The following represents the transition and effective date information related to Accounting Standards Update No. 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818): Effective date and early adoption
- a
Public business entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.
- b
Entities other than public business entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods.
- c
Early adoption of the pending content that links to this paragraph is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall adopt the pending content as of the beginning of the annual reporting period that includes that interim reporting period.
Transition method
- d
An entity shall apply the pending content that links to this paragraph on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets on the balance sheet) as of the beginning of the annual reporting period of adoption, subject to the guidance in (e) through (i). The date of initial application shall be the beginning of the annual reporting period in which the entity first applies the pending content that links to this paragraph.
- e
An entity shall recognize an environmental credit as an asset at the date of initial application of the pending content that links to this paragraph if it is probable at that date that the environmental credit will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. For all other environmental credits, an entity shall derecognize the carrying amount of those environmental credits at the date of initial application unless those environmental credits are within the scope of (g). In addition, at the date of initial application, an entity shall derecognize the carrying amount of an asset recognized for a nonrefundable deposit made to obtain an environmental credit if it is not probable that the environmental credit will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. - f
An entity shall measure an environmental credit recognized as an asset at the date of initial application of the pending content that links to this paragraph in accordance with (e) as follows:
- 1
An environmental credit that is classified as a compliance environmental credit at the date of initial application of the pending content that links to this paragraph shall be measured using the entity’s carrying amount of that environmental credit existing at the date of initial application. - 2
An environmental credit that is classified as a noncompliance environmental credit at the date of initial application of the pending content that links to this paragraph shall be measured at the lower of the entity’s carrying amount of the environmental credit existing at the date of initial application and the fair value of the environmental credit at the date of initial application. - 3
Notwithstanding the requirements of (f)(1) and (f)(2), an entity may make an entity-wide election to measure those environmental credits that were internally generated by the entity or received through a grant from a regulator or its designee(s) at the amount of the transaction costs incurred in accordance with paragraph 818-20-30-1. - 4
Notwithstanding the requirements of (f)(2), an entity that elects an accounting policy to subsequently measure a class of eligible noncompliance environmental credits at fair value shall measure those environmental credits at fair value at the date of initial application of the pending content that links to this paragraph.
- g
An entity shall continue to include the cost of environmental credits capitalized as part of another asset accounted for in accordance with another Topic (for example, Topic 330 on inventory) before the date of initial application of the pending content that links to this paragraph as part of the carrying amount of that other asset. - h
An entity shall apply the liability recognition and measurement requirements of Subtopic 818-30 on environmental credit obligations at the date of initial application of the pending content that links to this paragraph. - i
An entity shall apply the pending content in paragraphs and 805-20-30-32 prospectively to transactions accounted for as business combinations occurring after the date of initial application of the pending content that links to this paragraph.
Transition disclosures
- j
An entity shall provide the transition disclosures required by paragraph 250-10-50-1(a), (b)(3), and (c) and paragraph 250-10-50-2. The transition disclosure required by paragraph 250-10-50-1(b)(3) shall be as of the beginning of the annual reporting period of adoption rather than as of the beginning of the earliest period presented.