IASB issues guidance for reporting greenhouse gas liabilities

The International Accounting Standards Board has dipped a toe into environmental reporting issues with draft guidelines on accounting requirements for greenhouse gas emissions.

The guidance for companies that take part in government schemes aimed at reducing greenhouse gases emerged in proposals from the board's International Financial Reporting Interpretations Committee (IFRIC). This group's role is to indentify areas of potential divergence and in accounting treatments and seeks to establish a consensus.

The new draft guidelines, IFRIC Interpretation D1 'Emission Rights', would require companies to account for the emission allowances they receive from governments as intangible assets, recorded initially at fair value. Greenhouse gas emissions would then give rise to a liability for the obligation to deliver allowances to cover those emissions.

“Emission control schemes that utilise marketable allowances are becoming widespread as a result of the Kyoto Agreement,” IFRIC chairman Kevin Stevenson.

“In these proposals, we have focused on the important common features of the new schemes. We may have to go further as practice develops. At present some companies are not accounting for the assets, liabilities or government grants involved or at least are very uncertain about the appropriate accounting treatment.”

IASB chairman welcomed the draft guidelines and urged industries affected by such schemes to take an active part in the IFRIC's exposure process, which will last until 14 July 2003.

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