# ASC 340-980: Other Assets and Deferred Costs — Regulated Operations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/980/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-10T00:00:06.441Z Record version: sha256:8f6ef81835a30563fbc1007859fb3d0a91b64bde56bf1c91fffec9b3427c7d72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980: Other Assets and Deferred Costs — Regulated Operations ### Machine-generated study aids ```json { "summary": "This subtopic governs when a rate-regulated entity may capitalize incurred costs as regulatory assets (deferred costs) and, in particular, how to account for phase-in plans — rate-making arrangements that defer part of the rate increase caused by placing a newly completed plant in service in order to avoid a \"rate spike.\" A cost is capitalized only if it is probable that future revenue at least equal to the cost will result from including it in allowable costs and that revenue is intended to recover the previously incurred cost rather than fund similar future costs (980-340-25-1). Amounts deferred under a phase-in plan may be capitalized only for plants completed or substantially constructed before January 1, 1988, and only if the plan meets four strict criteria (980-340-25-3).", "key_points": [ "An incurred cost that would otherwise be expensed is capitalized as a regulatory asset only if (a) it is probable (Topic 450) that future revenue at least equal to the cost will result from its inclusion in allowable costs and (b) the revenue is provided to recover the previously incurred cost rather than to fund expected similar future costs (980-340-25-1); a cost failing these criteria is recognized later when they are met, and is charged to earnings if it ceases to meet them (980-340-40-1).", "For a phase-in plan on a plant with no substantial physical construction before January 1, 1988, none of the allowable costs deferred by the regulator may be capitalized for financial reporting (980-340-25-2).", "For plants completed or substantially constructed before January 1, 1988, all deferred allowable costs are capitalized as a separate deferred charge only if all four criteria are met: a formal plan agreed to by the regulator, specified timing of recovery, recovery of all deferrals within 10 years of when deferrals begin, and scheduled percentage rate increases that do not grow year over year (980-340-25-3); failing any one criterion, none may be capitalized.", "An allowance for earnings on shareholders' investment is not an incurred cost that would otherwise be charged to expense and cannot be capitalized under 980-340-25-1; it may be capitalized only during construction or as part of a qualifying phase-in plan (980-340-25-5 through 25-6).", "A regulator's exclusion of a cost from allowable costs reduces the carrying amount of the related regulatory asset by the excluded amount, other assets being tested under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 (980-340-35-1); later allowance of previously excluded costs creates a new asset (980-340-35-2), and an indirect disallowance embedded in a phase-in plan is accounted for under Section 980-360-35 (980-340-35-4).", "Cumulative amounts capitalized under phase-in plans are reported as a separate balance sheet asset, and the net amount capitalized or recovered each period is reported as a separate item of other income or expense, not as a reduction of other expenses (980-340-45-1).", "Disclosure is required of the terms of all phase-in plans (including net amounts deferred for rate-making purposes under nonqualifying plans), of major costs recovered without a return on investment during the recovery period, and of any allowance for earnings on shareholders' investment capitalized for rate-making but not for financial reporting (980-340-50-1 through 50-3)." ], "categories": [ "Recognition", "Subsequent measurement", "Industry-specific", "Disclosure" ], "audience_level": "advanced", "student_note": "Regulated utilities are the classic exception to the rule that costs are expensed when incurred — a regulator's rate action can itself create an asset. The most common misunderstanding is assuming any regulator-ordered deferral can be capitalized: deferrals under phase-in plans for post-1988 plants are never capitalized for GAAP (only disclosed), and an allowance for earnings on shareholders' investment is never capitalized outside construction or a qualifying phase-in plan.", "related_topics": [ "980-10", "980-360", "980-835", "360-10", "450", "842-40" ], "key_concepts": [ "regulatory asset", "phase-in plan", "allowable costs", "rate spike", "allowance for earnings on shareholders' investment", "disallowance of plant costs", "regulatory lag", "mirror construction work in progress" ] } ``` Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-09T23:59:39.238Z Record version: sha256:207bbb8541473e1326f6958d391ba731f12ee183e98ee629514830616eba9e84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/980/#00-status) SEC content: no ##### [340-980-00-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-09T23:59:39.238Z Record version: sha256:cffcb148d6d8203901590f083308bea078c8ed42ebd782ec3dc165550a266ede Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
980-340-25-4AmendedAccounting Standards Update No. 2016-0202/25/2016
980-340-55-9 through 55-11
AmendedAccounting Standards Update No. 2016-0202/25/2016
980-340-55-13 through 55-17
AmendedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:6501674c8ff8906cb4890de8f77d2bd70c07b85874275c2fefc4567656094c6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/980/#05-overview-and-background) SEC content: no ##### [340-980-05-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:29931d9c4af30ec4e4c3e637d45fbdad6cedb254aee72d89157a02a4201b6340 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for deferred costs for entities with regulated operations, including [phase-in plans](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity."). #### Phase-In Plans ##### [340-980-05-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:bde46a5b9a67b19034e47c0aeb1b3ec7985723318d7dd00c9049dc01e12edbdc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a utility places a newly completed plant in service, traditional rate-making procedures establish rates to recover the [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") of that plant. A combination of circumstances can cause traditional rate-making procedures to result in a phenomenon called rate spike, which is a major, one-time increase in rates that can result from the inclusion of the cost of new plants in rates under traditional rate-making procedures. ##### [340-980-05-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:160ced30ad036066e1c6d30a63b9f71aac55b45b99c8da5bcde979d32ec20a0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Phase-in plans were developed to alleviate the problem of rate spike. Those plans are intended to moderate the initial increase in rates that would otherwise result from placing newly completed plants in service by deferring some of that rate increase to future years and providing the utility with return on investment for those deferred amounts. Instead of the traditional pattern of an increase in allowable costs followed by decreasing allowable costs for utility plants after the plants are placed in service, phase-in plans create a pattern of gradually increasing allowable costs for the initial years of the plant's service life. Source downloaded (UTC): 2026-09-09T23:59:46.985Z to 2026-09-09T23:59:46.985Z Record version: sha256:af231b867dee6af79db0757ef732043cbf6f78426fd5f22188ee3f8cf94e7ac4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/980/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-980-15-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:46.985Z to 2026-09-09T23:59:46.985Z Record version: sha256:5f9647448b8b603b9d6b3e3dcfc2d591d4a570ee1ab3faf8e67b52a844f07e34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 980-10-15. Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:177f82a3f18420a0c3ed5df5278b3d3f3975fb8872376ffbb843681ccad5b022 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/980/#25-recognition) SEC content: no #### Effects of Regulation ##### [340-980-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:df3ae5a1e4c58f06af8ace762dc99cda3537e7d5efce7149bb35075d43df14dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Rate actions of a regulator can provide reasonable assurance of the existence of an asset. An entity shall [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") all or part of an [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") that would otherwise be charged to expense if both of the following criteria are met: 1. a It is probable (as defined in Topic 450) that future revenue in an amount at least equal to the capitalized cost will result from inclusion of that cost in [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") for rate-making purposes. 2. b Based on available evidence, the future revenue will be provided to permit recovery of the previously incurred cost rather than to provide for expected levels of similar future costs. If the revenue will be provided through an automatic rate-adjustment clause, this criterion requires that the regulator's intent clearly be to permit recovery of the previously incurred cost. A cost that does not meet these asset recognition criteria at the date the cost is incurred shall be recognized as a regulatory asset when it does meet those criteria at a later date. ##### [340-980-25-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:49bba16b0d774755e83fdbe2bf342493a7f5bafb9b85fdbd4d42d081430deb3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") is ordered by a regulator in connection with a plant on which no substantial physical construction had been performed before January 1, 1988, none of the allowable costs that are deferred for future recovery by the regulator under the plan for rate-making purposes shall be capitalized for general-purpose financial reporting purposes (hereinafter referred to as financial reporting). Allowable costs that are deferred for future recovery by the regulator under the plan consist of all allowable costs deferred for rate-making purposes under the plan beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. ##### [340-980-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:d836d6e3b3a9bc5aba3414f7c8c6b1408110298d9ecb348dbca639122a89ec98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a phase-in plan is ordered by a regulator in connection with a plant completed before January 1, 1988, or a plant on which substantial physical construction had been performed before January 1, 1988, the following criteria shall be applied to that plan. If the phase-in plan meets all of those criteria, all allowable costs that are deferred for future recovery by the regulator under the plan shall be capitalized for financial reporting as a separate asset (a deferred charge). If any one of those criteria is not met, none of the allowable costs that are deferred for future recovery by the regulator under the plan shall be capitalized for financial reporting. The criteria to determine whether capitalization is appropriate are: 1. a The allowable costs in question are deferred pursuant to a formal plan that has been agreed to by the regulator. 2. b The plan specifies the timing of recovery of all allowable costs that will be deferred under the plan. 3. c All allowable costs deferred under the plan are scheduled for recovery within 10 years of the date when deferrals begin. 4. d The percentage increase in rates scheduled under the plan for each future year is no greater than the percentage increase in rates scheduled under the plan for each immediately preceding year. That is, the scheduled percentage increase in Year 2 is no greater than the percentage increase granted in Year 1, the scheduled percentage increase in Year 3 is no greater than the scheduled percentage increase in Year 2, and so forth. ##### [340-980-25-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:209bb496040e7a65596e6f7a913c2926a18fc0e224eb693aabe1d10b9e7f50f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Examples illustrate various circumstances that may or may not constitute phase-in plans: 1. a Example 1 (see paragraph [980-340-55-9](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-9)) illustrates a sale with leaseback as a finance lease. 2. b Example 2 (see paragraph [980-340-55-12](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-12)) illustrates a sale with leaseback as an operating lease. 3. c Example 3 (see paragraph [980-340-55-15](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-15)) illustrates a sale with leaseback with profit recognition accelerated. 4. d Example 4 (see paragraph [980-340-55-18](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-18)) illustrates the modified depreciation method. 5. e Example 5 (see paragraph [980-340-55-21](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-21)) illustrates deferred costs before a rate order is issued. 6. f Example 7 (see paragraph [980-340-55-39](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-39)) illustrates a phase-in plan for two plants completed at different times that share common facilities. ##### [340-980-25-5](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:aa74037f08c69d7334e2579e6671ce24a4ced037d99478526d2f239f96b8152b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If specified criteria are met, paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) requires capitalization of an incurred cost that would otherwise be charged to expense. An allowance for earnings on shareholders' investment is not an incurred cost that would otherwise be charged to expense. Accordingly, such an allowance shall not be capitalized pursuant to that paragraph. The phrase _an allowance for earnings on shareholders' investment_, as used in this Subtopic, is intended to have the same meaning as the phrase _a designated cost of equity funds_, used in paragraph [980-835-30-1](https://asc.understandingaccounting.org/asc/835/980/#835-980-30-1) , which, in specified circumstances, requires capitalization of an allowance for earnings on shareholders' investment (a designated cost of equity funds) during construction. ##### [340-980-25-6](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:72e1daa50669e0639697f45625d7c538bda66daa8d4c204c71b33fa633760a42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) require capitalization of an allowance for earnings on shareholders' investment for qualifying phase-in plans. If an allowance for earnings on shareholders' investment is capitalized for rate-making purposes other than during construction or as part of a phase-in plan, the amount capitalized for rate-making purposes shall not be capitalized for financial reporting. For the requirement to accrue a carrying charge related to the expected recovery of the investment in abandoned assets, see paragraph [980-360-35-7](https://asc.understandingaccounting.org/asc/360/980/#360-980-35-7). Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:6aa0a8af44014f89295ad4801edd4fea3fab6771d613c17348d276cc111210e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/980/#35-subsequent-measurement) SEC content: no #### Effect of Rate Action on Asset Value ##### [340-980-35-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:e83d5460fbabb39a178fdad9264ed2e79d41519a0318a7cd427982eb74178593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Rate actions of a regulator can reduce or eliminate the value of an asset. If a regulator excludes all or part of a cost from [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments."), the carrying amount of any asset recognized pursuant to paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) shall be reduced to the extent of the excluded cost. Whether other assets have been impaired shall be judged the same as for entities in general and the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 shall apply. ##### [340-980-35-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:2f00875ddafcb35c6cc63e92a4220d554a43c65b4b68f5021f6da9e9f30c6b50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a regulator allows recovery through rates of costs previously excluded from allowable costs, that action shall result in recognition of a new asset. The classification of that asset shall be consistent with the classification that would have resulted had those costs been initially included in allowable costs. #### Phase-In Plans ##### [340-980-35-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:8d76e94cb43529e4682436ce36a868699c9a83541b638a37792586cf87dfc6bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an existing [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") is modified or a new plan is ordered to replace or supplement an existing plan, the criteria in paragraph [980-340-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) shall be applied to the combination of the original plan and the new plan. The date when deferrals begin, used in applying the criterion in paragraph [980-340-25-3(c)](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3), would be the date of the earliest deferral under either the new or the old plan, and the final recovery date would be the date of the last recovery of all amounts deferred under the plans. ##### [340-980-35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:3a1726ed910791a9cedce1ca0c06260c1fa37981f96f4f279f5793520bd797d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A phase-in plan is a method of rate-making intended to moderate a sudden increase in rates while providing the regulated entity with recovery of its investment and a return on that investment during the recovery period. A disallowance is a rate-making action that prevents the regulated entity from recovering either some amount of its investment or some amount of return on its investment. Section 980-360-35 specifies the accounting for disallowances of plant costs. If a method of rate-making that meets the criteria of this Subtopic for a phase-in plan includes an indirect disallowance of plant costs, that disallowance shall be accounted for in accordance with that Section. Example 6 (see paragraph [980-340-55-33](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-33)) illustrates a phase-in plan with an indirect disallowance. Source downloaded (UTC): 2026-09-09T23:59:56.623Z to 2026-09-09T23:59:56.623Z Record version: sha256:8899c196b6a66ca75baf1fc6761fa01ebb376db339f8994dfbf956c17bb34249 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/340/980/#40-derecognition) SEC content: no ##### [340-980-40-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-40-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:56.623Z to 2026-09-09T23:59:56.623Z Record version: sha256:2ac54035078b1958a0a955d39fc8f8f736ac1c16bc4882c81571c717ec15a592 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If at any time an entity's [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") no longer meets the criteria for the capitalization of an incurred cost (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)), that cost shall be charged to earnings. Source downloaded (UTC): 2026-09-09T23:59:59.282Z to 2026-09-09T23:59:59.282Z Record version: sha256:4df2656036b005de96f20a5c730d38fb35acb220d240a691e7eec47ac8bf670f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/980/#45-other-presentation-matters) SEC content: no #### Phase-In Plans ##### [340-980-45-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:59.282Z to 2026-09-09T23:59:59.282Z Record version: sha256:e67c8e0aafbb3920907f249c53d0bd3c383d83f0ce8b197fa3955cb645b9af0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cumulative amounts capitalized under phase-in plans shall be reported as a separate asset in the balance sheet. The net amount capitalized in each period or the net amount of previously capitalized [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") recovered during each period shall be reported as a separate item of other income or expense in the income statement. Allowable costs capitalized shall not be reported as reductions of other expenses. Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:dcf07da05fc4bec9898e067ea1085c746bd1b5bc4527c648a7a8cd7213eaf1c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/980/#50-disclosure) SEC content: no #### Recovery of Cost Without Return on Investment ##### [340-980-50-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:259cc5a858969a9cec0ba0a6a275d346cf50be4490ea9d10941d9a54f830c463 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, a regulator may permit an entity to include a cost that would be charged to expense by an unregulated entity as an allowable cost over a period of time by amortizing that cost for rate-making purposes, but the regulator does not include the unrecovered amount in the rate base. That procedure does not provide a return on investment during the recovery period. If recovery of such major costs is provided without a return on investment during the recovery period, the entity shall disclose the remaining amounts of such assets and the remaining recovery period applicable to them. #### Phase-In Plans ##### [340-980-50-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:0bb86885549d42ec3b8b8b2e98ed901309f2cd0f6d1aa7fb76268d9d60c5b3e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The terms of any phase-in plans in effect during the year or ordered for future years shall be