The IASB and the FASB discussed accounting issues in a cap and trade scheme. Specifically, the boards discussed the recognition of a liability for emissions in excess of the initial allocation and the measurement of liabilities and purchased allowances. The boards also discussed the presentation of the allowances and liabilities on the statement of financial position.
The staff provided the boards with three views on the recognition of liabilities in a cap and trade scheme. Board members supported two of the views that 'cap' the measurement of the liability for the allocation at the quantity of allowances allocated. Those two views differ only on the timing of the recognition of the liability for excess emissions. Some Board members supported the view that recognises the excess liability throughout the compliance period as an entity emits, while others supported the view that recognises the excess liability when the entity's emissions exceed the liability for the allocation. The boards asked the staff to seek feedback from constituents on both views.
The staff also presented two possible models for measuring the quantity of allowances to be returned or submitted the expected return model and the derecognition model. The boards asked the staff to seek feedback from constituents on both models.
The staff provided two measurement models for measuring the purchased allowances. The boards tentatively decided that purchased allowances should be initially and subsequently measured at fair value. This is consistent with the boards' tentative decision in October 2010 to measure the allocated allowances initially and subsequently at fair value.
The staff provided three views for the presentation of assets and liabilities in a cap and trade scheme in the statement of financial position. The IASB preferred gross presentation of the assets and liabilities on the statement of financial position; but they indicated that they would not object to a linked presentation. (A linked presentation would present the assets and liabilities gross, but the amounts would be presented together and total to a net emission asset or net emission liability.) The FASB tentatively decided that the assets and liabilities should be presented in the balance sheet using a form of linked presentation. However, the FASB also indicated that they did not believe that an entity needed to have the intention of offsetting the assets and liabilities to be able to present the items using a linked presentation.
The board asked the staff to perform outreach on the boards' tentative decisions to date and present them with feedback in the second half of 2011.