{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/710/980/","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","number":"710-980","topic":"710","title":"Regulated Operations","area":"Expenses","paragraphs":4,"summary":"This Subtopic addresses compensated absences and other compensation-related costs for entities with regulated operations. Even though a regulator may allow such compensation in rates only when paid, the entity must still accrue the liability under Topic 710 because regulator rate actions cannot eliminate obligations the regulator did not impose. Because the cost will be recoverable in future rates as paid, the entity simultaneously records a regulatory asset representing the probable future increased revenue.","concepts":["compensated absences","regulated operations","regulatory asset","allowable costs","accrual of liability","rate-making","probable future increased revenue"],"categories":["Recognition","Compensation and benefits","Industry-specific"],"level":"intermediate","topic_title":"Compensation—General","sections":[{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"710-980-05-1","para":"05-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Subtopic provides guidance for compensation-related costs for entities with regulated operations.</div></div>","snippet":"This Subtopic provides guidance for compensation-related costs for entities with regulated operations.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:84ba8f56870bcd5f176f6ea0530f91718afb04002c7517e8af842b69e6248572","downloaded_from":"2026-09-10T00:58:07.626Z","last_downloaded_at":"2026-09-10T00:58:07.626Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval 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same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section <a altsource=\"GUID-DFCF42C6-CE0D-45BC-9846-5A2EFDE587F3.ditamap\" class=\"ditamap\">980-10-15</a>.</div></div>","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 980-10-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81b72eb12d4a8aa6a61f8e414bf26987237e24055dcc6ec0a2017e0f4692c6f6","downloaded_from":"2026-09-10T00:58:11.360Z","last_downloaded_at":"2026-09-10T00:58:11.360Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479131","source_sha256":"8fb7f0cb766ad9ca5e0b18137c651236bba67b12814fdfa9e0f3a2b711715d94"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42b4b5e84ba1385e76544fcdf57e5b78bde70e225dab1795f7256d2105cf3892","downloaded_from":"2026-09-10T00:58:11.360Z","last_downloaded_at":"2026-09-10T00:58:11.360Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval 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id=\"sfr_47ACCBD8-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Topic <a altsource=\"GUID-5042BCF9-3F77-47CF-8C84-829A89BA53BA.ditamap\" class=\"ditamap\">710</a> specifies criteria for accrual of a liability for employees' compensation for future absences. For rate-making purposes, compensation for employees' absences may be included in <a href=\"/glossary/a/#allowable-costs\" class=\"term\" title=\"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.\"><span>allowable costs</span></a> when the compensation is paid. </span></span></div></div>","snippet":"Topic 710 specifies criteria for accrual of a liability for employees' compensation for future absences. For rate-making purposes, compensation for employees' absences may be included in allowable costs when the compensa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33b1bf238d50b32c829c38e803b48348c4bef2bac265cc3d72a429e4ce07f4eb","downloaded_from":"2026-09-10T00:58:16.201Z","last_downloaded_at":"2026-09-10T00:58:16.201Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479037","source_sha256":"0ef52bc8b6fd2608f1ddb8b9080ab398598695d500f2f927eb6f8cba16faf037"}},{"citation":"710-980-25-2","para":"25-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_47ACCD69-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The liability, if any, shall be accrued in accordance with Topic <a altsource=\"GUID-5042BCF9-3F77-47CF-8C84-829A89BA53BA.ditamap\" class=\"ditamap\">710</a> because rate actions of the regulator cannot eliminate obligations that were not imposed by the regulator (see paragraph <a href=\"/asc/405/980/#405-980-40-1\" class=\"xref\">980-405-40-1</a>). By including the accrued compensation in future allowable costs on an as-paid basis, the regulator provides reasonable assurance of the existence of an asset. The asset is the probable future benefit (increased revenue) that will result from the regulatory treatment of the subsequent payment of the liability (see paragraph <a href=\"/asc/340/980/#340-980-25-1\" class=\"xref\">980-340-25-1</a>). Accordingly, the entity also shall record the asset that results from the regulator's actions. </span></span></div></div>","snippet":"The liability, if any, shall be accrued in accordance with Topic 710 because rate actions of the regulator cannot eliminate obligations that were not imposed by the regulator (see paragraph 980-405-40-1). By including th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:001ccf31fc69fa864a629bb002a68fdd6cd8668592e19b5c31c20409659d333a","downloaded_from":"2026-09-10T00:58:16.201Z","last_downloaded_at":"2026-09-10T00:58:16.201Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479037","source_sha256":"0ef52bc8b6fd2608f1ddb8b9080ab398598695d500f2f927eb6f8cba16faf037"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e23332332741dc547965ccb098d6adfd0d9982b8df5cdb6b746747bfddfbabae","downloaded_from":"2026-09-10T00:58:16.201Z","last_downloaded_at":"2026-09-10T00:58:16.201Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479037","source_sha256":"0ef52bc8b6fd2608f1ddb8b9080ab398598695d500f2f927eb6f8cba16faf037"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b49a52e4d182eaf405c45f2595d3e02dca37db7ce68093d251c9a4bb8adc4999","downloaded_from":"2026-09-10T00:58:16.201Z","last_downloaded_at":"2026-09-10T00:58:16.201Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479037","source_sha256":"0ef52bc8b6fd2608f1ddb8b9080ab398598695d500f2f927eb6f8cba16faf037"}}],"enrichment":{"summary":"This Subtopic addresses compensated absences and other compensation-related costs for entities with regulated operations. Even though a regulator may allow such compensation in rates only when paid, the entity must still accrue the liability under Topic 710 because regulator rate actions cannot eliminate obligations the regulator did not impose. Because the cost will be recoverable in future rates as paid, the entity simultaneously records a regulatory asset representing the probable future increased revenue.","key_points":["Compensation-related costs of entities with regulated operations follow the scope of Section 980-10-15 (710-980-15-1).","A liability for employees' compensation for future absences must be accrued under Topic 710 even when the regulator includes such compensation in allowable costs only on an as-paid basis (710-980-25-1; 710-980-25-2).","Rate actions of a regulator cannot eliminate obligations that were not imposed by the regulator (710-980-25-2, referencing 980-405-40-1).","Including the accrued compensation in future allowable costs on an as-paid basis gives reasonable assurance of the existence of a regulatory asset (710-980-25-2, referencing 980-340-25-1).","The regulatory asset recorded is the probable future benefit—increased revenue—resulting from regulatory treatment of the subsequent payment of the liability (710-980-25-2)."],"categories":["Recognition","Compensation and benefits","Industry-specific"],"audience_level":"intermediate","student_note":"Classic regulated-utility twist: rate treatment changes the timing of recovery, not whether GAAP requires accrual. The common mistake is assuming that because the regulator allows the cost only when paid, the entity can use cash-basis recognition\\u2014instead you accrue the liability and record an offsetting regulatory asset.","related_topics":["710-10","980-10","980-340","980-405","712"],"key_concepts":["compensated absences","regulated operations","regulatory asset","allowable costs","accrual of liability","rate-making","probable future increased revenue"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4da0c1c9b51142760cb58dcc23f6c7309d445738106a29ed3c41249e5e2e02cd","downloaded_from":"2026-09-10T00:58:07.626Z","last_downloaded_at":"2026-09-10T00:58:16.201Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"405-980","title":"Regulated 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Operations","topic_title":"Contingencies","score":0.7311,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e812ac337761fdac25a25e03a92c5d7210fdd0450eaaee18d62003b545d066c4","downloaded_from":"2026-09-10T00:29:15.540Z","last_downloaded_at":"2026-09-10T00:29:23.763Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"712-10","title":"Overall","topic_title":"Compensation—Nonretirement Postemployment 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