# ASC 818-20-35: Environmental Credits and Environmental Credit Obligations — Environmental Credits — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/818/20/#35-subsequent-measurement) 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): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:9e9902b6e56e4d56c5ba8b08a4def2628d3ac9f0d8898779f61f5ccdf27bd979 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/818/20/#35-subsequent-measurement) SEC content: no ##### [818-20-35-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:61f57fb4333cd46e04d919c005aa2b432f5069de008bdefb8ab34380bebc2980 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)Before applying the subsequent measurement requirements of this Subtopic, an entity shall apply the asset recognition reassessment requirements in paragraph [818-20-40-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-2) at each reporting date. ##### [818-20-35-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:2f217b2d6466f4b5dd43cf78bbd7a40ac5901e11fdbedfaa5363c6d36162fb8e 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 subsequently measure similar [environmental credits](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.") recognized as assets using one of the following costing methods: 1. a Average cost 2. b First-in, first-out 3. c Specific identification. An entity shall apply the costing methods in (a) through (c) separately for [compliance environmental credits](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.") measured in accordance with paragraph [818-20-35-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-3) and [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.") measured in accordance with paragraph [818-20-35-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-4). ##### [818-20-35-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:87a2a8aefb51711ea651a975512a99065af6727a9d847abd19a59cd74f5f02a2 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 determine at each reporting date whether it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that an environmental credit recognized as an asset 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."). If it is probable, the environmental credit shall be classified as a compliance environmental credit and shall not be subsequently remeasured. ##### [818-20-35-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:a19dd56e6db650b9e218cf6d821c447f3d040d03671fb1e60968ed1144a6ef24 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)All other environmental credits recognized as assets shall be classified as noncompliance environmental credits and tested for impairment at each reporting date. An entity shall recognize an impairment loss when the carrying value of the noncompliance environmental credit exceeds its [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."). The impairment loss shall be measured as the excess of the carrying value over fair value. Subsequent reversal of a previously recognized impairment loss is prohibited. ##### [818-20-35-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:39ee4e370209797c643d629cdc19873464504fa67235f3db98cc53ee6e95f305 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)If an environmental credit is reclassified from a compliance environmental credit to a noncompliance environmental credit or vice versa, an entity shall apply the impairment requirements in paragraph [818-20-35-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-4) before applying the subsequent measurement guidance related to the new classification of the environmental credit. ##### [818-20-35-6](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-6) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:121f4ead49afa12fc364aede9fa887519bfc5b9fe52781419d6cd007f468c68b 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 not amortize an environmental credit. #### Fair Value Measurement Accounting Policy Election ##### [818-20-35-7](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-7) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:65a020c8edee91d8e5f794fe177112457be2356bf33618f4e7712f58effc661b 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)Notwithstanding the requirements of paragraphs [818-20-35-4 through 35-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-4) , an entity may elect an accounting policy by class to subsequently measure a class of eligible (see paragraph [818-20-35-9](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-9)) noncompliance environmental credits at fair value at each reporting date, with changes in fair value recognized in earnings. An entity should determine what constitutes a class based on its specific facts and circumstances. ##### [818-20-35-8](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-8) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:337545c5165851e758647cbc4fe6ee777b4f9f50022617c37eab231b6f6f9eff 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 environmental credit subsequently measured at fair value in accordance with paragraph [818-20-35-7](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-7) shall continue to be measured at fair value at each reporting date until that environmental credit is derecognized. See paragraph [818-20-55-8](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-8) for implementation guidance on the application of this paragraph. ##### [818-20-35-9](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-9) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:22f7312acb9285ef4c24397f3c0e4ed7dc753d6d5ae401e2df169b1b4500357e 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)To be eligible for subsequent fair value measurement, a noncompliance environmental credit shall be obtained through one of the following: 1. a 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 2. b 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) 3. c A [business combination](https://asc.understandingaccounting.org/glossary/b/#business-combination "A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals also are business combinations. See also Acquisition by a Not-for-Profit Entity."). See paragraph [818-20-55-7](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-7) for implementation guidance on the application of this paragraph. ##### [818-20-35-10](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-10) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:19.057Z to 2026-09-10T01:42:19.057Z Record version: sha256:e6462bdd420794e9d923afca35aac648a2ada0328e0b6756249448925e244897 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)A change in accounting policy to elect fair value measurement shall be subject to the guidance in Topic 250 on accounting changes and error corrections, including the requirements related to a change in accounting policy in an interim period in paragraphs [250-10-45-14 through 45-16](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-14) . However, notwithstanding the requirements of paragraph [250-10-45-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5), an entity that elects to change its accounting policy to subsequently measure a class of eligible noncompliance environmental credits at fair value shall apply that fair value measurement accounting policy prospectively, with a cumulative-effect adjustment to retained earnings as of the beginning of the annual reporting period in which the change is made. The change shall not be retrospectively applied to prior annual reporting periods. The adjustment to retained earnings shall be determined in accordance with Topic 250 and shall include the difference between the fair value and the carrying amount of all affected noncompliance environmental credits at the beginning of the annual reporting period in which the fair value measurement accounting policy change is made. The initial adoption of an accounting policy for a class of eligible noncompliance environmental credits is not a change in accounting policy subject to the guidance in Topic 250.