The IASB and FASB discussed the measurement of allowances (assets) and liabilities in a cap and trade scheme.
IASB Agenda Paper 5A/FASB Agenda Paper 7A presented four measurement models for measuring the allowances. The boards tentatively decided that the measurement of the allocated allowances and the liability for the allocation should be consistent. Board members expressed support for the model that measures the allocated allowances and liability for the allocation initially at fair value, and also subsequently measures those allocated allowances at fair value.
The boards also discussed how an entity should determine the quantity of allowances that would be returned under the liability for the allocation, as well as when an entity should recognise an obligation for emissions in excess of the liability for the allocation. The boards expressed support for an approach that determines the quantity of allowances to be returned based upon an entity�s expectations of emissions, or emissions reductions. However, the boards expressed different views as to when the liability for excess emissions should be recognised. The boards requested additional analysis, including quantitative examples that outline the effect of different measurement models.
At future board meetings, the boards will discuss quantitative examples that illustrate measurement issues, and when a liability is incurred for emissions in excess of the liability for the allocation. The boards will also discuss the issues of presentation (including netting) and whether a right to future allocations can be recognised as an asset.