US GAAP updates: From preferred stock to environmental credits

Below is a summary of selected ASUs issued during April through June 2026. This list is not exhaustive; please refer to our additional publications for a broader view of recent standard-setting activity and implementation considerations.

ASU 2026-01—Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock

Standardizing the measurement of PIK dividends on preferred stock

Effective for all entities: Annual reporting periods beginning after Dec. 15, 2026, and interim periods within those annual reporting periods; early adoption permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance.

What you need to know

• Establishes a consistent method for measuring PIK dividends based on the dividend provisions specified in the preferred stock agreement, reducing diversity in practice and improving comparability.
• Depending on an entity’s existing accounting approach, adoption may affect the carrying amount of preferred stock, equity balances, and the amount of income available to common shareholders used in EPS calculations.
• May require enhanced monitoring of liquidation values as PIK dividends increase the preferred stock carrying amount over time.

Why CFOs should pay attention

• While the guidance appears narrowly focused, entities with equity-classified preferred stock that includes PIK dividend features should evaluate the potential reporting impacts of the new requirements. This may be particularly relevant for venture-backed and high-growth companies, which frequently utilize preferred stock arrangements containing PIK features as part of their capital structures. Changes in how these dividends are measured can directly impact earnings-per-share calculations, investor reporting metrics, debt covenant analyses, and transaction modeling.
• Organizations should assess these arrangements early to avoid surprises during future reporting periods, financing transactions, IPO readiness initiatives, or M&A activities.

Your next steps

• Evaluate whether existing capitalization models, financial reporting processes, and SEC reporting controls adequately support the new requirements and whether implementation may affect key performance metrics monitored by investors and lenders.
• Inventory preferred stock arrangements and identify PIK dividend features subject to the new guidance.
• Assess whether existing accounting policies and measurement methodologies require modification.
• Evaluate the transition methods in the guidance and assess whether historical information will be required to support adoption.
• Evaluate whether systems, processes, and controls can appropriately track accreted liquidation values and future compounding effects.
• Determine the most appropriate transition method and plan implementation activities accordingly.
• Consider the impact on EPS calculations, financial statement disclosures, and related reporting processes.
• Discuss planned transition activities with auditors early in the process, including significant accounting judgments, anticipated changes to financial reporting processes and controls, and the organization’s readiness for adoption. Early dialogue can help identify areas requiring additional analysis or documentation and support a more efficient implementation process.

ASU 2026-02—Environmental Credits and Environmental Credit Obligations (Topic 818)

FASB introduces a comprehensive framework for environmental credits and obligations

Environmental credits have become increasingly important for organizations participating in regulatory compliance programs, emissions trading markets, and other environmental initiatives, resulting in greater focus on the related accounting and reporting considerations. ASU 2026-02 establishes a comprehensive accounting framework to improve consistency, transparency, and comparability in this growing area.

Effective for public business entities for annual reporting periods beginning after Dec. 15, 2027, and interim reporting periods within those annual reporting periods. For all other entities, for annual reporting periods beginning after Dec. 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption permitted as of the beginning of an annual reporting period.

What you need to know

• Introduces the first comprehensive U.S. GAAP framework for the recognition, measurement, presentation, and disclosure of environmental credits and related obligations. The accounting treatment depends on both the nature of the environmental credit and the entity’s intended use of the credit, resulting in different recognition and measurement outcomes for different types of programs.
• Enhances consistency and comparability across entities participating in environmental and regulatory compliance programs.
• Entities will need to evaluate the nature of their environmental credit activities and distinguish between compliance credits, non-compliance credits, and voluntary environmental credits when applying the new guidance.
• As organizations expand sustainability initiatives, participate in emissions trading programs, pursue renewable energy strategies, or make net-zero commitments, environmental credits increasingly represent material assets, obligations, and disclosure considerations.
• The new standard introduces a comprehensive accounting framework designed to reduce diversity in practice; however, implementation will likely require coordination across finance, sustainability, operations, legal, tax, and technology teams.
• Implementation may require enhanced processes and controls to support the classification, measurement, and monitoring of environmental credits and related obligations, including ongoing assessments of asset recoverability where applicable.
• Likely to have broad implications for industries with significant environmental credit activities, including energy, utilities, manufacturing, transportation, and other industrial sectors.
• May change the timing of recognition for environmental credit assets and related obligations, affecting earnings patterns, balance sheet presentation, and financial statement disclosures.
• Certain environmental credits may be subject to ongoing impairment or recoverability assessments, making it important for organizations to establish processes for identifying and monitoring factors that could affect the carrying value of environmental credit assets.

What CFOs should be doing now

• Inventory environmental credit arrangements across the organization.
• Assess data quality and ownership of environmental credit information.
• Evaluate accounting policies, valuation methodologies, and internal controls.
• Identify potential impacts on financial reporting, ESG reporting, and investor communications.

Organizations that begin planning early will be better positioned to avoid implementation challenges and support consistent reporting across financial and sustainability disclosures.

