The federal government’s proposed Carbon Pollution Reduction Scheme (Scheme), is intended to commence in 2010. For those affected by the implementation of the Scheme, it is important to be involved in the debate around appropriate accounting guidance for emission permits. 
 
The Institute’s recommendations 
In April 2008 the Institute made a submission on the Garnaut Review - Emissions Trading Scheme Discussion Paper. 
 
The Institute stated that in order for the Scheme to be an efficient market, the accurate and consistent measurement of emissions and tracking of permits to cover these emissions will be critical. How the Scheme is perceived to have impacted the economy will be affected by how permit costs and grants/compensation are accounted for in an entity’s income statement.  
 
There is currently no specific international accounting standard for emissions permits and as a result there are a variety of methods being used by companies in the European Union, which operate a similar type of trading scheme. These different interpretations have led to variances in the reported profit and assets of companies with similar positions in relation to emissions permits.  
 
The federal government has been successful in influencing the International Accounting Standards Board (IASB) to include the development of an accounting standard on the IASB’s active agenda. However, it is questionable whether this will be developed in time to be adopted in Australia in 2010. The green paper indicated that depending on the status of the IASB project nearer the time, the government has indicated that consideration may be given to the Australian Accounting Standards Board (AASB) issuing interim Australian specific accounting requirements.  
 
The Institute recommends that the federal government should liaise with the AASB, to ensure that international work on this issue is progressed at such a pace to ensure consistency in the accounting for emissions permits and to assist entities in measuring and reporting their emissions thus avoiding distortions. 
 
However, until any pronouncement is issued by the IASB or the AASB, Australian entities can choose the most appropriate method of accounting for emission permits as long as it is compliant with Australian accounting standards. 
 
Relevant links

• The Institute: website
• The Institute: Charter Magazine
• Parliament of Australia: website