Why do we need accounting standards
for environmental markets?
Despite the significant and growing size of environmental markets, there is no guidance on how firms should account for these transactions on their balance sheets.
In 2018, Earth Economics released the report Accounting for Emissions Trading and Other Environmental Market Transactions: Emerging Opportunities for the FASB, which summarized the current state of knowledge and practice related to accounting for emissions trading. The report also included results from a survey conducted across firms representing 40% of carbon allowances bought and sold in California. The report found that despite the growing size and importance of these environmental markets, participants face several unique challenges related to accounting for these transactions, many of which can be addressed by the FASB and GASB.
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