Table of contents for Accounting for infrastructure regulation : an introduction / Martin Rodriguez Pardina, Richard Schlirf Rapti, Eric Groom.

Bibliographic record and links to related information available from the Library of Congress catalog.

Note: Contents data are machine generated based on pre-publication provided by the publisher. Contents may have variations from the printed book or be incomplete or contain other coding.


Counter
Contents
Chapter 1: Why Accounting Information Matters	1
1.1. Objectives of public service regulation	4
1.2. External and internal regulatory information	5
1.2.1. Information originating in the firm	5
1.2.2. Information originating outside the firm	7
1.3. Limitations of traditional accounting information for regulatory purposes	9
1.4. Information exchange and participation: the need for processes and mechanisms	12
Chapter 2: Case Studies	14
2.1. Case study 1: privatization of an electricity and water operator in Africa¿initial contract not specific enough	14
2.1.1. Information requirements	15
2.1.1.1. Powers of the regulatory authority	15
2.1.1.2. Obligations stated in the contract and in the law	15
2.1.2. Conflict and solutions	17
2.2. Case study 2: regulating operators in Latin America¿manual deficiencies led to inconsistent cost accounting by different utilities	18
2.3. Case study 3: efficient model company regulation in a Latin American country¿deficiencies of benchmarking information and the need for regulatory accounting information	21
2.3.1. The regulatory framework	21
2.3.2. A new regulatory accounting model	22
Chapter 3: Corporate Information and Financial Accounting	25
3.1. Corporate information systems	25
3.1.1. Internal reporting	27
3.1.2. External reporting	27
3.2. Statutory financial statements	27
3.2.1. Generally accepted accounting principles	27
3.2.1.1. Basic postulate of fairness	28
3.2.1.2. Principles related to the socioeconomic environment	28
3.2.1.3. Principles directly related to the recording of information	29
3.2.1.4. Principles related to valuation	29
3.2.2. Key elements of statutory financial statements	30
3.2.2.1. Balance sheet	30
3.2.2.2. Income statement	33
3.2.2.3. Cash flow statement	35
3.2.3. Chart of accounts	36
3.2.4. The new International Financial Reporting Standards norms	38
Additional reading and resources	39
Chapter 4: Management and Cost Accounting	40
4.1. Objectives of management and cost accounting	40
4.2. Cost classifications	42
4.2.1. Management function	42
4.2.1.1. Manufacturing costs	42
4.2.1.2. Nonmanufacturing costs	43
4.2.2. Degree of averaging	43
4.2.3. Timing of charges against revenue	43
4.2.4. Relevance to planning, control, and decisionmaking	44
4.2.4.1. Cost classification by behavior	44
4.2.4.2. Cost typologies unrelated to behavior	46
4.2.5. Comparison of cost classifications	47
4.3. Cost allocation	50
4.3.1. Goals of cost allocation	51
4.3.2. General criteria for cost allocation	51
4.3.3. A step-by-step process	52
4.3.3.1. Choosing a cost objective	53
4.3.3.2. Identifying direct costs and tracing them to cost objectives	53
4.3.3.3. Pooling indirect costs that relate to cost objectives	53
4.3.3.4. Choosing a cost allocation base	54
4.3.3.5. Assigning direct and indirect costs to cost objects	54
4.3.4. Cost allocation approaches and methods	54
4.3.4.1. Accounting approaches	55
4.3.4.2. Economic approach to allocation: Ramsey pricing	57
4.3.5. Cost distortion or cross-subsidization	57
4.3.6. Allocate budgeted or actual costs?	58
Additional reading and resources	58
Chapter 5: Why Do Regulatory Accounting?	59
5.1. Regulatory accounting and its objectives	60
5.2. General presentation of information needs	61
5.2.1. Perimeter of information	62
5.2.2. Content of information	62
5.2.3. Format of information	63
5.2.4. Periodicity of reporting	63
5.2.5. Allocation and valuation rules	64
5.3. Limitations of traditional and management accounting of the regulated company	64
5.4. Consistency between statutory accounts and regulatory accounts	65
5.5. Regulators¿ behavior and principles to follow	66
5.5.1. Ignorance	66
5.5.2. Interference	67
5.5.3. Risks	67
5.6. Using accounting costs in tariff determination	68
5.6.1. Excluding costs	69
5.6.1.1. Full exclusion of cost items	70
5.6.2. Partial exclusion of incurred expenses	71
5.6.3. A few criteria and guidelines	73
5.6.3.1. Presumption of prudent management	73
5.6.3.2. Realism	73
5.6.3.3. Materiality	74
5.6.3.4. Objective assessment¿findings of mismanagement	74
5.7.1. Eligibility to be the auditor	75
5.7.2. Process for appointing the auditor	75
5.7.3. Duty of care of the auditor	76
5.7.4. Audit standard	76
5.7.5. Pro forma of the audit report	77
5.7.6. Consequence of a qualified audit report	77
Additional reading and resources	77
Chapter 6: Core Issues in Regulatory Accounting	79
6.1. Separation of activities	80
6.1.1. Regulatory alternatives	82
6.1.1.1. Single till regulation	82
6.1.1.2. Separation of companies	83
