What Is TFRS 20 “Regulatory Assets and Regulatory Liabilities”?

TFRS 20, together with its international equivalent IFRS 20, aims to show transparently, in the financial statements of entities whose prices are set by a regulator (such as energy, water, natural gas and transport), the timing differences arising from tariff regulation.

What problem does the standard solve?

Under regulated tariffs, a cost or income incurred in one period is often reflected in the tariffs of later periods. This causes reported profit to fluctuate between periods and makes it harder to read the company's true performance.

• Regulatory asset: amounts the entity has the right to recover in the future by adding them to the tariff.
• Regulatory liability: amounts the entity must return to customers in the future by deducting them from the tariff.

Who is affected?

EMRA-licensed electricity and natural gas distribution companies, water and wastewater service providers, and transport and infrastructure operators working under regulated tariffs.

What should companies do?

• Analyse their tariff mechanisms and agreements with the regulator from the standard's perspective,
• Determine prior-period differences and opening balances,
• Prepare systems, processes and internal controls for the new reporting requirements.

For the effective date and transition provisions, refer to the text of the standard published by the POA. For support with TFRS 20 transition projects, you can talk to our CFO advisory team.