The IASB issued IFRS 20, Regulatory Assets and Regulatory Liabilities, a new accounting standard for companies subject to rate regulation that determines how much a company can charge customers and when it can charge them.
The standard aims to help investors better understand how that rate regulation affects a company’s financial performance, financial position, and its prospects for future cash flows, a news release said. IFRS 20 is also expected to reduce diversity in accounting practices and improve comparability between companies in regulated industries, the release said.
Companies that supply vital services such as electricity, water, and gas are often subject to this type of regulation.
“If there is a difference between when a company supplies regulatory goods and services and when it charges customers for those goods and services, reported revenue may not fully reflect the company’s performance in a period,” the release said. “IFRS 20 calls this a ‘difference in timing’. The new standard requires companies to account for the effects of differences in timing in their financial statements.”
The development of IFRS 20 was informed by extensive consultation, including more than 300 comment letters, more than 200 stakeholder meetings, and two rounds of fieldwork conducted in 22 jurisdictions, the release said. IFRS 20 supplements the information a company provides when applying IFRS 15, Revenue From Contracts With Customers, and replaces IFRS 14, Regulatory Deferral Accounts.
The standard is effective for annual reporting periods beginning on or after 1 January 2029.
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