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Guidance Note on Accounting for Rate Regulated Activities

In India, some of the large public sector and private sector entities are involved in businesses which are regulated in one form or the other by a statute In India.

The rate regulation, as presently prevailing in India in respect of industries such as electricity, does result in creation of a right (asset) or an obligation (liability), as the case may be, as envisaged by the accounting framework, while it may not be so in respect of other industries. So, not accounting for the right to receive cash flows or the obligation to refund cash flows under such a regulatory requirement would not reflect a true and fair view of assets/liabilities and income/expenses as reflected in the financial statements.The Same is attached herewith.

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