Today is Monday, 24 June 2024.
FASB, the accounting regulator headquartered in United States, starts moving in the same direction and a few days after senior officials also from the Government announced support to high integrity carbon credit markets, inviting the private sector to join in.
FASB stands for Financial Accounting Standards Board, a body that establishes and updates the accounting rules adopted basically in United States, known as GAAP Generally Accepted Accounting Principles. In spite of the term “generally accepted”, it should not be confused with IFRS, International Financial Reporting Standards, followed around the globe. Some people say that the primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based.
IFRS was behind the more and more popular IFRS S1 General Sustainability-related Disclosures and IFRS S2 Climate-related Disclosures.
This FASB technical project aims specifically on “environmental credit programs” including “noncompliance environmental credits”, an interesting reference to voluntary arrangements, such as the voluntary carbon credits.
It includes the recognition, measurement, presentation, and disclosure requirements for participants in compliance and voluntary programs that result in the creation of environmental credits and for the nongovernmental creators of environmental credits. Fair Value Measurement is also on the spotlight.
An Exposure Draft of this new FASB Standard is expected for 3rd quarter 2024 and when finalized it will apply to companies that acquire, are granted or create environmental credits. And guide external auditors.
Click below for the Board Meeting Handout, a detailed 20-pages document discussed in the June 12, 2024 meeting.
As you will note, the expression “ECO liabilities” appears throughout the document, with ECO standing for the acronym Environmental Credit Obligation.
Please note that “This material is presented for discussion purposes only; it is not intended to reflect the views of the FASB or its staff. Official positions of the FASB are determined only after extensive due process and deliberations”.
Click at the image below for FASB’s last update from June 17, 2024 about the initiative.
Carbon Credit Markets recommends that this initiative should be closely monitored together with the discussions related to the legal nature of carbon credits, a topic not yet pacified across the globe.
