Carbon assets and liabilities as accounting objects

Abstract

Purpose. The purpose of this study is to develop a conceptual framework for the classification, recognition, and measurement of carbon assets and liabilities under International Financial Reporting Standards (IFRS) that reduces methodological uncertainty arising from the absence of a dedicated standard and provides a consistent basis for financial reporting by entities participating in emissions trading schemes.

Results. The research has established that the absence of a specialised standard is a natural consequence of the withdrawal of IFRIC 3 in 2005 and the subsequent freezing of the IASB project on pollutant pricing mechanisms, which forced enterprises to develop their accounting policies independently based on analogies with related standards. A comparative analysis of the three main approaches, based on IAS 38, IAS 2, and IAS 37, showed that none of them provides a methodologically consistent reflection of carbon instruments. The key structural problem is the asymmetry in the valuation of the asset and the liability, which generates artificial volatility in financial results. Three categories of financial reporting risks have been identified: overstatement of assets, understatement of liabilities, and destabilisation of the capital structure. Analysis of the reporting of Engie, Enel, and EDF confirmed the diversity of accounting approaches and low comparability of reporting data in the absence of a single standard. It is substantiated that public declarations on achieving carbon neutrality can be qualified as constructive obligations under IAS 37, which significantly expands the scope of provisions subject to recognition in financial reporting.

Scientific novelty. The theoretical justification for classifying approaches to carbon instruments under the IFRS framework has been deepened; the content of the concept of constructive obligation in relation to corporate climate declarations has been refined; and financial reporting risks arising from the volatility of carbon markets have been systematised.

Practical value. The study’s results can be used by enterprises to inform their accounting policies for carbon instruments, by regulatory authorities to develop national standards for climate assets, and by the scientific community as a methodological basis for further research into ESG reporting and emissions accounting automation.