# ASC 818-20-25: Environmental Credits and Environmental Credit Obligations — Environmental Credits — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/818/20/#25-recognition) 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): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:d2d0c53f75220234723a9a4eb0dddabd67292874f4ff9483a3aa10cd4ce4b350 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/818/20/#25-recognition) SEC content: no ##### [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:61c86bc4aa364b57050fb46d4edadfa9d4ed790f4f96d9d3bb32bfe248973762 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)An entity shall recognize 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.") as an asset if it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that the environmental credit will be used to settle 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."), transferred 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, or used 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."). For all other environmental credits, an entity shall recognize an expense when costs are incurred and is prohibited from including those costs in the carrying amount of another asset accounted for in accordance with another Topic. ##### [818-20-25-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:c02207461bbb31e95f5cbcd2f9b841c274d67f25d2bd044583a8517bbe0fc5bb 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)An entity that recognizes an environmental credit as an asset in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) shall classify an environmental credit that is probable of being used to settle an environmental credit obligation as a [compliance environmental credit](https://asc.understandingaccounting.org/glossary/c/#compliance-environmental-credit "(P) December 16, 2027; (N) December 16, 2028818-10-65-1An environmental credit recognized as an asset in accordance with Topic 818 and probable of being used to settle an environmental credit obligation."). All other environmental credits recognized as assets shall be classified as [noncompliance environmental credits](https://asc.understandingaccounting.org/glossary/n/#noncompliance-environmental-credit "(P) December 16, 2027; (N) December 16, 2028818-10-65-1An environmental credit recognized as an asset in accordance with Topic 818 that is not a compliance environmental credit."). ##### [818-20-25-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:975a3dd7ab86e6c2673e413b1de3d79d611f9038999657aac61bb8b0c83c17c2 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)An entity shall recognize an expense for a nonrefundable deposit made to obtain an environmental credit for which it is not probable that the entity will use the environmental credit: 1. a To settle an environmental credit obligation 2. b To transfer in an exchange transaction 3. c In a nonreciprocal transfer. ##### [818-20-25-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:a20adf5c4db407842d400dc2974814c8e854ebcd68ad9e16b03d6055afc7f96a 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)See paragraphs [818-20-55-2 through 55-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-2) for implementation guidance on the application of asset recognition. ##### [818-20-25-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:13.310Z to 2026-09-10T01:42:13.310Z Record version: sha256:be739c25e2886edd96f301f26eb35ce0d6f8108c64091454236d9ba09528d14d 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 recognition guidance in paragraphs [818-20-25-1 through 25-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) is not required to be applied at the individual environmental credit level. See paragraph [818-20-55-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-4) for implementation guidance on the application of this paragraph.