IFRS 20 is here: New accounting requirements for rate-regulated activities

IFRS 20 Regulatory Assets and Regulatory Liabilities is a new accounting standard issued by the International Accounting Standards Board (IASB) in May 2026, which applies to annual reporting periods beginning on or after 1 January 2029, with early adoption permitted. It supersedes IFRS 14 Regulatory Deferral Accounts, an interim standard that allowed eligible first-time adopters to continue recognising and measuring regulatory deferral account balances using previous generally accepted accounting principles (GAAP).

Note: At the time of writing, the Australian Accounting Standards Board had not yet approved IFRS 20 for application in Australia as AASB 20.

Who does IFRS 20 apply to?

IFRS 20 applies to entities that have regulatory assets and regulatory liabilities. However, it does not apply to regulatory assets and regulatory liabilities arising when premiums charged in insurance contracts within the scope of IFRS 17 Insurance Contracts are regulated.

What problem is IFRS 20 solving?

IFRS 20 aims to give users (existing and potential investors, lenders and other creditors), better information about how rate regulation affects financial performance, financial position and prospects for future cash flows. It addresses a gap in financial reporting caused by “differences in timing”. These arise when the compensation an entity is entitled to charge customers for regulatory goods or services (a regulated rate) supplied in one period is included in regulated rates charged in another period. In those cases, revenue recognised under IFRS 15 Revenue from Contracts with Customers on its own may not fully reflect performance for the period.

What do we mean by ‘regulated rate’?

Example

A simple example shows why the Standard matters. If an entity incurs costs in Year 1 that it can only recover from customers in Year 2, reporting only IFRS 15 revenue in Year 1 results in the entity appearing to underperform in Year 1 and overperform in Year 2. IFRS 20 addresses this by recognising regulatory income and a related regulatory asset in Year 1, and regulatory expense as that asset is recovered in Year 2. This gives a more complete picture of total allowed compensation for the goods or services supplied in each period.

Requirements of IFRS 20

IFRS 20 requires recognition, measurement, presentation and disclosure of these regulatory balances and their effects. According to the IASB’s IFRS 20 at a glance summary, entities will need to consider whether a regulatory asset or regulatory liability exists, measure it using updated future cash flows discounted using the regulatory interest rate, present regulatory income or expense in the statement of profit or loss, and provide disclosures including reconciliations, maturity analysis and information about unrecognised regulatory balances.

Transition

When applying IFRS 20 for the first time, the transition date is the beginning of the annual reporting period immediately preceding the date of initial application (for example, an entity with a 31 December 2029 year-end, the transition date will be 1 January 2028).

All regulatory assets and regulatory liabilities must either be retrospectively restated from the transition date, or a modified retrospective approach is allowed.

Modified retrospective approach

An entity choosing the modified retrospective approach may use one or more of the following transition reliefs:

• Elect to apply the requirements for a regulatory return on assets not yet available for use in specific circumstances only to assets that are not yet available for use at the transition date
• Implied regulatory interest rates: The entity may elect to disregard any implied regulatory interest rates that would have been derived from the terms of the regulatory agreement before the transition date
• Hindsight is permitted at the transition date when applying the requirements in IFRS 20. For example, an entity may use hindsight when estimating the cash flows arising from a regulatory asset or a regulatory liability.

If an entity uses the modified retrospective approach, it must disclose:

• Which of the transition reliefs it has applied, and
• Describe, if appropriate, how it has applied those transition reliefs.

Interim financial statements

IAS 34 Interim Financial Reporting, paragraph 10, requires an entity to include in its interim financial reports, the headings and subtotals that were included in its most recent annual financial statements. However, in the first year applying IFRS 20, the transitional provisions require an entity to apply a ‘look forward’ approach: it must present in its first interim financial statements, each heading and subtotal it expects to use when applying IFRS 20 in its first annual financial statements, with adjustments for comparatives.

Need help?

Please contact our IFRS & Corporate Reporting team if you need help navigating the new requirements for rate-regulated activities.