disclosed. This Subtopic does not permit capitalization for financial reporting of [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") deferred for future recovery by the regulator pursuant to a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") that does not meet the criteria of paragraph [980-340-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) or a phase-in plan related to a plant on which substantial physical construction was not completed before January 1, 1988. Nevertheless, the financial statements shall include disclosure of the net amount deferred at the balance sheet date for rate-making purposes and the net change in deferrals for rate-making purposes during the year for those plans. #### Allowance for Earnings on Shareholders' Investment Capitalized for Rate-Making Purposes ##### [340-980-50-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:470c28ea57a950ac61f6b06a9534576705c2b37e837125218b748a57a9cb8eb1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature and amounts of any allowance for earnings on shareholders' investment capitalized for rate-making purposes but not capitalized for financial reporting shall be disclosed. Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5f21fee432f3310b2e878145c1caf89d6e27d9c25b9680beaa02fbf4328cd729 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/980/#55-implementation-guidance-and-illustrations) SEC content: no ##### [340-980-55-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:a61ee0d943735aa751e0c9ed4d34840f13a39ccddcb81b9f8847cd9c82c053ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance for application of this Subtopic to some specific situations, but does not address all possible applications of this Subtopic. All of the implementation guidance and illustrations assume that the entity meets the criteria in paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2); thus, recovery of any cost is probable if that cost is designated for future recovery by the regulator. #### Implementation Guidance ##### [340-980-55-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f65c66b04bf236732d8dc7ddad610341af7c050eb9d81d67e567530485be1864 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, a regulator may approve rates that are intended to recover an [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") over an extended period without a return on the unrecovered cost during the recovery period. ##### [340-980-55-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0d37545aa1f2c4d6b7a9ac3a1ac5fbb613e817964811bd4fcbb32ba5afd71b80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The regulator's action provides reasonable assurance of the existence of an asset (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)). Accordingly, the regulated entity would [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") the cost and amortize it over the period during which it will be allowed for rate-making purposes. That cost would not be recorded at discounted present value. An exception to this general rule is provided for costs of abandoned plants. See Example 1 (paragraph [980-360-55-2](https://asc.understandingaccounting.org/asc/360/980/#360-980-55-2)) for an illustration of accounting for future revenues expected to result from the cost of an abandoned plant. If the amounts are material, the disclosures specified in paragraph [980-340-50-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-1) would be furnished. ##### [340-980-55-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:209d41734e9ecc16d159f0fb04090cbf7e4ed21ef3598f19ca03e76ea7e7c632 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mirror construction work in progress is one means of moderating the sudden, one-time increase in rates that would otherwise result from placing a newly completed utility plant in service. Under mirror construction work in progress, increasing amounts of construction work in progress are included in the current rate base in the periods before the plant goes into service, providing the utility with a current return on a portion of its investment in construction while the construction proceeds. After the plant is placed in service, a decreasing amount of plant-in-service is excluded from the rate base each year, mirroring the pattern in which the construction was included in the rate base. The result of this procedure is to increase rates while the plant is under construction and to reduce the increase in rates in the initial years of the plant's service life. ##### [340-980-55-5](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:78c12ef5a3a57c2f21790e444566c1d0ef0d0d7c6818424406827f04b646942f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For rate-making purposes, no [allowance for funds used during construction](https://asc.understandingaccounting.org/glossary/a/#allowance-for-funds-used-during-construction "The cost of financing construction as financed partially by borrowings and partially by equity, capitalized as part of the cost of plant and equipment pursuant to requirements of the regulator.") is recognized on the portion of the construction that is included in the rate base while the asset is under construction, and an allowance for funds used during construction is recognized on the portion of the plant-in-service that is subsequently excluded from the rate base after the plant is placed in service. The same total amount is capitalized as if no construction had been included in the current rate base. ##### [340-980-55-6](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:838a9a1cdb2c939800d9cfb56f8f0d3ef1c57c77742141b1dba10244cafcd38c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The mirror construction work in progress arrangement described is not a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") under the definition used in this Subtopic because it does not defer recovery of costs that would not have been deferred under the methods of rate making used prior to 1982. Rather, it effectively provides a temporary loan from customers to the utility during construction and requires repayment of that loan after the plant is placed in service. ##### [340-980-55-7](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6f59294a76801a97ea8109dc886d5a841d1c3061adf98f455422057bbd01ade0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the arrangement is known to be a mirror construction work in progress arrangement at the time of the construction (for example, if that arrangement is required by law or has been specifically ordered by the regulator), an allowance for funds used during construction should be accrued on the total cumulative construction cost in each period for financial reporting. The revenue collected as a result of inclusion of construction in the current rate base should be recorded as a liability to customers, with disclosure of the approximate timing of the repayment that will be required under the mirror construction work in progress arrangement. ##### [340-980-55-8](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:d306b3d298c33b1e97abfed9451272ab2026213b73039c99b4247a653a968651 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the arrangement is not known to be a