Research Committee of ICAI has invited comments/ suggestions on Exposure Draft of the ‘Guidance Note on Accounting for Hydropower Industry‘, latest by 27/01/2022 via post or email at [email protected]
The Guidance Note on Accounting for Hydropower Industry is meant for guidance on the accounting issues/ principles contained in Ind ASs in respect of the Hydropower Industry, like accounting treatment for costs incurred on activities relating to pre-feasibility, pre-construction, construction, maintenance and renovation of hydropower plants, Decommissioning Costs, Borrowing Costs, Depreciation, Provisions & Contingent Liabilities, Impairment of Assets, Leases & Power purchase agreement in nature of a lease, Rate Regulated Activities, Business Acquisitions & Merger of a Subsidiary Company with Parent Company, etc.
It may be noted that the Guidance Note on Accounting for Hydropower Industry is not meant for addressing the accounting and reporting issues relating to the power distribution and transmission activities. It also does not address accounting and reporting issues relating to other conventional and/ or non-conventional forms of power generation, e.g., thermal, solar, wind, geo-thermal, etc.
Hydro Power Generation Projects are highly capital intensive and are located in remote areas. These projects are subject to the risks of Extraordinary Geological Occurrences (EGOs), contractual challenges and contractor claims, long gestation period, stoppages of work due to local disturbances, etc. Further, installation base of the Hydropower generating assets is quite huge and complex, which is expensive to construct, tends to be exposed to harsh operating conditions and require periodic replacement or repair.
Given the peculiar nature of the Hydropower Industry, the accounting of transactions of the project pauses a great challenge even for professionals. Therefore, it’s required to establish industry-specific accounting principles in relation to expense recognition, measurement, presentation and disclosure for the Hydropower Industry and accordingly, the ICAI has moved in the required direction.
ICAI’s Guidance Note on Accounting for Hydropower Industry: Exposure Draft dt. 28/12/2021 for Comments