The regulation of an entity, including over the rates it charges its customers, introduces a unique economic dimension and has related accounting ramifications. Industry-specific accounting guidance for regulated operations is predominantly codified as ASC 980. Regulated utilities that meet certain criteria under ASC 980 are required to apply its guidance.

The purpose of ASC 980 is for financial reporting to reflect the economic effects of certain rate-regulated activities and actions taken by regulators that arise in the normal course of regulated operations. The basic premise of ASC 980 is that the actions of a regulator will impact the financial statements prepared for financial reporting purposes only if the action has an economic effect on the regulated utility and meets the requirements for recognition or deferral under the standard. A regulated utility should comply with US GAAP applicable to entities in general with regard to its accounting and financial reporting. If it is also subject to ASC 980, the applicable provisions within that standard are applied as an adjustment to or in lieu of other US GAAP (when specifically required by ASC 980).

ASC 980 provides guidance for (1) determining whether a reporting entity has regulated operations subject to rate-regulated accounting and (2) accounting for certain assets, liabilities, and transactions arising from regulated operations. This chapter addresses these requirements, the discontinuation of application and reapplication of ASC 980, and related presentation and disclosure requirements. See UP 18, UP 19, and UP 20 for further information on utility plant, income tax, and business combination issues, respectively, specific to regulated utilities.