GASB 62: Guidance Clarifying Regulated Operations Accounting Applies to Water Utilities

In 2010 the Governmental Accounting Standards Board (GASB) issued Statement No. 62, which establishes an alternative to Concept 4 for expenditures on “business type activities” that are not annual expenses but also do not produce conventional assets. GASB 62 authorizes public agencies to book these expenditures as “regulatory assets” that can be capitalized. Regulatory accounting does not require that the utility own or control the asset in order to capitalize the cost; the asset is the binding promise to repay the loan, not the items procured or produced with the loan. Guidance issued in 2018 makes it clear that the regulated assets approach is available to any public water resource entity seeking to access capital for consumer rebate programs of any kind as long as the Statement 62 requirements are met.

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