# ASC 818-20: Environmental Credits and Environmental Credit Obligations — Environmental Credits

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/818/20/)

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## ASC 818-20: Environmental Credits and Environmental Credit Obligations — Environmental Credits

### Machine-generated study aids

```json
{
  "summary": "ASC 818-20 governs the accounting for environmental credits (e.g., emissions allowances, carbon offsets, renewable energy certificates, RINs). An environmental credit is recognized as an asset only if it is probable it will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer; otherwise the cost is expensed as incurred and can never later be capitalized. Credits recognized as assets are classified as compliance credits (not remeasured) or noncompliance credits (tested for impairment each reporting date, with an optional fair value policy election by class for eligible credits).",
  "key_points": [
    "An environmental credit is recognized as an asset only if it is probable it will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer; all other credits (and nonrefundable deposits for such credits) are expensed as costs are incurred and may not be added to the carrying amount of another asset (818-20-25-1; 25-3).",
    "Credits recognized as assets are classified as compliance environmental credits if probable of being used to settle an environmental credit obligation, and as noncompliance environmental credits otherwise; the probability assessment is collective and need not be made credit by credit (818-20-25-2; 25-5; 55-2; 55-4).",
    "Initial measurement: internally generated credits and credits granted by a regulator or its designee are measured at transaction costs incurred, if any (zero if none); credits obtained in a transaction measured under another Topic follow that Topic; all others are measured at cost under 805-50-30-1 through 30-4 (818-20-30-1 through 30-3; 55-5).",
    "Compliance environmental credits are not subsequently remeasured; noncompliance environmental credits are tested for impairment at each reporting date, with loss equal to the excess of carrying value over fair value and reversal prohibited; no credit is amortized (818-20-35-3; 35-4; 35-6).",
    "Similar credits are subsequently measured using average cost, FIFO, or specific identification, applied separately to compliance and noncompliance credits (818-20-35-2).",
    "An entity may elect, by class, to measure eligible noncompliance credits (obtained in an exchange transaction, a nonreciprocal transfer other than a regulator grant, or a business combination) at fair value through earnings; that measurement continues until derecognition, even if later reclassified as compliance credits, and a change to the policy is applied prospectively with a cumulative-effect adjustment to retained earnings (818-20-35-7 through 35-10; 55-7; 55-8).",
    "Derecognition follows Subtopic 610-20 (or Topic 606 for contracts with customers); if it is no longer probable a credit will be used, transferred, or nonreciprocally transferred, it is derecognized through earnings and can never be re-recognized as an asset (818-20-40-1 through 40-3)."
  ],
  "categories": [
    "Recognition",
    "Initial measurement",
    "Subsequent measurement",
    "Impairment"
  ],
  "audience_level": "intermediate",
  "student_note": "This is new guidance (effective for fiscal years beginning after Dec. 16, 2027 for public entities) creating a distinct asset model for carbon credits and allowances. The classic trap: regulator-granted and internally generated credits are measured at transaction costs (often zero) and are never eligible for the fair value election, and once a credit fails the probable test it is expensed permanently — no later capitalization or impairment reversal.",
  "related_topics": [
    "818-10",
    "818-30",
    "610-20",
    "805-50",
    "820",
    "250"
  ],
  "key_concepts": [
    "environmental credit",
    "compliance environmental credit",
    "noncompliance environmental credit",
    "probable use assessment",
    "transaction costs",
    "fair value policy election by class",
    "impairment without reversal",
    "costing methods"
  ]
}
```

Source downloaded (UTC): 2026-09-10T01:42:02.300Z to 2026-09-10T01:42:02.300Z

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## ASC 818-20-00: 00 Status

[Read section](https://asc.understandingaccounting.org/asc/818/20/#00-status)

SEC content: no

##### [818-20-00-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-00-1)

Pending content: no

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The following table identifies the changes made to this Subtopic.