Your next steps

• Identify and evaluate all environmental credit programs, assets, and compliance obligations within the organization.
• Review existing accounting policies to determine whether current practices will require modification under Topic 818.
• Evaluate whether existing processes, controls, and data are sufficient to support the recognition, measurement, and ongoing monitoring of environmental credits and environmental credit obligations under ASC 818.
• Engage sustainability, legal, operational, and finance stakeholders to support implementation and ongoing compliance.

Call to action: Preparing for new reporting challenges

While ASU 2026-01 and ASU 2026-02 address very different accounting topics, both underscore a common reality: Successful implementation depends on more than technical accounting analysis. Organizations should evaluate how the new guidance may influence earnings-per-share calculations, capitalization models, environmental credit tracking, valuation methodologies, internal controls, and disclosure processes.

Companies that begin planning now can better identify data gaps, strengthen governance over complex transactions and environmental programs, and ensure that finance, sustainability, legal, operational, and technology teams are aligned well in advance of the effective dates. Early preparation can help minimize implementation challenges while supporting transparent, decision-useful reporting for investors and other stakeholders.

IFRS Update: A new era for rate-regulated reporting

The IASB continued its efforts to enhance the quality, transparency, and comparability of financial reporting during the second quarter of 2026. The most significant development was the issuance of IFRS 20, “Regulatory Assets and Regulatory Liabilities,” which introduces a comprehensive accounting framework for entities subject to rate regulation and replaces the temporary guidance previously provided by IFRS 14.

For many entities subject to rate regulation, IFRS 20 may represent one of the most significant financial reporting changes in recent years because it introduces recognition and measurement requirements that were not previously addressed comprehensively under IFRS Accounting Standards. Utilities, infrastructure providers, energy companies, and other regulated entities may experience substantial changes in how regulatory assets, liabilities, revenues, and expenses are recognized and presented. Beyond compliance, finance leaders should consider how these changes may influence financial statement trends, analyst communications, performance metrics, financing arrangements, and future strategic planning decisions.

IFRS 20 – A new accounting framework for rate-regulated activities

Effective for: Annual reporting periods beginning on or after Jan. 1, 2029; earlier application permitted. IFRS 20 was issued in May 2026.

What you need to know:

• Introduces a comprehensive accounting model for regulatory assets and regulatory liabilities arising from rate-regulated activities, requiring entities to recognize the effects of timing differences between when regulated goods or services are provided and when the related amounts are recovered through customer rates.
• Enhances comparability and transparency for entities subject to rate regulation by providing consistent recognition and measurement requirements.
• Replaces the temporary guidance in IFRS 14 and establishes a permanent framework for reporting the effects of regulatory agreements.
• Expected to have the greatest impact on utilities and other industries whose pricing is governed by regulatory authorities.

Your next steps

• Conduct an early impact assessment: Identify regulated activities and assess whether existing rate-regulated arrangements fall within the scope of IFRS 20.
• Evaluate system and data requirements needed to support the recognition, measurement, and disclosure requirements of IFRS 20.
• Assess potential implementation challenges and develop a plan to reduce implementation risk.
• Consider how future reporting changes may affect stakeholder communications, including discussions with investors, lenders, regulators, and analysts.
• Evaluate the potential impact on financial statement recognition, measurement, and presentation of regulatory balances.
• Review systems, processes, and controls needed to capture information required under the new standard.
• Coordinate with regulatory, finance, and operational stakeholders to assess implementation implications.
• Develop an implementation roadmap well in advance of the 2029 effective date, including consideration of any transition requirements.

What this means for finance leaders

• Like the FASB updates above, the latest IASB standard-setting activity reinforces a broader reality facing today’s CFOs: Accounting changes increasingly require enterprise-wide transformation rather than isolated technical accounting exercises.
• For some entities, IFRS 20 may result in the recognition of regulatory assets and regulatory liabilities that were not previously reported under IFRS Accounting Standards, requiring new processes, controls, and reporting capabilities to support ongoing compliance.
• Successful implementation depends on strong governance, effective cross-functional collaboration, scalable processes, and robust internal controls.
• Organizations that proactively assess the implications of new standards will be better positioned to reduce compliance risk, improve reporting efficiency, and provide stakeholders with transparent, decision-useful information.

Now is the time to evaluate readiness, identify implementation challenges, and develop a roadmap that supports both compliance and long-term business objectives.

Call to Action: Preparing for IFRS 20

With IFRS 20 establishing a permanent accounting framework for rate-regulated activities, regulated entities should use the extended implementation timeline as an opportunity to assess readiness rather than delay planning. Utilities, energy companies, infrastructure providers, and other regulated organizations may need to revisit existing processes, data sources, controls, and reporting methodologies to support the standard's recognition, measurement, and disclosure requirements.

By conducting an early impact assessment and developing a structured implementation roadmap, finance leaders can better manage transition challenges, improve stakeholder communications, and position their organizations for a smoother adoption process when the standard becomes effective.