Accounting For Greenhouse Gases Emissions Allowances In Romania

The present paper tries to analyze the accounting challenges that the implementation of EU Emissions Trading Scheme has risen. On 2 December 2004, IASB has issued an interpretation regarding the accounting of the GHG emissions allowances (IFRIC 3 „Emission Rights”). This interpretation should have been effective for annual periods beginning after 1 March 2005, the first year of the EU Emission Trading Scheme implementation. Less than a year after it was issued, IFRIC has withdrawn IFRIC 3. In December 2007, IASB has started a new project in order to provide guidance on accounting for carbon allowances called Emissions Trading Schemes Project. In the absence of an accounting standard regarding the accounting of these emissions allowances a diversity of accounting practices have been identified. Nowadays, there are three main accounting practices for the recognition of the emissions allowances and the GHG emissions liabilities: IFRIC 3 approach, the government grants approach and the net liability or off balance sheet approach. The accounting treatment of greenhouse gas emissions allowances by Romanian companies resembles the net liability or off balance sheet approach. Finance Ministry Order no. 1118/2012 states that GHG emission certificates should be recognized as fixed assets (if the entity is expecting a profit in the long term) or in the category of short term investments (if the entity is expecting a profit in the short term). The accounting of the greenhouse gas emissions allowances described above is applicable mainly to traders of such certificates and not for the installations in the scope of the EU ETS directive, which should recognize GHG emissions off balance sheet, at their nominal value (nil if received for free). The shortfall or excess of allowances will be recognized in the profit or loss as they are bought or sold by the entity (the accounting treatment imposed by Finance Ministry Order no. 3055/2009).