There are no explicit requirements that address the accounting for mandatory emissions trading schemes, including mandatory carbon credits, or for voluntary carbon credits.
The award of carbon credits certificates in compliance markets represents generally a government grant.
Whether received from a grant or purchased, determine if credits or certificates are recognised as per IAS 2 Inventories or IAS 38 Intangible Assets.
Consider IAS 2 when credits are held for sale in the ordinary course of business.
Consider IAS 38 when credits are held to settle an emissions liability in the ordinary course of business.
| ‘Full market value’ approach (IFRIC 3) | ‘Cost of settlement’ approach - ‘Initial market value’ | ‘Cost of settlement’ approach - ‘Nominal amount’ | ||
|---|---|---|---|---|
|
Granted and purchased allowances (Asset)
|
Recognition
|
Recognise when the ability to exercise control is achieved
|
||
|
Initial measurement
|
Initial measurement at the fair value on the date of initial recognition
|
Measure initially and subsequently at cost
|
||
|
Subsequent measurement
|
Subsequent measurement can be based on either the initially recognised amount (using the cost model) or the revalued amount (using the revaluation model)
|
Subsequent measurement can be based on either the initially recognised amount (using the cost model) or the revalued amount (using the revaluation model)
|
Granted allowances are typically valued at zero. Purchased allowances, on the other hand, are subject to subsequent impairment assessments.
|
|
|
Government grant
|
Recognition
|
Recognise at the same time as allowances
|
||
|
Initial measurement
|
Initially measured at the fair value of the allowances at the date of initial recognition
|
Measure initially and subsequently at cost
|
||
|
Subsequent measurement
|
Amortise over the compliance period using a systematic and rational approach
|
Amortise over the compliance period using a systematic and rational approach
|
Measure both initially and subsequently at a nominal value, typically zero
|
|
|
Emissions obligations (liability)
|
Recognition
|
Recognise when the liability when emissions obligations are incurred with debit to appropriate cost in income statement
|
||
|
Measurement
|
Remeasure the liability by considering the fair value of allowances at the end of each reporting period, or a value determined based on a forward rate, regardless of whether they will be settled using available allowances or through market purchases.
|
At the end of each reporting period, remeasure the liability. The portion of the liability to be settled with currently held allowances is assessed at the carrying amount of those allowances. Any surplus emissions are assessed at the market value of allowances at the end of the period, or a value determined based on an appropriate forward rate.
|
Remeasure the liability at the end of each reporting period. The portion of the liability intended to be settled with currently held allowances is typically valued at zero. Any excess emissions are valued at the market value of allowances at the end of the period.
|
|
