# ASC 818-10-05: Environmental Credits and Environmental Credit Obligations — Overall — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/818/10/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:41:41.658Z to 2026-09-10T01:41:41.658Z Record version: sha256:830f23a8cce55122fa2c11e5830f47d7519af13065db60e68edf0eb081cdf391 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/818/10/#05-overview-and-background) SEC content: no ##### [818-10-05-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-05-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:41:41.658Z to 2026-09-10T01:41:41.658Z Record version: sha256:63aa14c62f9475a913b1bee8887f6bdec52e85b2bdfbb3665f36c3bf81b7b708 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [818-10-65-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-65-1)The Environmental Credits and Environmental Credit Obligations Topic includes the following Subtopics: 1. a Overall 2. b Environmental Credits 3. c Environmental Credit Obligations. ##### [818-10-05-2](https://asc.understandingaccounting.org/asc/818/10/#818-10-05-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:41:41.658Z to 2026-09-10T01:41:41.658Z Record version: sha256:002e0cb571848a7e6d38200af5f0e144b2041d63952ef919cea8a96312bc2c4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [818-10-65-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-65-1)The Subtopics listed in paragraph [818-10-05-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-05-1) establish the financial accounting and reporting requirements for entities that obtain or generate an [environmental credit](https://asc.understandingaccounting.org/glossary/e/#environmental-credit "(P) December 16, 2027; (N) December 16, 2028818-10-65-1An enforceable right that is acquired, internally generated, granted by a regulatory agency or its designee(s), or received in a nonreciprocal transfer that is not a grant from a regulator or its designee(s) that meets all of the following criteria:Lacks physical substance and is not a financial asset.Is represented to prevent, control, reduce, or remove emissions or other pollution.Is, or previously was, separately transferable in an exchange transaction. If an item is no longer separately transferable in an exchange transaction, an entity must be able to use that item to satisfy an environmental credit obligation to meet this criterion.Is not an income tax credit that may be used to settle an entity’s income tax liability, regardless of whether the entity has a tax liability or intends to use the credit for that purpose.An environmental credit that meets the above criteria may exist in a variety of forms, including (but not limited to) credits, certificates, allowances, and offsets.") or are subject to regulatory compliance programs (for example, cap-and-trade, renewable portfolio standards, or renewable fuel standards) that result in an [environmental credit obligation](https://asc.understandingaccounting.org/glossary/e/#environmental-credit-obligation "(P) December 16, 2027; (N) December 16, 2028818-10-65-1A regulatory compliance obligation arising from existing or enacted laws, statutes, or ordinances represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. Obligations within the scope of Subtopic 410-30 are not environmental credit obligations."). ##### [818-10-05-3](https://asc.understandingaccounting.org/asc/818/10/#818-10-05-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:41:41.658Z to 2026-09-10T01:41:41.658Z Record version: sha256:34ca77b3fd8fbc7a0577a791145cf1ee245f8106475f72ab6abd967cf5d9f8df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [818-10-65-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-65-1)Entities engage in a variety of transactions that involve environmental credits. Environmental credits are acquired, internally generated, granted by a regulator or its designee(s), or received in a [nonreciprocal transfer](https://asc.understandingaccounting.org/glossary/n/#nonreciprocal-transfer "Nonreciprocal transfer is a transfer of assets or services in one direction, either from an entity to its owners (whether or not in exchange for their ownership interests) or to another entity, or from owners or another entity to the entity. An entity's reacquisition of its outstanding stock is an example of a nonreciprocal transfer.") that is not a grant from a regulator or its designee(s). Entities use those environmental credits: 1. a To settle environmental credit obligations 2. b To transfer in an [exchange](https://asc.understandingaccounting.org/glossary/e/#exchange "An exchange (or exchange transaction) is a reciprocal transfer between two entities that results in one of the entities acquiring assets or services or satisfying liabilities by surrendering other assets or services or incurring other obligations.") transaction 3. c In a nonreciprocal transfer 4. d To meet voluntary environmental initiatives (referred to as using environmental credits for voluntary purposes).