IFRS 20 Regulatory Assets and Regulatory Liabilities: A New Standard for Rate-Regulated Entities
IFRS Explainer · New Accounting Standard
A new IFRS Accounting Standard for rate-regulated entities. What it introduces, who it affects, and why preparers should treat 2029 as a deadline, not a starting point.
The International Accounting Standards Board (IASB) issued IFRS 20 Regulatory Assets and Regulatory Liabilities on 27 May 2026, a new Standard for entities subject to a specific type of rate regulation. It is effective for annual reporting periods beginning on or after 1 January 2029, with earlier application permitted, and it both replaces IFRS 14 Regulatory Deferral Accounts and supplements the information provided under IFRS 15 Revenue from Contracts with Customers.
In plain terms, IFRS 20 ensures financial statements reflect not only what a company billed customers in the current period, but also the regulatory rights and obligations that will affect future rates.
IFRS 20 at a glance
- Standard
- IFRS 20 Regulatory Assets and Regulatory Liabilities
- Issued
- 27 May 2026, by the IASB
- Effective
- Annual periods beginning on or after 1 January 2029 (early application permitted)
- Replaces
- IFRS 14 Regulatory Deferral Accounts
- Supplements
- IFRS 15 Revenue from Contracts with Customers
- Scope
- Entities subject to a regulatory agreement that creates regulatory assets and regulatory liabilities
- Excluded
- Regulated premiums in insurance contracts within IFRS 17
Why IFRS 20 was introduced
For many years, IFRS Accounting Standards offered no comprehensive model for reporting the effects of rate regulation. The result was diversity in practice: some entities recognised regulatory balances, others did not, and the financial statements of similar businesses were not always comparable, even where the underlying economics were similar.
IFRS 20 closes that gap. Its purpose is to help investors understand how rate regulation affects an entity’s financial performance, financial position and prospects for future cash flows.
What type of regulation does it address?
IFRS 20 applies to an entity subject to a regulatory agreement that creates regulatory assets and regulatory liabilities. A regulatory agreement establishes enforceable rights and obligations, and prescribes how a regulator determines the regulated rate, or range of rates, charged to customers.
This type of regulation is common in essential service sectors such as electricity, water and gas, where a regulator determines how much an entity can charge customers and when it can charge them. The crucial point is timing. A company may supply a service in one period but be permitted to recover related amounts only in a future period, or charge amounts now that must be deducted from future rates.
Scope note
IFRS 20 does not apply to regulatory assets and regulatory liabilities arising from regulated premiums charged in insurance contracts within the scope of IFRS 17 Insurance Contracts.
The key issue: differences in timing
At the heart of IFRS 20 is timing: the gap between when regulatory goods or services are supplied and when the related compensation is included in regulated rates.
A difference in timing arises when part or all of the total allowed compensation for regulatory goods or services supplied in one reporting period is included in the regulated rates charged to customers in a different reporting period.
Where those timing differences create enforceable rights or obligations, IFRS 20 requires the recognition of regulatory assets and regulatory liabilities, together with related regulatory income and regulatory expense.
Regulatory assets and regulatory liabilities
Two concepts sit at the centre of the Standard. They are mirror images of one another.
| Regulatory asset | Regulatory liability | |
|---|---|---|
| Definition | An enforceable present right to add an amount to future regulated rates. | An enforceable present obligation to deduct an amount from future regulated rates. |
| Represents | An amount the entity is entitled to recover from customers in the future, for goods or services already supplied. | An amount already recovered from customers that must effectively be returned through reduced future charges. |
| Arises when | Costs are incurred now but recoverable through later tariffs. | Amounts are over-recovered now and reversed through later tariffs. |
Worked example · Regulatory asset
A regulated electricity company supplies electricity in 2026 and incurs approved costs of GHS 10 million. The regulator does not allow full recovery through 2026 tariffs, but permits GHS 3 million to be added to tariffs in 2027. That future recovery may give rise to a regulatory asset.
Worked example · Regulatory liability
A regulated water company charges customers GHS 5 million more than the regulator permits for a period. If the regulator requires future tariffs to be reduced by GHS 5 million, the entity may recognise a regulatory liability.
