FASB to Tackle Rule-Making on Accounting for Environmental Credits

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US accounting standard-setter will consider writing clear rules related to companies’ renewable-energy credits and carbon offsets

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Carbon offset credits are what companies purchase and calculate their goals for reducing greenhouse gas emissions. Renewable-energy credit certificates are awarded by regulators to energy providers when they distribute wind, solar or hydroelectric power to the power grid.

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As of now, there are no specific accounting rules that companies must follow when recording purchases of renewable-energy credits and carbon offsets. Some companies credit expenses at the time of purchase, while others capitalize and write them off later.

The FASB move comes two months after the Securities and Exchange Commission proposed broad disclosure requirements around climate risk for US public companies. The SEC’s proposal would force companies to explain how carbon offsets and renewable-energy credits play into their climate-related business strategies.

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It is unclear whether the FASB’s project will overlap with the US securities regulator’s plan. The SEC on Wednesday proposed new requirements for investment funds, taking into account environmental, social and corporate-governance factors.

In December the FASB asked its employees to begin research on environmental credits. The board is evaluating its priority projects after a consultation which has received over 500 letters from companies, investors, academia and other stakeholders.

The companies were particularly vocal in suggesting the FASB set rules for accounting for climate-related transactions as they expect them to become a more relevant part of their business.

telecommunications company charter communication Inc.

A letter to the FASB last September said an accounting framework for climate-related deals would help it and other companies work toward becoming carbon neutral and enter into more such transactions.

“Uncertainty exists about how the GAAP accounting literature is applied today,” said Kevin Howard, Charter’s chief accounting officer and controller, referring to generally accepted accounting principles in the US. On Wednesday, Charter did not respond to a request for comment on the FASB’s decision to add the eco-credit project to its technical agenda.

“Preparers are asking us to take a look at this area,” said FASB board member Jim Crocker. “Auditors who want to enforce high-quality standards … are left with the same challenges if we have to account for one of these programs.”

Write [email protected] . on Mark Maurer

Credit: www.wsj.com /

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