# ASC 980-10-15: Regulated Operations — Overall — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/980/10/#15-scope-and-scope-exceptions) 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): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:eb4ef3e5a0051e6c25cd60858b34a8b5c34bec4ec2b8bd5b7908b7e32e09e4a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/980/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [980-10-15-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:cc586fb7c7692a3296d307dc64e2ab945080159d664260c309be0e20c5440598 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Subtopics within the Regulated Operations Topic only provide incremental industry-specific guidance for the entities defined in this Scope Section, or as further defined in the Scope Sections of the individual Regulated Operations Subtopics. Entities within the scope of this Topic shall also comply with the applicable guidance not included in this Topic. #### Entities ##### [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:5b2386c508e4ecbf1bfabe9f489b66659e75d9687541ae95c08bd5a89e91fa95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Regulated Operations Topic applies to general-purpose external financial statements of an entity that has regulated operations that meet all of the following criteria: 1. a The entity's rates for regulated services or products provided to its customers are established by or are subject to approval by an independent, third-party regulator or by its own governing board empowered by statute or contract to establish rates that bind customers. 2. b The regulated rates are designed to recover the specific entity's costs of providing the regulated services or products. This criterion is intended to be applied to the substance of the regulation, rather than its form. If an entity's regulated rates are based on the costs of a group of entities and the entity is so large in relation to the group of entities that its costs are, in essence, the group's costs, the regulation would meet this criterion for that entity. 3. c In view of the demand for the regulated services or products and the level of competition, direct and indirect, it is reasonable to assume that rates set at levels that will recover the entity's costs can be charged to and collected from customers. This criterion requires consideration of anticipated changes in levels of demand or competition during the recovery period for any capitalized costs. This last criterion is not intended as a requirement that the entity earn a fair return on shareholders' investment under all conditions; an entity can earn less than a fair return for many reasons unrelated to the ability to bill and collect rates that will recover [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 example, mild weather might reduce demand for energy utility services. In that case, rates that were expected to recover an entity's allowable costs might not do so. The resulting decreased earnings do not demonstrate an inability to charge and collect rates that would recover the entity's costs; rather, they demonstrate the uncertainty inherent in estimating weather conditions. This requirement must also be evaluated in light of the circumstances. For example, if the entity has an exclusive franchise to provide regulated services or products in an area and competition from other services or products is minimal, there is usually a reasonable expectation that it will continue to meet the other criteria. Exclusive franchises can be revoked, but they seldom are. If the entity has no exclusive franchise but has made the very large capital investment required to provide either the regulated services or products or an acceptable substitute, future competition also may be unlikely. ##### [980-10-15-3](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:72f511e29a2298c376f5c603cbf80b4aa82c4a304956a4bdff25e55e15335675 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, the rates set by state regulatory agencies are accepted for Medicare and Medicaid reimbursement purposes. There is some disagreement about the extent to which such rates are based on a provider's costs. If regulatory agencies in those states base rates on the provider's costs and adopt a permanent system of regulation, health care providers in those jurisdictions could be subject to the provisions of this Topic. However, the criterion in (c) in the preceding paragraph also would have to be considered to determine whether this Topic applies to the entity. ##### [980-10-15-4](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:0c48fbd6538a3f2f43cc7474331ae2b182fa9096ab29a94658d2f41a963ddba2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If some of an entity's operations are regulated and meet the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2), this Topic shall be applied to only that portion of the entity's operations. ##### [980-10-15-5](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:a74378f2fc595b4384d2985b05f22842dfc6809b83aa40a9d0d55cfe9696df5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Guidance in other Codification Topics that applies to entities in general also applies to regulated entities. However, entities subject to this Topic shall apply it instead of any conflicting provisions of other parts of the Codification. For example, a regulator might authorize a regulated entity to incur a major research and development cost because the cost is expected to benefit future customers. The regulator might also direct that cost to be capitalized and amortized as an allowable cost over the period of expected benefit. If the criteria of paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) are met, the 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.") that cost even though Subtopic 730-10 requires such costs to be charged to income currently. That Subtopic shall still apply to accounting for other research and development costs of the regulated entity, as shall the disclosure requirements of that Subtopic. ##### [980-10-15-6](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:7ecade0e7054692d7e15e0a267130c559b8f68281cb3d601aa694b910067411b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). #### Transactions ##### [980-10-15-7](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:5ddfd648d624f8f4b3d2cf1e987f66e96966eedd62e60ddc5e9a970315e40c19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Regulated Operations Topic does not apply to any of the following transactions: 1. a Accounting for price controls that are imposed by governmental action in times of emergency, high inflation, or other unusual conditions, or accounting for contracts in general. However, if the terms of a contract between an entity and its customer are subject to regulation and the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) are met with respect to that contract, the guidance in this Topic shall apply. 2. b An entity's regulatory accounting. Regulators may require regulated entities to maintain their accounts in a form that permits the regulator to obtain the information needed for regulatory purposes. This Topic neither limits a regulator's actions nor endorses them. Regulators' actions are based on many considerations. Accounting addresses the effects of those actions. This Topic merely specifies how the effects of different types of rate actions are reported in general-purpose financial statements. 3. c The criterion in paragraph [980-10-15-2(a)](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) is intended to exclude contractual arrangements in which the government, or another party that could be viewed as a regulator, is a party to a contract and is the entity's principal customer.