IASB issues IFRS 20 Regulatory Assets and Regulatory Liabilities

The IASB has issued IFRS 20 Regulatory Assets and Regulatory Liabilities, a new IFRS Accounting Standard aimed at improving financial reporting for entities subject to rate regulation, such as utilities providing electricity, water and gas. The Standard addresses ‘timing differences’ arising when the total allowed compensation to an entity under rate regulation for goods or services supplied in one reporting period is included in determining the regulated rates to be charged to customers in a different reporting period.  The Standard requires entities to recognise regulatory assets and liabilities to better reflect the compensation they are entitled to receive for goods or services provided in a reporting period and in turn, the financial performance and position. It is expected to enhance transparency, reduce diversity in practice and improve comparability across regulated industries. 

IFRS 20 is effective for annual periods beginning on or after 1 January 2029, with early application permitted, and replaces IFRS 14 Regulatory Deferral Accounts while complementing IFRS 15 Revenue from Contracts with Customers. The IASB expects the new Standard to provide investors with more complete and decision-useful information about the effects of rate regulation on companies’ cash flows and future prospects.

The press release, IFRS Accounting Standard, Basis for Conclusions, Illustrative Examples and other supporting materials may be accessed here.