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

Format:

Book

Government document

Author/Creator:

Rodriguez Pardina, Martin, 1961-

Contributor:

Rapti, Richard Schlirf, 1960-

Groom, Eric, 1954-

Language:

English

Subjects (All):

Infrastructure (Economics)--Government policy.

Infrastructure (Economics).

Infrastructure (Economics)--Accounting--Government policy.

Public utilities--Accounting--Government policy.

Public utilities.

Corporations--Accounting--Government policy.

Corporations.

Disclosure in accounting--Government policy.

Disclosure in accounting.

Government policy.

Corporations--Accounting.

Public utilities--Accounting.

Infrastructure (Economics)--Accounting.

Physical Description:

xiii, 222 pages : illustrations ; 24 cm

Place of Publication:

Washington, DC : World Bank, [2008]

Summary:

Developing effective regulation for utilities has always depended on getting good accounting information on finances and operations. But reforms within the utility sector-such as promoting competition and encouraging private participation-make accurate regulatory accounting even more important. As sector and corporate structures become more complex, with utilities operating in both competitive and regulated markets or across several jurisdictions, cost allocations have become both more critical and complex. Clear requirements for regulatory accounts are an essential element in the transparent, consistent, and credible regulation of utilities and reporting of their performance.

Accounting for Infrastructure Regulation: An Introduction provides a practical guide for regulators, policy makers and utility managers to establishing regulatory accounts that can be the cornerstone for better, more complete, and more reliable accounting information. Drawing upon a number of case studies to illustrate key issues and choices, the book sets out the essential accounting features of regulatory accounts and provides practical guidance on controversial areas such as the allocation of costs, the valuation of assets, and depreciation. The book emphasizes the need for consistency with Generally Accepted Accounting Principles (GAAP), but highlights the specific role and requirements of regulatory accounts from the perspective of sector reform and best-practice regulation.

Contents:

1 Why Accounting Information Matters 1

1.1 Objectives of public service regulation 3

1.2 External and internal regulatory information 5

1.3 Limitations of traditional accounting information for regulatory purposes 8

1.4 Information exchange and participation: The need for processes and mechanisms 12

2.1 Case study 1: Privatization of an electricity and water operator in Africa-Initial contract not sufficiently specific 15

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

3 Corporate Information and Financial Accounting 27

3.1 Corporate information systems 27

3.2 Statutory financial statements 29

Additional reading and resources 41

4 Management and Cost Accounting 43

4.1 Objectives of management and cost accounting 43

4.2 Cost classifications 45

4.3 Cost allocation 53

Additional reading and resources 61

5 Why Do Regulatory Accounting? 63

5.1 Regulatory accounting and its objectives 64

5.2 General presentation of information needs 65

5.3 Limitations of traditional and management accounting of the regulated company 68

5.4 Consistency between statutory accounts and regulatory accounts 69

5.5 Regulators' behavior and principles to follow 70

5.6 Using accounting costs in tariff determination 71

5.7 Regulatory accounting and auditing of regulated companies 77

Additional reading and resources 80

6 Core Issues in Regulatory Accounting 83

6.1 Separation of activities 84

6.2 Regulatory asset base determination 92

6.3 Depreciation policies of the regulatory asset base 98

6.4 Related-party transactions and transfer pricing 102

Additional reading and resources 108

7 Scope of a Regulatory Accounting System 111

7.1 Contents of regulatory accounting guidelines 111

7.2 Information exchange processes 121

7.3 Need for competencies, tools, and time and methodology 128

7.4 Legitimizing the regulatory methodology 131

Additional reading and resources 132

Annex 1 Understanding Financial Statements: Ratio Analysis 135

Liquidity ratio analysis 136

Activity ratios 137

Capital structure (leverage ratios) 138

Profits and profitability 139

Annex 2 Regulatory Model 141

What are regulatory models? 142

Matching regulatory objectives and instruments 146

What regulators need to know about the operator's finances 150

Annex 3 Examples of Guidelines and Templates 155

Australia: Electricity Industry Guideline 155

Australia: Regulatory Accounting Statements-Templates 156

United Kingdom: Ofwat Regulatory Accounting Guideline 167

United Kingdom: Ofwat Regulatory Accounting Statements-Templates 167

Annex 4 Impacts of Alternative Depreciation Profiles 175

Perspectives on depreciation 175

Regulatory approaches to depreciation 176

Alternative approaches to depreciation 177

Estimation of asset lives 178

Impact of different approaches to calculating depreciation 179

Data requirements 184

Principles for depreciation 184

Annex 5 List of Sample Performance Indicators 187

Annex 6 Cost Allocation: Illustration of a Step-by-Step Approach 189

Step 1 Identify cost objectives 189

Step 2 Identify direct costs 189

Step 3 Classify indirect costs and allocate cost pools to cost objectives 189

Annex 7 Regulatory Asset Base Valuation 193

Valuation approach 196

Regulatory asset base and accounting 198.

Notes:

Includes bibliographical references (pages 205-209) and index.

ISBN:

9780821371794

0821371797

0821371800

9780821371800

OCLC:

123955162