# ASC 980-20-40: Regulated Operations — Discontinuation of Rate-Regulated Accounting — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/980/20/#40-derecognition) 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): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:fcd672857e34244fd8e6024aabd788445c4a3cf06c6bf74fd90a2d1c2e02ad21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-20-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/980/20/#40-derecognition) SEC content: no #### Discontinuation of Regulatory Operations Guidance ##### [980-20-40-1](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:ddc68695fb0ac1417a73ed67e5a2104d86b7c0a4ff0150e606c3a60568c96343 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity determines that its operations in a regulatory jurisdiction no longer meet the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) for application of the Regulated Operations Topic, that entity shall discontinue application of this Topic to its operations in that jurisdiction. If a separable portion of the entity's operations within a regulatory jurisdiction ceases to meet the criteria of that paragraph for application of this Topic, application of this Topic to that separable portion shall be discontinued. That situation creates a presumption that application of this Topic shall be discontinued for all of the entity's operations within that regulatory jurisdiction. That presumption can be overcome by establishing that the entity's other operations within that jurisdiction continue to meet the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) for application of this Topic. The separable portion may be an entity's operations within a regulatory jurisdiction or a smaller portion (such as a customer class within a regulatory jurisdiction), either of which could require the allocation of system-wide assets and liabilities. ##### [980-20-40-2](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:c8955d8dcf27d2b2e21b56c8e537fc75f50c361e67d261c595a8a171809a00a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity discontinues application of this Topic to all or part of its operations, that entity shall eliminate from its statement of financial position prepared for general-purpose external financial reporting the effects of any actions of regulators that had been recognized as assets and liabilities pursuant to this Topic but would not have been recognized as assets and liabilities by entities in general, and the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 shall apply, except for the provisions for income statement reporting in paragraphs [360-10-45-4](https://asc.understandingaccounting.org/asc/360/10/#360-10-45-4) and [360-10-50-2](https://asc.understandingaccounting.org/asc/360/10/#360-10-50-2). However, the carrying amounts of plant, equipment, and inventory measured and reported pursuant to this Topic shall not be adjusted unless those assets are impaired, in which case the carrying amounts of those assets shall be reduced to reflect that impairment. ##### [980-20-40-3](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:1ae8bd207ffd7607cd4440711b16ff2857179b2543a6d7acb8edd339c97e1720 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The carrying amounts of plant, equipment, and inventory for entities applying this Topic differ from those for entities in general only because of the [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."), intra-entity profit, and disallowances of costs of recently completed plants. If any other amounts that would not be includable in the carrying amounts of plant, equipment, or inventory by entities in general (such as postconstruction operating costs capitalized pursuant to paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)) are included in or netted against the carrying amounts of plant, equipment, or inventory, those amounts shall be accounted for as this Subtopic prescribes for the effects of actions of a regulator. ##### [980-20-40-4](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:5ae44784de4830602882b64cb30ee5ccdca34a47123c501e5387361839e7b8eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Whether those assets have been impaired shall be judged in the same manner as for entities in general. The net effect of the adjustments required by this Subtopic shall be included in income of the period in which the discontinuation occurs and shall be classified separately in income from continuing operations as an unusual or infrequently occurring item. ##### [980-20-40-5](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:96e01ff306cb43df1587bef59763cbc37325aa3e946b19051b00a7d76b458fb9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples illustrating the discontinuation of regulatory operations guidance include the following: 1. a Example 1 (see paragraph [980-20-55-1](https://asc.understandingaccounting.org/asc/980/20/#980-20-55-1)) illustrates assets recorded based solely on expected future revenue from the regulator. 2. b Example 2 (see paragraph [980-20-55-6](https://asc.understandingaccounting.org/asc/980/20/#980-20-55-6)) illustrates liabilities recorded based solely on actions of the regulator. 3. c Example 3 (see paragraph [980-20-55-10](https://asc.understandingaccounting.org/asc/980/20/#980-20-55-10)) illustrates assets recorded for deferred income taxes not previously recognized for rate-making purposes but expected to be in the future. #### Deregulatory Legislation or Rate Order in a Separable Portion of the Entity ##### [980-20-40-6](https://asc.understandingaccounting.org/asc/980/20/#980-20-40-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:28:01.063Z to 2026-09-10T02:28:01.063Z Record version: sha256:5160a0429c22ca18a5450b12f20d7db55cd5e15e8e14769f6759064dc158e664 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When deregulatory legislation is passed or when a rate order (whichever is necessary to effect change in the jurisdiction) that contains sufficient detail for the entity to reasonably determine how the transition plan will affect a separable portion of its business whose pricing is being deregulated is issued, the entity shall stop applying this Topic to that separable portion of its business. It has not been established whether an entity shall stop applying the accounting and reporting for regulatory operations as provided in the other Subtopics of this Topic to that separable portion of its business before the issuance of sufficiently detailed deregulatory legislation or a sufficiently detailed rate order.