Utilities companies prepare for IFRS 20

Multiple-choice questions. In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please reread the article before attempting the questions again.

What was the primary reason for introducing IFRS 20?

To simplify financial statement presentation

To replace IFRS 15 Revenue from Contracts with Customers

To address timing differences caused by rate regulation arrangements

To provide guidance on sustainability reporting

Which types of entities are most likely to be affected by IFRS 20?

Investment funds

Retail companies

Technology start-ups

Entities providing regulated services such as electricity, water, and gas

IFRS 20 replaces which existing standard?

IFRS 14, Regulatory Deferral Accounts

IAS 1, Presentation of Financial Statements

IFRS 18, Presentation and Disclosures in Financial Statements

IAS 12, Income Taxes

If a company incurs 20 dollars in costs in year 1 that can be recovered by being added to the regulated rate in year 2, how would this be accounted for in year 1 prior to IFRS 20?

Break-even

Loss of 120 dollars

Profit of 20 dollars

Loss of 20 dollars

If a company incurs 20 dollars in costs in year 1 that can be recovered by being added to the regulated rate in year 2, how would this be accounted for in year 1 under IFRS 20?

Dr Regulatory asset 20 dollars, Cr Regulatory income 20 dollars

Dr Trade receivables 20 dollars, Cr Revenue 20 dollars

Dr Regulatory expense 20 dollars, Cr Regulatory liability 20 dollars

No recognition

What is the core principle of IFRS 20?

All regulatory balances should be recognised directly in equity

Revenue should always equal cash received

Regulatory assets should be recognised only when cash is received

Total compensation should be recognised in profit or loss in the same period as the related goods or services are supplied

When is IFRS 20 mandatory for companies applying IFRS Accounting Standards?

1 January 2027

1 January 2026

1 January 2029

1 January 2028

How many IFRS Accounting Standards were issued between 2018 and 2023?

Which of the following statements is/are true? Statement 1, IFRS 18 replaces IAS 1, Presentation of Financial Statements, or statement 2, IFRS 20 replaces IAS 2, Inventories

Statement 2 only is true

Statement 1 only is true

Both statements are true

Neither statement is true

Which of the following statements is/are true? Statement 1, IFRS 20 is expected to have a wider impact on companies than IFRS 18, or statement 2, companies are permitted to apply IFRS 20 before its mandatory effective date.