FASB proposal offers guidance on disclosure of environmental credits

FASB published a proposed Accounting Standards Update (ASU) designed to improve the financial accounting for and disclosure of financial activities related to environmental credits and environmental credit obligations.

In a news release, FASB said the ASU came about as a result of stakeholder feedback that GAAP doesn’t provide authoritative guidance on how to recognize and measure the increasing volume of environmental credits spurred by government mandates and regulations related to emissions.

The proposal provides recognition, measurement, presentation, and disclosure requirements for all entities that purchase or hold environmental credits or that have regulatory obligations settled with environmental credits. The news release noted that because FASB’s mission is to establish and improve financial accounting and reporting standards, the proposed ASU addresses only amounts reported in financial statements and doesn’t address the measuring or tracking of an entity’s actual greenhouse gas emissions or voluntary emissions initiatives.

Public comments on Environmental Credits and Environmental Credit Obligations (Topic 818) are being accepted through April 15, 2025.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com