6.1.1.3. Separation of activities and accounting	83
6.1.2. Accounting separation of activities	84
6.2. Regulatory asset base determination	89
6.2.1. Asset base valuation	89
6.2.1.1. Historical cost	90
6.2.1.2. Market value	90
6.2.1.3. Replacement cost	91
6.2.1.4. Deprival rule	91
6.2.2. Regulatory asset base composition	92
6.2.2.1. Assets	92
6.2.2.2. Goodwill	92
6.2.2.3. Deferred operating costs and regulatory assets	93
6.2.2.4. Leased property	93
6.2.2.5. Third-party contributions	93
6.2.2.6. Working capital	94
6.2.2.7. Other principles	94
6.3. Depreciation policies of the regulatory asset base	96
6.3.1. Regulatory approaches to depreciation	97
6.3.2. Alternative approaches to depreciation	97
6.3.3. Estimation of asset lives	98
6.3.4. Treatment of depreciation on variations from forecast capital expenditures	98
6.3.5. Principles for depreciation	99
6.4. Related-party transactions and transfer pricing	99
6.4.1. Definition of related parties	100
6.4.2. Specified transactions	102
6.4.3. Information disclosure	104
6.4.4. Basis of cost allocation	104
Additional reading and resources	105
Chapter 7: Scope of a Regulatory Accounting System	106
7.1. What should a regulatory accounting guidelines document include?	106
7.1.1. Purpose of regulatory accounting guidelines	106
7.1.2. Legal basis and authorities	107
7.1.2.1. Disclosure and confidentiality rules	108
7.1.2.2. Revision, dates, and periods	109
7.1.3. Definitions of terms	109
7.1.4. General principles of preparation of the Regulatory Accounting Guidelines	109
7.1.4.1. General accounting and allocation principles	109
7.1.4.2. Conformity of regulatory accounting with national accounting standards	111
7.1.4.3. Substance to prevail over legal form	111
7.1.4.4. Related-party transactions and third-party benefits	112
7.1.4.5. Directors¿ responsibility	113
7.1.4.6. Audit	113
7.1.5. Principles for preparing the regulatory accounting statements	114
7.1.5.1. Cost and revenue allocation	114
7.1.5.2. Revision of methodologies	115
7.1.5.3. Qualification of costs	115
7.1.5.4. Regulatory asset base	116
7.1.6. Information (reporting) requirements	117
7.2. Information exchange processes	118
7.2.1. Accountability	120
7.2.1.1. Deadlines	121
7.2.1.2. Consultation period	121
7.2.1.3. Dispute resolution	121
7.2.2. Communication and dissemination	122
7.2.3. Consultation	123
7.2.4. Transparency	125
7.3. Need for competences, tools, and time and methodology	125
7.3.1. Competences	126
7.3.2. Tools	126
7.3.3. Time and methodology	127
7.4. Legitimizing the regulatory methodology	129
Additional reading and resources	130
Annex 1: Understanding Financial Statements: Ratio Analysis	131
Liquidity ratio analysis	131
Current ratio	132
Acid test	132
Activity ratios	132
Accounts receivable turnover ratio	132
Inventory turnover ratio	133
Accounts payable turnover ratio	133
Capital structure (leverage ratios)	134
Profits and profitability	134
Gross margin ratio	135
Net margin	135
Return on assets ratio	135
Return on equity ratio	136
Annex 2: Regulatory Model	137
What are regulatory models?	138
Matching regulatory objectives and instruments	142
Regulatory objectives	142
Regulatory instruments	144
What regulators need to know about the operator¿s finances	146
Conclusions	147
Annex 3: Examples of Guidelines and Templates	150
Australia: Electricity Industry Guideline	150
Australia: Regulatory Accounting Statements¿Templates	151
United Kingdom: Ofwat Regulatory Accounting Guideline	159
United Kingdom: Ofwat Regulatory Accounting Statements¿Templates	159
Annex 4: Impacts of Alternative Depreciation Profiles	165
Perspectives on depreciation	165
Regulatory approaches to depreciation	166
Alternative approaches to depreciation	167
Estimation of asset lives	168
Effect of different approaches to calculating depreciation	169
The impact of changing depreciation profiles	170
Impact of changing the assumed asset life	172
Treatment of depreciation on variations from forecast capital expenditure	173
Data regulatory requirements	173
Principles for depreciation	174
Annex 5: List of Sample Nonfinancial Indicators	176
Annex 6: Cost Allocation: Illustration of Step-by-Step Approach	178
Step 1: identifying cost objectives	178
Step 2: identifying direct costs	178
Step 3: classifying indirect costs and allocating cost pools to cost objectives	179
Annex 7: Regulatory Asset Base Valuation	181
Valuation approach	184
Regulatory asset base and accounting	186
The case of Argentina	187
The case of the United Kingdom	187
The case of Bolivia	189
The case of Chile	190
Electric sector	190
The case of Mali¿accounting of assets	191
Bibliography	193

Library of Congress Subject Headings for this publication:

Infrastructure (Economics) -- Government policy.
Infrastructure (Economics) -- Accounting -- Government policy.
Public utilities -- Accounting -- Government policy.
Corporations -- Accounting -- Government policy.
Disclosure in accounting -- Government policy.