What Rate-Regulated Businesses Need to Know

A new Standard for rate-regulated activities

The issuance of IFRS 20 Regulatory Assets and Regulatory Liabilities by the International Accounting Standards Board on 26 May 2026, marks an important development for entities operating in rate-regulated industries. The Standard applies to annual reporting periods beginning on or after 1 January 2029, with earlier application permitted. 

IFRS 20 introduces specific requirements for recognising and measuring regulatory assets and regulatory liabilities. These arise when a rate regulator determines the amount an entity can charge customers for goods or services, and where that amount creates rights to recover costs or obligations to reduce future rates.

For businesses in sectors such as electricity, water, gas, energy, and transport, the Standard is expected to provide a clearer picture of how regulation affects reported performance, financial positions, and future cash flows. 

Why IFRS 20 matters

Rate-regulated entities often incur costs in one reporting period but recover them through customer rates in another. Similarly, amounts charged to customers in one period may need to be returned through lower rates in the future.

These timing differences can make financial results difficult to interpret if they are not clearly reflected in the financial statements. IFRS 20 addresses this by requiring entities to recognise regulatory income, regulatory expense, regulatory assets, and regulatory liabilities.

This should help users of financial statements better understand:

• Performance: Whether the entity has earned regulatory compensation during the period, even if it has not yet been billed to customers.
• Financial Position: Whether the entity has a right to recover amounts through future rates or an obligation to reduce rates in the future.
• Future Cash Flows: When regulatory adjustments are expected to affect future billings, collections or refunds.

How IFRS 20 fits within existing IFRS Standards

The key change is that the effects of rate regulation will be recognised more directly in the financial statements. This should reduce diversity in practice and make it easier to compare entities operating in regulated sectors across different jurisdictions.

For management, this also means that regulatory arrangements will need to be reviewed carefully to determine whether they create regulatory assets or liabilities under the new Standard.

Practical considerations

Although the effective date may appear some time away, implementation may require significant preperation. Businesses should start considering:

1. Whether their existing regulatory agreements fall within the scope of IFRS 20.
2. What information will be needed to identify and measure regulatory assets and liabilities.
3. Whether current systems can capture the required data.
4. How the Standard may affect reported revenue, profit, net assets and key performance indicators.
5. Whether internal controls and reporting processes need to be updated.
6. How the expected impact should be communicated to investors, lenders and other stakeholders.

Early assessment can help businesses identify gaps, avoid last-minute implementation challenges, and provide more meaningful information to stakeholders.

How Grant Thornton Malta can help

IFRS 20 is more than a technical accounting change. For affected entities, it may require a detailed understanding of regulatory agreements, financial reporting processes, data availability and stakeholder communication. 

Grant Thornton Malta can support businesses in assessing the impact of IFRS 20, identifying implementation gaps and preparing for a smooth transition. Our accounting advisory and assurance team can help translate the requirements of the new Standard into practical, business-focused actions.