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FASB to Tackle Rule-Making on Accounting for Environmental Credits

The standard-setter for U.S. accounting FASB (Financial Accounting Standards Board), will be considering the creation of rules for how companies should account for climate-related transactions.  This will be a key step to providing clarity to firms and investors alike when dealing with items involving renewable-energy credits and carbon offsets.

Upcoming Projects

FASB recently reported that this project will be added to their technical agenda which features its rule-making priorities.  Earlier this month, a different project was added on the accounting and disclosure for some digital assets such as Bitcoin and Ethereum.  It seems like between these two complex topics, FASB will have its hands full.

Environmental Credits

The information looking to be accounted for is related to renewable-energy credits and carbon offsets.  Renewable-energy credits are certificates regulators offer to energy providers when they deliver wind, solar, or hydroelectric energy to a power grid.  Carbon offsets are credits companies buy and count towards their targets to reduce greenhouse gas emissions.

At this time, there are no specific rules that companies must follow when accounting for the purchase of renewable-energy credits and carbon offsets.  Currently, some companies expense the credits at the time of purchase, while others capitalize and write them off later.

wind turbines

Wrap Up

FASB now has some high-priority projects staring them down as they will be creating a standard set of rules for both environmental credits, and reporting on the majority of digital assets.  While it is currently unclear how these rules will shape up, we will be following along to provide you with the latest updates.

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