mirror construction work in progress arrangement when the construction is included in the rate base but the regulator later orders a mirror construction work in progress arrangement, the accounting described in the preceding paragraph should be implemented as soon as the nature of the arrangement becomes known. That will require an adjustment for the cumulative effect of the arrangement to date. An amount should be capitalized, with a corresponding accrual of an allowance for funds used during construction, when the mirror construction work in progress arrangement becomes known. Current revenues should be reduced by an equal amount, and a corresponding liability to customers should be recognized. That amount should be the amount that would have been capitalized if the arrangement had been known to be a mirror construction work in progress arrangement when the revenue was collected during construction. That capitalized amount should be reported in the year in which the mirror construction work in progress arrangement becomes known in the same manner as if it had been capitalized during construction. #### Illustrations ##### [340-980-55-9](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:4b3d066e2d3742c959c04d548fec6203e3b7f3d87fdd2a07b6e628c8d13b4029 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-10](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:31edf151fd9439084780976b512adbee68fdc5fb583f6ab8a9b074d9f07f8830 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility B sells its interest in a newly completed electric generating plant for an amount equal to its cost and leases that interest back under a lease that requires equal annual payments. The arrangement would not qualify for sale and leaseback accounting in accordance with Subtopic 842-40 because the leaseback would be classified as a finance lease. However, the arrangement previously qualified as a sale and a capital leaseback in accordance with Subtopic 840-40 before the effective date of Topic 842. Therefore, Utility B continues to account for the arrangement as a sale and a leaseback. Utility B's regulator includes the lease rentals in allowable cost as they accrue. In the past, Utility B's regulator has treated other leases entered into by Utility B in the same manner, but those leases were for much less significant items of equipment—not for an interest in an electric generating plant. ##### [340-980-55-11](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:439c834c96bc1a22dd2e4bdcadddb3b635125f26f6216a739b80e7b1a03d7ef2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method described is a phase-in plan under the definition in this Subtopic. Generally accepted accounting principles (GAAP) applicable to entities in general require a finance lease to be accounted for much like a purchase of the underlying asset. The resulting expense related to the lease consists of interest on the remaining lease obligation and depreciation based on the method used for similar owned assets. In the early years of a lease, the lease rentals included in allowable cost as they accrue are significantly less than the sum of interest on the lease obligation and depreciation on the leased asset. Thus, significant deferrals will result. The method also defers recognition of expenses compared with the methods of expense recognition used by Utility B's regulator for similar assets of Utility B prior to 1982 because Utility B's interests in electric generating plants were included in [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") in the past based on current provisions for depreciation and for the cost of capital invested in the plants. The use of this rate-making method in the past for leases of equipment does not change this conclusion. The definition is based on the method of rate-making used prior to 1982 for similar allowable costs. Similar allowable costs would be those resulting from electric generating plants. ##### [340-980-55-12](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:91e646cc0eb17852de5999ab019c21f045a6ac003560b24ca4a944977eb347f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-13](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5d5941aa4b6a68e685e8e9b3d2a5a1536c9dd591fc3374797909d111f5169a3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility C sells its interest in a newly completed electric generating plant for an amount equal to its cost and leases that interest back under a lease that requires equal annual payments. The arrangement qualifies as a sale and a leaseback in accordance with Subtopic 842-20. The leaseback is classified as an operating lease. Utility C's regulator includes the lease payments in allowable cost as they accrue. In the past, Utility C's regulator has treated other leases entered into by Utility C in the same manner, but those leases were not for an interest in an electric generating plant. ##### [340-980-55-14](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:664337ea280e125603cbdc13db3f4134d65eece07417b2738123438416a2f4c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method applied to Utility C is not a phase-in plan under the definition in this Subtopic because it recognizes lease expense for rate-making purposes in the same way as that expense would be recognized for entities in general for this type of lease. ##### [340-980-55-15](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:21e4a1088e834bb87f8c7a8277f257a9fe59def46de576d2dc53246a07f41df2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-16](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:03cd832fb543a7e6f12c4299904c5fc1b74c07839c3c76a4ca500a2699c71d04 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility D sells its interest in a 5-year-old electric generating plant for an amount that exceeds its undepreciated cost by $500,000 and leases that interest back. The leaseback term is 20 years, and there are no renewal options. The arrangement would not qualify for sale and leaseback accounting in accordance with Subtopic 842-40 because the leaseback would be classified as a finance lease. However, the arrangement previously qualified as a sale and a capital leaseback in accordance with Subtopic 840-40 before the effective date of Topic 842. Therefore, Utility D continues to account for the arrangement as a sale and a leaseback. Utility D's regulator includes the lease payments in allowable cost as they accrue and orders Utility D to amortize the profit, for rate-making purposes, over 10 years. The sale occurred at a time when Utility D was about to place a newly completed plant in service. Utility D has not had any similar transactions in the past. ##### [340-980-55-17](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:556080aa0f1205c985f09411726d463defe1c3fcbc46774fa699eb481931f321 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method described is a phase-in plan under the definition in this Subtopic. GAAP applicable to entities in general at the time of entering into this arrangement required a profit on a sale and leaseback transaction to be amortized over the term of the leaseback. Amortization of that profit, for rate-making purposes, over 10 years when GAAP applicable