X
X

Find Your Specialist

X

Contact Us

Go Back

Utilities Accounting Standards

Utilities accounting standards: are you missing an opportunity?

Governmental utilities operate in a highly regulated environment with complex accounting standards. Some entities may not realize they have the opportunity to capitalize certain costs that would otherwise be expensed. Today’s blog looks at Statement No. 62 issued by the Governmental Accounting Standards Board.

Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was issued by the Governmental Accounting Standards Board (“GASB”) in December 2010.  Statement No. 62 (“GASBS 62”) became effective for periods beginning after December 15, 2011.  GASBS 62 continues the accounting for regulated operations allowed by Statement 71 of the Financial Accounting Standards Board.

GASBS 62 allows the regulator of governmental utilities that have regulated operations to capitalize costs that would otherwise be expensed if it is probable that future revenue will be provided to recover the capitalized costs.   GASBS 62 also allows the regulator of governmental utilities that have regulated operations to create liabilities.  For example, instead of flowing natural gas or power purchases through the Statement of Revenues, Expenses, and Change in Net Assets, a regulator can report over-or-under-recovery of fuel costs on the Balance Sheet.

The regulated operations section of GASBS 62 can be applied by a governmental utility if the business-type activities meet all of the following criteria:

a. The regulated business-type activity’s rates for regulated services 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.

b. The regulated rates are designed to recover the specific regulated business-type activity’s costs of providing the regulated services.

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 regulated business-type activity’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.

Need help understanding GASB pronouncements? Frazier & Deeter has 30+ years of experience working with utilities – our experts can help you understand requirements and minimize risk.

About the author. Dwight Work is one of the nation’s leading experts in utility consulting and litigation support services.  He can be reached at Dwight.work@frazierdeeter.com

Related Articles

Privacy Overview

When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

You can enable or disable our use of cookies per category.

When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

You can enable or disable our use of cookies per category.

Necessary Always Enabled

Essential cookies enable you to navigate our Site and use certain features, such as accessing secure areas of our Site and using other features of our service that require us to keep track of certain information as you navigate from page to page. Although some of these cookies are “required” to enable certain functionality, you can disable them in the browser, but doing so will limit your ability to use the features supported by such cookies.

Functionality cookies are cookies that support features of the Site, such as remembering your preferences.

These cookies collect information about how you use our Site, including which pages you go to most often and if they receive error messages from certain pages. These cookies are only used to improve how our Site functions and performs.

From time-to-time, we may engage third parties that track individuals who visit our Site. These third parties may track your use of the Site for purposes of providing us with certain marketing automation features (to help us improve our outreach to current and prospective clients) and providing you with targeted advertisements.