Australia proposes accounting methods for carbon emission permits
Climate Connect News, 18 July 2012, London: Australian
investors are likely to have limited access to information about the
impact of carbon price on the company balance sheet if the one of the
accounting standards proposed by the Australian Accounting Standards
Board is implemented. The Australian Accounting Standards Board has
proposed two approaches to calculate the carbon price effect on a
company’s balance sheet viz. the ‘gross’ and the ‘net’.
The gross approach allows all permit
holders to recognize the free emission allowances as asset at $23/tonne
and carbon tax as a liability that grows at $23/tonne with emissions.
The net approach, on the other hand, allows a company to recognize only
the net impact of the carbon pricing scheme. The free emission
allowances would have nil value and will not be mentioned in the balance
sheet. The amount paid for offsetting emissions over the permissible
limit would be noted as liability. Thus the investors would be presented
only with the net impact of the carbon price on a company without the
details of the company’s transactions in the carbon instruments.
Experts believe that the net approach is likely to be followed by companies as it is simpler and focuses on cash flow and limits disruption to financial records.
Experts believe that the net approach is likely to be followed by companies as it is simpler and focuses on cash flow and limits disruption to financial records.
The introduction of a cap & trade
mechanism in 2015 is likely to create more difficulties. Critics predict
a similar situation as in Europe’s cap & trade from 2015 because of
the possible profit fluctuations from market valuations of permits.
Details available in Australian Accounting Standards Board's staff paper
Details available in Australian Accounting Standards Board's staff paper