to entities in general at that time required amortization over the 20-year leaseback term is equivalent to a deferral of allowable costs. In view of the timing of the rate order on the sale and leaseback transaction, the presumption is that the order was issued in connection with the newly completed plant. The method cannot be compared with methods in use prior to 1982 because Utility D has had no previous transactions of this type. ##### [340-980-55-18](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0a675726b46d03b4557c220727fefb26c62e33feb767725a40f77111c3931ab4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-19](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:1bc44d2bb13ccf0bcbd4eeeba27d87b10da2bd9cb318f741ff8ca88cf3830cd6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility E's regulator orders it to depreciate its new electric generating plant, for rate-making purposes, by using an annuity method. Under the method ordered, depreciation increases each year so that the total of depreciation and return on investment stays approximately level over the life of the plant. In the past, Utility E's regulator required the use of straight-line depreciation for electric generating plants. ##### [340-980-55-20](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6d429a89bb18c439c5ade1e711b355047faf38d8cd5f49c09e6a39a6392cabd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method applied to Utility E is a phase-in plan under the definition in this Subtopic because it meets both of the following conditions: 1. a It defers depreciation expense compared with the depreciation methods that are acceptable under GAAP applicable to entities in general (as indicated in paragraph [360-10-35-10](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-10), annuity methods of depreciation are not acceptable under GAAP applicable to entities in general). 2. b It defers depreciation expense compared with the method of depreciation used by Utility E's regulator for Utility E's electric generating plants prior to 1982. ##### [340-980-55-21](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5d5612108b05a0b1385054b4b76497121496d96650aec68e5a54494cfe3a1e8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) and [980-340-35-3 through 35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-3) related to the deferral of costs before a rate order is issued when: 1. a Utility F has deferred costs before a rate order is issued (Case A). 2. b Utility F has deferred costs before a rate order is issued and has subsequent interaction with a disallowance (Case B). 3. c Utility G has deferred costs before a rate order is issued and has interaction with a subsequent phase-in plan (Case C). ##### [340-980-55-22](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f52ee6d173d05a8b59fd6c0f6cbd2fb7c518503cc19acfec857230152d962bc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C share all of the assumptions described in the following paragraph. ##### [340-980-55-23](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:985731230b969a1e4cfb290c86eb6991bbaa2ba398298bb2044f90f31a55fac1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility F completes construction of a nuclear generating plant and places that plant in service. Utility F's regulator decides that it will complete its examination of the prudence of Utility F's construction cost before rates are adjusted to reflect the cost of operating the plant. During the examination and until rates are adjusted, the regulator orders Utility F to capitalize its net cost of operating the plant (operating costs, depreciation, allocable interest cost, and an allowance for earnings on shareholders' investment, all net of savings that result from operation of the new plant). ##### [340-980-55-24](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6e335be772d792c2e4e65d88cf263b88801266e9a6e5f44dbe8b4b053a81ea8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The resulting deferral is not a phase-in plan under the definition in this Subtopic. The regulator's order to capitalize an amount pending completion of a rate hearing is designed to protect the utility from the effects of regulatory lag in the absence of a rate order—a routine procedure on the part of regulators. Regulatory lag is the delay between a change in a regulated entity's costs and a change in rates ordered by a regulator as a result of that change in costs. A shortfall in a utility's net income can occur when regulators set rates prospectively and the estimated or test-period costs on which those rates were based are less than the actual costs that are incurred during the period covered by those rates. Regulators' actions that are designed to protect a utility from the effects of regulatory lag can occur during a rate case but before a rate order is issued, as in this Case, and when no rate case is under active consideration. An accounting order to a utility to capitalize the cost of repairing storm damage would be an example of the latter situation. Those actions can also be a part of a rate order. An example of that type of action would be a fuel adjustment clause that is intended to protect the utility from the effects of unanticipated changes in fuel costs. ##### [340-980-55-25](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6f4053382f72317ab3bc85715565371e056eb7db734a33a0b75676d1c2ddfa03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The definition of a phase-in plan in this Subtopic is not intended to encompass actions of a regulator that are designed to protect a utility from the effects of regulatory lag in the absence of a rate order, nor is it intended to encompass the regulator's subsequent treatment of any allowable costs that result from those actions. ##### [340-980-55-26](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:39b48fb26599e3318d4fd2a0dd918c6b6ea2ce7b07a2e415381f5f0b1e4b9d53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1), Utility F should capitalize that portion of the amount capitalized for rate-making purposes that represents incurred costs that would otherwise be charged to expense, provided that it is probable that future revenue in an amount at least equal to the capitalized cost will result from inclusion of those costs in allowable costs for rate-making purposes. Otherwise, Utility F should not capitalize those costs. ##### [340-980-55-27](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8005a2c7663087d791b9daa33f53a2b33fd16b2162889b36a39abb7a55e17bfd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Since the situation in this Case is neither during construction nor a phase-in plan, this Topic does not permit capitalization of an allowance for earnings on shareholders' investment. Accordingly, Utility F should not capitalize, for financial reporting, the portion of the amount capitalized for rate-making purposes that represents an allowance for earnings on shareholders' investment. If recovery of that allowance subsequently occurs, increased earnings during the recovery period will result. ##### [340-980-55-28](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:cb3ef723b456ac67d3b93c1bf066705217b5427361e2a5535681e87b90b56d3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Six