IASB Issues IFRS 20 Regulatory Assets and Regulatory Liabilities

IASB Issues IFRS 20 Regulatory Assets and Regulatory Liabilities

On 27 May 2026, the IASB issued IFRS 20 Regulatory Assets and Regulatory Liabilities, the comprehensive standard for entities operating under rate regulation. IFRS 20 supersedes IFRS 14 Regulatory Deferral Accounts and is effective for annual periods beginning on or after 1 January 2029, with early application permitted.

The Problem IFRS 20 Solves

Rate-regulated entities face a fundamental timing challenge. The revenue recognised under IFRS 15 Revenue from Contracts with Customers in a given period often differs from the total allowed compensation — the amount to which the company is entitled for regulatory goods or services supplied in that period. This gap arises because regulators set tariffs in advance or in arrears, creating rights and obligations that cross reporting periods and were previously unrecognised under IFRS.

Illustration: Company A has input costs of CU120 in Year 1 but charges customers only CU100 (the estimated rate). Under IFRS 15 alone it reports a loss of (20) in Year 1 and a profit of 20 in Year 2 — misleading investors about each year's performance. Applying IFRS 20, it recognises regulatory income of CU20 in Year 1 and a regulatory asset of CU20, showing breakeven profit in both years and accurately reflecting the economics of each period.

Scope

IFRS 20 applies to companies subject to a regulatory agreement — an agreement that creates enforceable rights and obligations prescribing how a regulator (a body required by law or regulation to determine rates) sets the regulated rate charged for goods or services supplied in a period.

Regulatory goods or services encompass more than simply supplying goods or services to customers (which gives rise to IFRS 15 revenue). They also include maintaining the network (including routine maintenance and standing ready to repair), upgrading network capacity, and satisfying other regulator-set objectives.

Scope exception: IFRS 20 does not apply to regulatory assets and liabilities arising from regulated premiums charged under insurance contracts within the scope of IFRS 17.

Key Concepts: Differences in Timing

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 charged to customers in a different period through the regulated rates. These differences give rise to:

• Regulatory asset — an enforceable present right to add an amount to future regulated rates, because compensation for goods or services already supplied has not yet been included in IFRS 15 revenue
• Regulatory liability — an enforceable present obligation to deduct an amount from future regulated rates, because compensation for goods or services to be supplied in the future has already been included in IFRS 15 revenue
• Regulatory income — income arising from changes in a regulatory asset or regulatory liability
• Regulatory expense — expense arising from changes in a regulatory asset or regulatory liability

Recognition

A company recognises all regulatory assets and liabilities existing at the end of the reporting period and all regulatory income and expense arising during the period. The recognition threshold is more likely than not to exist.

In assessing existence, the company considers all reasonable and supportable information available without undue cost or effort, including applicable regulatory decisions and court rulings, direct and indirect precedents, evidence of incurred allowable expenses, and advice from qualified legal advisers.

For regulatory assets and liabilities arising from regulatory depreciation of a regulatory capital base (RCB), recognition requires a direct relationship between the RCB and the related items (such as depreciable or amortisable assets). The company must be able to track, by amount and reporting period, how regulatory depreciation provides compensation for, or makes a deduction for, amounts arising from those related items.

Measurement

IFRS 20 requires a cash-flow-based measurement technique:

1. Estimate all future cash flows arising from recovery of the regulatory asset or fulfilment of the regulatory liability (including cash flows from regulatory interest), using either the most likely amount or the expected value method 2. Discount those cash flows at the regulatory interest rate — typically the rate specified in the regulatory agreement

After initial recognition, the company updates its estimates as facts change, but continues to use the discount rate determined at initial recognition unless the regulatory agreement changes the regulatory interest rate.

A simplified measurement approach applies when an item affects regulated rates only when cash is paid or received: the regulatory asset or liability is measured at the carrying amount of the related liability or asset, adjusted for differences such as credit risk or demand risk.

Presentation

Statement of profit or loss: Regulatory income and regulatory expense are classified as revenue and presented as a separate line item alongside IFRS 15 revenue, giving investors direct visibility into the total allowed compensation for each period. Where an item of income or expense is included in OCI under another IFRS standard (for example, pension remeasurements under IAS 19), the related regulatory income or expense is also recognised in OCI.

Statement of financial position: Regulatory assets and regulatory liabilities are presented as separate line items, classified between current and non-current.

Disclosure Requirements

IFRS 20 introduces extensive disclosure requirements:

• Reconciliations of opening to closing carrying amounts of regulatory assets and liabilities, showing components in profit or loss and OCI
• Maturity analysis showing quantitative information, using time bands, about when the company expects to recover regulatory assets and fulfil regulatory liabilities
• Information about unrecognised regulatory assets and liabilities and the reasons they have not been recognised
• Disclosures about the company's RCB and its relationship to related items: the type of relationship (direct or not direct), the reasons for that characterisation, and any changes

Transition

Companies may apply IFRS 20 either:

• Retrospectively in accordance with IAS 8 Basis of Preparation of Financial Statements, or
• Using a modified retrospective approach, which provides transition reliefs including the use of hindsight at the transition date

Regardless of the approach chosen, adjusted comparative information for the immediately preceding period is required. First-time adopters of IFRS Accounting Standards may also use the modified retrospective approach.

Effective Date

IFRS 20 is effective for annual periods beginning on or after 1 January 2029. Early application is permitted. It supersedes IFRS 14 Regulatory Deferral Accounts.

Who Is Affected?

IFRS 20 primarily affects entities in regulated sectors worldwide:

• Electricity, gas and water utilities
• Telecommunications network operators
• Railways, airports and transport infrastructure
• Any entity subject to a regulatory agreement that prescribes the rates it charges customers