rate-making purposes

ASC 715-980 tells rate-regulated entities how to account for the difference between net periodic pension cost (715-30) or net periodic postretirement benefit cost (715-60) and the amounts of those costs allowed for rate-making purposes. The regulator's actions create a regulatory asset (deferred cost whose recovery is probable) or a liability (unearned revenue collected for future costs), which changes only the timing of expense recognition, not the underlying 715-30/715-60 measurement. Deferral of 715-60 costs as a regulatory asset is permitted only if strict criteria about the rate order, five-year phase-in, roughly 20-year deferral-recovery period, and non-increasing rate escalation are met.

This Subtopic addresses how rate-regulated entities account for leases when the regulator's rate-making treatment differs from Topic 842. Lease classification for financial reporting follows Topic 842 regardless of how the regulator treats the lease, but the timing of expense (or income) recognition is modified to conform to the rate treatment, with timing differences capitalized or accrued as regulatory assets or liabilities. Sale-and-leaseback timing differences are handled either as part of a phase-in plan under Subtopic 980-340 or by conforming recognition to the Regulated Operations Topic.