Current cost accounting: its role in regulated utilities

Current cost accounting (CCA) was an important issue in financial accounting in the 1980s. In the UK, an accounting standard (SSAP 16, 1980) required supplementary CCA disclosures by large companies, but widespread noncompliance led to its being made non-mandatory in 1986 and completely withdrawn in 1988. The forces behind this failure were partly a decline in the rate of inflation, which made the effects of changing prices less important, and partly changes of government policy which meant that tax reliefs were not given on the basis of CCA and CCA was no longer needed as a means of justifying price increases.2 The US had a similar experience, a standard requiring CCA disclosures (FAS 33) being introduced in 1979 and withdrawn at about the same time as the UK standard. Since the withdrawal of SSAP 16, UK financial accounting has typically represented an uneasy mixture of historical costs and current values, which the Accounting Standards Board (ASB) is currently attempting to regulate (Accounting Standards Board, 1993a and 1993b). However, companies are still permitted to produce full CCA information if they so wish. In practice, the only companies that have chosen to do this are regulated utility companies.