<table class="asc-table" frame="all"><tbody><tr><td class="entry"><strong class="ph b">Paragraph</strong></td><td class="entry"><strong class="ph b">Action</strong></td><td class="entry"><strong class="ph b">Accounting Standards Update</strong></td><td class="entry"><strong class="ph b">Date</strong></td></tr><tr><td class="entry"></td><td class="entry"></td><td class="entry"></td><td class="entry"></td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/a/#acquiree" class="term" title="The business or businesses that the acquirer obtains control of in a business combination. This term also includes a nonprofit activity or business that a not-for-profit acquirer obtains control of in an acquisition by a not-for-profit entity."><span>Acquiree</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/a/#acquirer" class="term" title="The entity that obtains control of the acquiree. However, in a business combination in which a variable interest entity (VIE) is acquired, the primary beneficiary of that entity always is the acquirer. (P) December 16, 2026; (N) December 16, 2026805-10-65-5The entity that obtains control of the acquiree.See paragraphs 805-10-25-4805-10-25-5 for guidance on determining the acquirer."><span>Acquirer</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity" class="term" title="A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities."><span>Acquisition by a Not-for-Profit Entity</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/b/#business" class="term" title="Paragraphs 805-10-55-3A805-10-55-4805-10-55-5805-10-55-6 and 805-10-55-8805-10-55-9 define what is considered a business."><span>Business</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/b/#business-combination" class="term" title="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."><span>Business Combination</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/c/#compliance-environmental-credit" class="term" title="(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."><span>Compliance Environmental Credit</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/c/#contract" class="term" title="An agreement between two or more parties that creates enforceable rights and obligations."><span>Contract</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/c/#customer" class="term" title="A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."><span>Customer</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/e/#environmental-credit" class="term" title="(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."><span>Environmental Credit</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/e/#environmental-credit-obligation" class="term" title="(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."><span>Environmental Credit Obligation</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/e/#exchange" class="term" title="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."><span>Exchange</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/f/#fair-value" class="term" title="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."><span>Fair Value</span></a> (2nd def.)</td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/f/#financial-asset" class="term" title="Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."><span>Financial Asset</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/i/#income-taxes" class="term" title="Domestic and foreign federal (national), state, and local (including franchise) taxes based on income."><span>Income Taxes</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/m/#market-participants" class="term" title="Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics: They are independent of each other, that is, they are not related parties, although the price in a related-party transaction may be used as an input to a fair value measurement if the reporting entity has evidence that the transaction was entered into at market terms They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary They are able to enter into a transaction for the asset or liability They are willing to enter into a transaction for the asset or liability, that is, they are motivated but not forced or otherwise compelled to do so."><span>Market Participants</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/n/#noncompliance-environmental-credit" class="term" title="(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."><span>Noncompliance Environmental Credit</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/n/#nonreciprocal-transfer" class="term" title="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."><span>Nonreciprocal Transfer</span></a> (1st def.)</td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity" class="term" title="An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans."><span>Not-for-Profit Entity</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/o/#operating-cycle" class="term" title="The average time intervening between the acquisition of materials or services and the final cash realization constitutes an operating cycle."><span>Operating Cycle</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/o/#orderly-transaction" class="term" title="A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (for example, a forced liquidation or distress sale)."><span>Orderly Transaction</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/p/#probable" class="term" title="The future event or events are likely to occur."><span>Probable</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/glossary/r/#related-parties" class="term" title="Related parties include: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests."><span>Related Parties</span></a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"></td><td class="entry"></td><td class="entry"></td><td class="entry"></td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-05-1" class="xref">818-20-05-1</a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-15-1" class="xref">818-20-15-1</a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1" class="xref">818-20-25-1 through 25-5</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1" class="xref">818-20-30-1 through 30-3</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-35-1" class="xref">818-20-35-1 through 35-10</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-40-1" class="xref">818-20-40-1 through 40-3</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-45-1" class="xref">818-20-45-1</a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-45-2" class="xref">818-20-45-2</a></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-50-1" class="xref">818-20-50-1 through 50-6</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr><tr><td class="entry"><div class="xref-range displayInline"><a href="https://asc.understandingaccounting.org/asc/818/20/#818-20-55-1" class="xref">818-20-55-1 through 55-14</a></div></td><td class="entry">Added</td><td class="entry"><a href="https://asc.understandingaccounting.org/updates/asu-2026-02/" class="xref">Accounting Standards Update No. 2026-02</a></td><td class="entry">05/19/2026</td></tr></tbody></table>

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## ASC 818-20-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/818/20/#05-overview-and-background)

SEC content: no

##### [818-20-05-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-05-1)

Pending content: yes

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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)This Subtopic addresses the accounting for 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."). Paragraph [818-20-55-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-1) provides a flowchart of the recognition and measurement requirements of this Subtopic.

Source downloaded (UTC): 2026-09-10T01:42:07.777Z to 2026-09-10T01:42:07.777Z

Record version: sha256:856a6202d478b7dd0025f806a439f0466a2ffd7a6581a3aa4eed0cb23478bf23

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/818/20/#15-scope-and-scope-exceptions)

SEC content: no

##### [818-20-15-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-15-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:07.777Z to 2026-09-10T01:42:07.777Z

Record version: sha256:1cd931bb5ba5929a8ca8a68380809fba520ce07f66acc9375b0bee076804814b

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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)This Subtopic follows the same Scope and Scope Exceptions as the Overall Subtopic.

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.

Source downloaded (UTC): 2026-09-10T01:42:17.279Z to 2026-09-10T01:42:17.279Z

Record version: sha256:104f17d3a88eae513ed05f5cd4fb7bdc76a77ec70b8261bfcce3dc41fe25b68e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-30: 30 Initial Measurement

[Read section](https://asc.understandingaccounting.org/asc/818/20/#30-initial-measurement)

SEC content: no

##### [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:17.279Z to 2026-09-10T01:42:17.279Z

Record version: sha256:a6ad2f27d75ee6091ae7f180b4dcd4a85b7ea32a4b0961e8ba12087bae42baff

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](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.") that is internally generated by an entity or received through a grant from a regulator or its designee(s) shall be initially measured at the transaction costs incurred, if any. See paragraph [818-20-55-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-5) for implementation guidance on the application of this paragraph.