months after the accounting order referred to in Case A, Utility F's regulator approves part of the cost of the new plant but disallows $600,000,000—consisting of construction expenditures of $570,000,000 and amounts capitalized for rate-making purposes during this 6-month operating period prior to the rate order of $30,000,000. The recorded cost of the plant before consideration of the disallowance is $4,500,000,000. During this 6-month period, Utility F has capitalized $500,000,000 of net cost for rate-making purposes. This $500,000,000 consists of an allowance for earnings on shareholders' investment of $200,000,000 and incurred costs that would otherwise be charged to expense of $300,000,000. For rate-making purposes, the balance sheet accounts, before and after the disallowance, are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-56069F69-1063-4D20-BC46-C30E4843DEAA-low.gif) Balance before Disallowance Disallowance (in thousands) Balance after Disallowance Plant in service " $4,500,000 " " $(570,000)" " $3,930,000 " Amounts capitalized pending rate order " 500,000 " " (30,000)" " 470,000 " Combined totals " $5,000,000 " " $(600,000)" " $4,400,000 " ##### [340-980-55-29](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3bc33c69e717e92172251e4e4b41b6dc58f619395f712cd2add24e1bc1baed5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 980-360-35 requires a disallowance of plant costs to be recognized as a loss. Utility F should perform the following analysis to determine the loss that should be recognized and how it will be allocated: 1. a Assuming that $300,000,000 of the $500,000,000 capitalized for rate-making purposes during the 6-month period was also capitalized for financial reporting (the $200,000,000 allowance for earnings on shareholders' investment would not be capitalized), the total loss recognized by Utility F for financial reporting should be the amount that reduces the combined total of plant in service and amounts capitalized pending rate order ($4,800,000,000) to the combined total that will be honored for rate-making purposes ($4,400,000,000). The recognizable loss is $400,000,000. 2. b Utility F should allocate to plant in service the lesser of the amount of the disallowance that was allocated to plant in service by the regulator ($570,000,000) or the total disallowance recognized for financial reporting ($400,000,000), or $400,000,000. 3. c Utility F should allocate the rest of the disallowance recognized for financial reporting, if any, to amounts capitalized pending rate order. In this case, no amount is allocated to that asset. ##### [340-980-55-30](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0ff4443ace1a7a7b1c0f6ffaea66bec9cf958b057cba7841f3cfa54fc8e37ad7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The recognition of the disallowance and the effect of that recognition on the financial reporting balance sheet accounts are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B4BFDE34-C467-4D33-BF36-D415AB03CC27-low.gif) Balance before Disallowance Recognition of Disallowance (in thousands) Balance after Disallowance Plant in service " $4,500,000 " " $(400,000)" " $4,100,000 " Amounts capitalized pending rate order " 300,000 " " 300,000 " Combined totals " $5,000,000 " " $(400,000)" " $4,400,000 " ##### [340-980-55-31](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3ef5c385e9ca55fcc8695f0bedb60a186348c38f8281cd229a3350a6b1800ef4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility G's fact situation is identical to that of Utility F, described in Cases A and B, except that Utility G's regulator approves all of the costs related to the newly completed plant. Utility G's regulator adopts a formal phase-in plan intended to provide recovery of amounts deferred under the plan and amounts capitalized, for rate-making purposes, during the six-month period from the plant's in-service date to the date of the rate order. ##### [340-980-55-32](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3a0c494a8bf37b4da6635e28186f2bef5038745ab61eed842b0eb4c1aa417358 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The phase-in plan does not affect the financial reporting of those previously deferred costs described in paragraphs [980-340-55-26 through 55-27](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-26) , nor does the existence of those previously deferred costs affect the financial reporting of the phase-in plan. Accordingly, the allowance for earnings on shareholders' investment that was not capitalized previously during the period preceding issuance of the rate order may not be capitalized upon adoption of the phase-in plan. ##### [340-980-55-33](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:fbda37767fcdc313892f55dac2737272c41d20ef2e7cfe396a7f140c04e45b5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraph [980-340-35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-4). ##### [340-980-55-34](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:c14feafb41cef3eb77cfdb1121339a0eda3f7d1c95b9259ecda65b042d89601a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility A is an electric utility that operates solely in a single-state jurisdiction. On January 1, 19X1, Utility A's new electric generating plant becomes operational. The cost of that plant is $1 billion. ##### [340-980-55-35](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:e4148199dff8892585559c86aedf608a4a335214ecb06e69b4e1a622a91cce17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility A's regulator orders that the costs of the newly completed plant be phased in over a three-year period, as follows: 1. a 19X1—A portion of the return (interest and an allowance for earnings on shareholders' investment) on unrecovered investment is deferred by excluding 25 percent of the cost of the plant from the rate base. 2. b 19X2—All of the remaining cost of the plant is to be included in the rate base with no recovery of previously deferred amounts. 3. c 19X3—All of the remaining cost of the plant is to be included in the rate base. Also, additional revenue is to be provided equal to the return on unrecovered investment excluded from rates in Year 1. The order does not provide for recovery in any year of a return on Utility A's investment in the deferred amounts. Utility A's weighted-average cost of capital in its latest rate case was 11 percent. ##### [340-980-55-36](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8481dd99dca573133d90eedfd7676d28479b1e86c976fb8f05a60e1ac1428400 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The phase-in plan is partially a disallowance of plant costs because no return on investment is provided for the deferred amounts. That disallowance should be recognized in accordance with Section 980-360-35 when it became probable. The amount of equivalent cost disallowed should be determined as shown in Schedule 1. The recorded cost of the plant should be reduced by that amount, and a corresponding loss should be reported in 19X1. ##### [340-980-55-37](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:9a510f9d64f460eb778658ef819626d9855b01a00420a80eed4fb1e9f1285db0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disallowance