On June 12, 2024, the Financial Accounting Standards Board (FASB) voted 7-0 to move forward on an exposure draft that will propose both public and privately held companies apply one model to account for various environmental credits.
Currently, there are no environmental accounting rules that companies must follow, which has led to inconsistent accounting and disclosure practices.
One of the FASB’s priorities this year is to provide investors with consistent and comparable information. The proposal will cover environmental credits, carbon offsets and cap-and-trade programs, including credits generated from renewable sources.
The proposal would require companies to follow the following framework when accounting for most environmental credits:
- Companies would be required to recognize an environmental credit revenue or expense when the credit likely will be used to settle an obligation or sold.
- Credits would be required to be valued at cost on the balance sheet and evaluated for impairment.
- Companies will be required to include additional disclosures, including significant holdings; compliance obligations and information supporting revenue and expenses recorded on the income statement.
The FASB plans to issue a formal proposal by the end of 2024.
About Schneider Downs Energy & Resources ServicesÂ
The Schneider Downs Energy & Resources industry group provides specialized financial advice and services to our clients in the oil and gas, mining and aggregates, forest products and alternative fuel and energy industries throughout the Columbus and Pittsburgh regions. Our extensive knowledge of industry issues enables us to provide proactive audit, tax and management consulting services. Â
To learn more, visit our Energy and Resources Industry Group page.Â
