-55-4).
  • Estimated refunds not previously accrued are charged to income in the first period in which they meet the accrual criteria of paragraph 450-20-25-2 (250-980-55-5).
  • If estimated refund amounts are material, the disclosures specified in paragraph 980-605-50-1 must be furnished (250-980-55-5).
  • The Subtopic follows the same scope and scope exceptions as Section 980-10-15 (250-980-15-1).

For students. The key exam trap is assuming regulated entities always follow Topic 250's retrospective-application default: they do only when the change does not affect rate-making allowable costs; if it does, the regulatory treatment generally drives the accounting. Remember this only works if the entity qualifies under 980-10-15-2.

regulated operationschange in accounting principleallowable costs for rate-makingprior period adjustmenterror correctionestimated refundsregulatory accountingresearch and development costs

Machine-generated study aid for ASC 250-980. Check the source paragraphs below.

250-980-00Status

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250-980-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
980-250-55-3AmendedAccounting Standards Update No. 2016-0202/25/2016

250-980-05Overview and Background

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250-980-05-1
This Subtopic provides guidance for accounting changes and error corrections for entities with regulated operations.

250-980-15Scope and Scope Exceptions

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Overall Guidance

250-980-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 980-10-15.

250-980-55Implementation Guidance and Illustrations

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Implementation Guidance

250-980-55-1
All of the following guidance assumes that the entity meets the criteria in paragraph 980-10-15-2; thus, recovery of any cost is probable if that cost is designated for future recovery by the regulator.
250-980-55-2
Topic 250 defines various types of accounting changes and establishes guidelines for reporting each type.
250-980-55-3
If a regulated entity changes accounting methods and the change does not affect costs that are allowable for rate-making purposes, the regulated entity would apply the change in the same manner as would an unregulated entity. If a regulated entity changes accounting methods and the change affects allowable costs for rate-making purposes, the change generally would be implemented in the way that it is implemented for regulatory purposes. A change in the method of accounting for research and development costs, either from a policy of capitalization and amortization to one of charging those costs to expense as incurred or vice versa, is an example of that type of change.
250-980-55-4
Paragraphs
250-10-45-25 through 45-26
limit prior period adjustments (other than those that result from reporting accounting changes) to corrections of errors and adjustments related to prior interim periods of the current fiscal year.
250-980-55-5
In accordance with Section 250-10-45, estimated refunds that were not previously accrued would be charged to income in the first period in which they meet the criteria for accrual (see paragraph 450-20-25-2). If the amounts are material, the disclosures specified in paragraph 980-605-50-1 should be furnished.

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