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FASB Codification research paper
Finance & Accounting
Pages 4 (1004 words)
If the Company reported its results pursuant to IFRSs rather than U.S. GAAP, how would the Company record the purchase and sale of its EAs differently? Currently, there is no accounting standard or interpretation within International Financial Reporting Standards (IFRS) or US GAAP that is very clear in the accounting scheme for emission credits (Accounting Guidance for Emissions Programs - EY - United States, n.p.)…
03-14 “Participants’ Accounting for Emission Allowances under a “Cap and Trade” Program” (Fornaro and Winkelman et al, n.p.). According to the results of that discussion, U.S. accounting practices for emissions allowances can be found in the “Uniform System of Accounts”, published by the Federal Energy Regulatory Commission (FERC) in 1993 (Fornaro and Winkelman et al, n.p.; FASB, n.p.). According to FERC, emissions allowances should be classified as inventory assets, and be reported at historical cost; in case of purchased allowances, these should be “recordered at their exchange price while those received from the EPA at no charge have a zero basis” (Fornaro and Winkelman et al, n.p.). FERC requires to apply the weighted-average cost method and to perform calculations monthly based either on reasonable estimates or actual data (Fornaro and Winkelman et al, n.p.). At its November 19, 2010 meeting, FASB jointly with IASB provided two measurement models for measuring the purchased allowances (FASB 2010, 2). Tentative decision of the Boards was the following “purchased allowances should be initially and subsequently measured at fair value” (FASB 2010, 2). ...
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