{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/980/10/#05-overview-and-background","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.","topic":"980","topic_title":"Regulated Operations","subtopic":"980-10","subtopic_title":"Overall","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"980-10-05-1","para":"05-1","html":"
The Regulated Operations Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Discontinuation of Rate-Regulated Accounting
  3. c
    Accounting Changes and Error Corrections
  4. d
    Other Assets and Deferred Costs
  5. e
    Intangibles—Goodwill and Other
  6. f
    Property, Plant, and Equipment
  7. g
    Liabilities
  8. h
    Asset Retirement and Environmental Obligations
  9. i
    Contingencies
  10. j
    Debt
  11. k
    Revenue Recognition—Alternative Revenue Programs
  12. l
    Compensation—General
  13. m
    Compensation—Retirement Benefits
  14. n
    Income Taxes
  15. o
    Consolidation
  16. oo
    Derivatives and Hedging
  17. p
    Interest
  18. q
    Leases.
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The Overall Subtopic provides guidance on the accounting and reporting for entities with regulated operations.
","snippet":"The Overall Subtopic provides guidance on the accounting and reporting for entities with regulated operations.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:290d60c00ee67101d45433a8ebea9d30fd7772d0fd7dfd72af8179ffa4904bd7","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5547c4fa6d3e8c686fb639919dde2ba8b14b9a9ce5f8575bdfc854521b1d6816","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},{"block":null,"heading":"Effect of Regulatory Accounting","paragraphs":[{"citation":"980-10-05-3","para":"05-3","html":"
Regulation of an entity's rates (also referred to as prices) is sometimes based on the entity's costs. Regulators use a variety of mechanisms to estimate a regulated entity's allowable costs, and they allow the entity to charge rates that are intended to produce revenue approximately equal to those allowable costs. Specific costs that are allowable for rate-making purposes result in revenue approximately equal to the costs.
","snippet":"Regulation of an entity's rates (also referred to as prices) is sometimes based on the entity's costs. Regulators use a variety of mechanisms to estimate a regulated entity's allowable costs, and they allow the entity to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67f87048719ce7263db8766c68a10126821a7851e3f6c7dd57cb5939bf445028","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},{"citation":"980-10-05-4","para":"05-4","html":"
In most cases, allowable costs are used as a means of estimating costs of the period during which the rates will be in effect, and there is no intent to permit recovery of specific prior costs. The process is a way of setting prices—the results of the process are reported in general-purpose financial statements in accordance with the same accounting principles that are used by unregulated entities.
","snippet":"In most cases, allowable costs are used as a means of estimating costs of the period during which the rates will be in effect, and there is no intent to permit recovery of specific prior costs. The process is a way of se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a9dace6da2450212630d4e946d47fa6d678d856ab5abc6d688ca37564360043","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},{"citation":"980-10-05-5","para":"05-5","html":"
Regulators sometimes include costs in allowable costs in a period other than the period in which the costs would be charged to expense by an unregulated entity. For the regulated entity, that procedure can do any of the following:
  1. a
    Create assets (future cash inflows that will result from the rate-making process)
  2. b
    Reduce assets (reductions of future cash inflows that will result from the rate-making process)
  3. c
    Create liabilities (future cash outflows that will result from the rate-making process).
","snippet":"Regulators sometimes include costs in allowable costs in a period other than the period in which the costs would be charged to expense by an unregulated entity. For the regulated entity, that procedure can do any of the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e10da34213499ac425ba99182d109d4cae58c41aa23af86c4279d74f3e6508c1","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},{"citation":"980-10-05-6","para":"05-6","html":"
For general-purpose financial reporting, an incurred cost for which a regulator permits recovery in a future period is accounted for like an incurred cost that is reimbursable under a cost-reimbursement-type contract.
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Accounting requirements that are not directly related to the economic effects of rate actions may be imposed on regulated businesses by orders of regulatory authorities and occasionally by court decisions or statutes. This does not necessarily mean that those accounting requirements conform with generally accepted accounting principles (GAAP). For example, a regulatory authority may order an entity to capitalize and amortize a cost that would be charged to income currently by an unregulated entity. Unless capitalization of that cost is appropriate under this Topic, GAAP requires the regulated entity to charge the cost to current income.
","snippet":"Accounting requirements that are not directly related to the economic effects of rate actions may be imposed on regulated businesses by orders of regulatory authorities and occasionally by court decisions or statutes. Th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:742099fc06e3c5ea73b7b9519dfa40a87b3b57af6379632aec812d91698bad08","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},{"citation":"980-10-05-8","para":"05-8","html":"
Unless an accounting order indicates the way a cost will be handled for rate-making purposes, it causes no economic effects that would justify deviation from the GAAP applicable to business entities in general. The mere issuance of an accounting order not tied to rate treatment does not change an entity's economic resources or obligations. In other words, the economic effect of regulatory decisions—not the mere existence of regulation—is the pervasive factor that determines the application of GAAP.
","snippet":"Unless an accounting order indicates the way a cost will be handled for rate-making purposes, it causes no economic effects that would justify deviation from the GAAP applicable to business entities in general. The mere …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36c69ebba48b0402da396287c2fb16628e6a7f6f87638ed1fff6fc9ec71c027d","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99e7d72c246b35f06f07869d0e1feac9d9aa94863db8a31280da2e1547571d0f","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d39a77954f64fe8849662139d0fff77d36d973927232070ae267c2de83dcee6","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d39a77954f64fe8849662139d0fff77d36d973927232070ae267c2de83dcee6","downloaded_from":"2026-09-10T02:27:20.595Z","last_downloaded_at":"2026-09-10T02:27:20.595Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482115","source_sha256":"1ea4c993cfa66966db29a3a56ff08f57817066d9ac6c9c508858ae2abe144d2a"}}