will reduce revenues only in Years 1 through 3, so the depreciation charge that would otherwise be recognized for that plant in Years 1 through 3 should be reduced by the amount of the effective disallowance attributable to those years (the amount in column 4 of Schedule 1). Amounts deferred under the plan (the amount for months 1-12 in column 1 of Schedule 1) should be capitalized as a separate asset, and that asset should be amortized as recovery occurs (in months 25-36), using the amounts in column 1 of Schedule 1. ##### [340-980-55-38](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-38) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:947b4e48a44cf1b5f53daf5aacb9f29c0d3cafd84f2937a9ea15bcebe72d24e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates the determination of effective disallowance. - ![](https://asc.understandingaccounting.org/asc-img/GUID-BCE46570-EA8B-4AE2-A04F-02C032A90ABC-low.gif) Schedule 1 Utility A Determination of Effective Disallowance Return on Investment Disallowed for Amounts Deferred under Phase-in Plan (in thousands) (1) (2) (3) (4) Month Cost Deferral (Recovery) Cumulative Amount Deferred Return on Investment on Cumulative Deferral Effective Disallowance 1 " $2,292 " " $2,292 " $21 $- 2 " 2,291 " " 4,583 " 42 21 3 " 2,292 " " 6,875 " 63 41 4 " 2,292 " " 9,167 " 84 61 5 " 2,291 " " 11,458 " 105 80 6 " 2,292 " " 13,750 " 126 99 7 " 2,292 " " 16,042 " 147 118 8 " 2,291 " " 18,333 " 168 137 9 " 2,292 " " 20,625 " 189 155 10 " 2,292 " " 22,917 " 210 173 11 " 2,291 " " 25,208 " 231 190 12 " 2,292 " " 27,500 " 252 207 13 - " 27,500 " 252 224 14 - " 27,500 " 252 222 15 - " 27,500 " 252 220 16 - " 27,500 " 252 218 17 - " 27,500 " 252 216 18 - " 27,500 " 252 214 19 - " 27,500 " 252 212 20 - " 27,500 " 252 210 21 - " 27,500 " 252 208 22 - " 27,500 " 252 206 23 - " 27,500 " 252 204 24 - " 27,500 " 252 202 25 " (2,292)" " 25,208 " 231 201 26 " (2,291)" " 22,917 " 210 182 27 " (2,292)" " 20,625 " 189 164 28 " (2,292)" " 18,333 " 168 146 29 " (2,291)" " 16,042 " 147 129 30 " (2,292)" " 13,750 " 126 112 31 " (2,292)" " 11,458 " 105 95 32 " (2,291)" " 9,167 " 84 78 33 " (2,292)" " 6,875 " 63 62 34 " (2,292)" " 4,583 " 42 46 35 " (2,291)" " 2,292 " 21 31 36 " (2,292)" - - 15 Total loss to be recognized in 19X1 " $5,099 " Computations: Column (1)—Cost of plant ($1 billion) × .25 × 11% ÷ 12 Column (2)—Column (2) for prior month + Column (1) for current month Column (3)—Column (2) × 11% ÷ 12 Column (4)—Present value (at beginning of month 1) at 11% (.9167 per month) of amount in Column (3) for prior month ##### [340-980-55-39](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-39) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:2123d5e6e32044864c11772d2f63014402b24159632f6f803f013e017819a4ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraph [980-340-25-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) and the application of the definition of a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity."). ##### [340-980-55-40](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-40) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:bbc536eb170394491f460b3dccdd9e50ee1e436f72acac8419e5af2e993c65c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A utility that meets the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) for application of this Topic constructs two generating plants on a common site and those plants share certain facilities (primarily coal handling equipment, transmission facilities, and an administrative building). One plant (Unit 1) is completed January 31, 19X1, and the other plant (Unit 2) is completed December 31, 19X1. The coal handling equipment, transmission facilities, and administrative building are completed by January 31, 19X1, and are used by Unit 1 during 19X1. ##### [340-980-55-41](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-41) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:1edcdb61067cf1a5ef7dbdc2481b4c29481adb617d94b4aeed63e9f546d71dcf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. New rates are placed in effect on February 1, 19X1, that include the effect on revenue requirements of Unit 1 and one-half of the coal handling equipment, transmission facilities, and administrative building. New rates are again placed in effect on January 1, 19X2, to include the effect on revenue requirements of Unit 2 and the other half of the coal handling equipment, transmission facilities, and administrative building. ##### [340-980-55-42](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-42) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:c996f7c95ebaf4a92aff2b663946a4583d5cf62564d1396d194c44065dd7ffba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consistent with the above rate treatment, the utility capitalizes interest on and does not depreciate one-half of the coal handling equipment, transmission facilities, and administrative building from January 31 to December 31, 19X1. The question is whether deferral of depreciation and continued capitalization of interest on one-half of the coal handling equipment, transmission facilities, and administrative building is a phase-in plan under Subtopic 980-340. ##### [340-980-55-43](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-43) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f0eeb12596838e6aa0b8ab233c15726597d1abf00ca99ee2dd1cc433af6e2d05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This deferral represents a phase-in plan unless that rate treatment was routinely used before 1982 by that regulator for similar allowable costs of that regulated entity. The definition of a phase-in plan provides that a phase-in plan defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The interest capitalization period should end and depreciation for the common facilities should begin on February 1, 19X1. Assuming the depreciation pattern for those facilities that results from the above rate-making treatment is not a rational and systematic method of depreciation that would be acceptable for an entity in general, that deferral of depreciation and interest is a phase-in plan. If the depreciation pattern for those facilities that results from the above treatment is a rational and systematic method of depreciation that would be acceptable for an entity in general, only the deferral of the interest is a phase-in plan. ##### [340-980-55-44](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-44) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8dca4346ec5c379750a64ee17dbd2ba2ae0d95fcf428fec3691df8bee30eb02c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 980-340 provides an exception to the definition of a phase-in plan for the effects of regulatory lag. However, regulatory lag ends for a utility's newly completed plant with the first rate order that both: 1. a Is effective after the in-service date of that plant 2. b Addresses the costs of that plant. Therefore, even if different portions of the cost of a unit of property (for example, transmission facilities) are considered for rate treatment in successive rate filings under the notion of regulatory lag, it creates a phase-in plan.