Accounting for Green House Gas Emission Schemes: Accounting Theoretical Framework Perspective

This paper presents a discussion of a theoretical framework perspective of accounting for Green House Gas (GHG) emission schemes. The paper focuses on cap-and-trade emission schemes and uses both FASB and IASB’s current and proposed accounting theoretical frameworks and their deliberations of the GHG emission scheme accounting issue. The paper concludes that GHG emission schemes trigger both an asset and a liability that need to be recognized from the initiation of the scheme’s compliance period. The asset and liability need to be revalued each reporting period using actual and projected emissions, number of allowances on hand, and their current fair market values. A net presentation model can be used in financial statements.