How it affects reported performance
Alongside regulatory assets and liabilities, IFRS 20 introduces regulatory income and regulatory expense. This matters because, without it, a regulated entity’s reported performance can be distorted by timing. The entity may appear less profitable when costs are incurred before they can be recovered, or more profitable when amounts charged must later be returned through lower rates.
By recognising these items, IFRS 20 makes the timing effects visible and improves the usefulness of the financial statements.
Measuring regulatory balances
IFRS 20 requires entities to measure regulatory assets and liabilities using a cash-flow-based measurement technique, unless otherwise specified: estimate the future cash flows arising from the balance, then discount them using the applicable regulatory interest rate.
In practice, this means weighing:
- the amount expected to be recovered or deducted;
- the timing of recovery or reversal;
- uncertainty around the estimated cash flows; and
- the effect of the time value of money.
It calls for careful judgement, reliable regulatory data and strong documentation.
How it fits with IFRS 15 and IFRS 14
| Relationship | What it means | |
|---|---|---|
| IFRS 15 | Supplemented, not replaced | Revenue from customer contracts is still recognised under IFRS 15. IFRS 20 adds the effects of rate regulation, so an entity may report IFRS 15 revenue and, separately, regulatory items under IFRS 20. |
| IFRS 14 | Replaced in full | IFRS 14 was an interim Standard that mainly let certain first-time adopters carry forward regulatory deferral balances under previous GAAP. IFRS 20 provides a comprehensive model for recognising, measuring, presenting and disclosing regulatory balances. |
Presentation and disclosure
IFRS 20 requires entities to disclose information about regulatory assets, regulatory liabilities, regulatory income and regulatory expense. The aim is to help users understand how the balances arose, when they are expected to be recovered or fulfilled, the risks and uncertainties involved, and how rate regulation affects performance and position.
These disclosures matter because regulatory balances directly affect users’ assessment of the amount, timing and uncertainty of an entity’s future cash flows.
Effective date and transition planning
IFRS 20 applies for annual reporting periods beginning on or after 1 January 2029, with earlier application permitted. The date may look distant, but implementation can require data that is not currently captured in an IFRS-ready form. Affected entities should begin assessing:
- whether they are within the scope of IFRS 20;
- which regulatory arrangements may create timing differences;
- whether regulatory assets or liabilities may arise;
- what data is needed to measure those balances;
- how systems will track future recovery or reversal; and
- the impact on profit or loss, assets, liabilities and key metrics.
Practical implications
IFRS 20 will be most relevant to entities subject to regulatory agreements that create regulatory assets and regulatory liabilities, commonly in sectors such as utilities, energy and other essential services. The effect depends on the regulatory framework: some entities may recognise significant regulatory assets where current costs are recoverable through future tariffs; others may recognise regulatory liabilities where they have over-recovered amounts. The Standard may also move key measures, including profit or loss, total assets, total liabilities, gearing ratios and return on assets.
Key accounting points to remember
- IFRS 20 applies to entities under a regulatory agreement that creates regulatory assets and liabilities.
- It addresses timing differences between when regulated goods or services are supplied and when amounts enter regulated rates.
- A regulatory asset is an enforceable present right to add amounts to future rates; a regulatory liability is an enforceable present obligation to deduct amounts from future rates.
- IFRS 20 supplements IFRS 15 and replaces IFRS 14.
- Effective for periods beginning on or after 1 January 2029; earlier application permitted.
- It does not apply to regulated insurance premiums within IFRS 17.
Conclusion
IFRS 20 is a major development for rate-regulated entities. Its purpose is to make the economic effects of rate regulation more visible, comparable and understandable. For providers of essential services such as electricity, water and gas, it will require careful analysis of regulatory arrangements and the timing of recoveries and reversals through future rates. For users of financial statements, it should offer clearer insight into how regulation shapes performance, position and future cash flows.
Affected entities should begin preparing now. The 2029 effective date is best treated as an implementation deadline, not a starting point.
Based on IFRS 20 Regulatory Assets and Regulatory Liabilities, issued by the International Accounting Standards Board (IASB) on 27 May 2026. This explainer is for educational purposes and is not a substitute for the full Standard or professional advice.