##### [818-20-30-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-2)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:17.279Z to 2026-09-10T01:42:17.279Z

Record version: sha256:0a53f6bbd569379f637208e2be70c4d7f16692c47ce42c0649ea67389ff650bc

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)Environmental credits other than those measured in accordance with paragraph [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1) that are obtained in a transaction initially measured in accordance with another Topic shall follow the requirements of that other Topic. See paragraph [818-20-55-6](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-6) for implementation guidance on the application of this paragraph.

##### [818-20-30-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-3)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:17.279Z to 2026-09-10T01:42:17.279Z

Record version: sha256:ee05863d565cee858adea8221885854de34d37c27eb9a6b80c9e68bc82759c2e

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)Environmental credits other than those measured in accordance with paragraph [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1) or [818-20-30-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-2) shall be initially measured at cost in accordance with paragraphs

[805-50-30-1 through 30-4](https://asc.understandingaccounting.org/asc/805/50/#805-50-30-1)

.

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.

Source downloaded (UTC): 2026-09-10T01:42:22.130Z to 2026-09-10T01:42:22.130Z

Record version: sha256:982812eccfe01c4b19699540bd3729923a8fb43aa2cc14e5d396839edf89927f

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-40: 40 Derecognition

[Read section](https://asc.understandingaccounting.org/asc/818/20/#40-derecognition)

SEC content: no

##### [818-20-40-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:22.130Z to 2026-09-10T01:42:22.130Z

Record version: sha256:17c2a9d1e6f6012d0ce92c42e8d766c3c42f91ee5e5e5edbea1f63ccb5bc0892

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 derecognize 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.") in accordance with Subtopic 610-20 on gains and losses from the derecognition of nonfinancial assets unless a scope exception from that Subtopic applies. For example, a nonfinancial asset in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") shall be derecognized in accordance with Topic 606 on revenue from contracts with customers.

#### Asset Recognition Reassessment

##### [818-20-40-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-2)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:22.130Z to 2026-09-10T01:42:22.130Z

Record version: sha256:258b03ad6a67869eada7096114b7acbba85dd5a1c2724a9f64bb9d1784d0205d

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)At each reporting date, an entity shall reassess whether environmental credits shall continue to be recognized as assets in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1). If an entity determines that it is no longer [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that an 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."), the entity shall derecognize the environmental credit through earnings.

##### [818-20-40-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-3)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:22.130Z to 2026-09-10T01:42:22.130Z

Record version: sha256:3a6505eeea9fda51c008696c271e03307a711c3af811c16e9da3c06ce0f2607e

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 is prohibited from recognizing an environmental credit as an asset if the entity previously determined that the environmental credit was not probable of being used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. Therefore, an environmental credit previously derecognized or never recognized as an asset shall not subsequently be recognized as an asset.

Source downloaded (UTC): 2026-09-10T01:42:25.246Z to 2026-09-10T01:42:25.246Z

Record version: sha256:5bfabd9335a0580199f6b63524554811a68504059075dc2ed60d19b6ad8854b3

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-45: 45 Other Presentation Matters

[Read section](https://asc.understandingaccounting.org/asc/818/20/#45-other-presentation-matters)

SEC content: no

#### Balance Sheet

##### [818-20-45-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-45-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:25.246Z to 2026-09-10T01:42:25.246Z

Record version: sha256:af94d5749790712079c516658a0064d9d285e0184a71c28dd7dbbeb3105bd063

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 presents a classified balance sheet shall classify [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.") reasonably expected to be 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, 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."), or remitted to a regulator within one year (or the [operating cycle](https://asc.understandingaccounting.org/glossary/o/#operating-cycle "The average time intervening between the acquisition of materials or services and the final cash realization constitutes an operating cycle.") of the business, if longer) as current assets. All other environmental credits shall be classified as noncurrent assets.

##### [818-20-45-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-45-2)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:25.246Z to 2026-09-10T01:42:25.246Z

Record version: sha256:06e5b8c38c5266d1681fd99d5365a90f0abac7172fa50ba7d863fabad9d5d9e5

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 present [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.") separately from any related [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.") liabilities recognized in accordance with Subtopic 818-30 on its balance sheet.

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:ca1e0068820a1de92f49f16357f7e066f68d3a41fb40576d23128957267c0b1c

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-50: 50 Disclosure

[Read section](https://asc.understandingaccounting.org/asc/818/20/#50-disclosure)

SEC content: no

##### [818-20-50-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:e7beb73dad9e353edffc2426ed8652e70f1c4a21b366fb9644ab61072cddd76e

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)For annual reporting periods, an entity shall disclose the types of [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.") owned by the entity and all of the following:

1.  a
    
    How the entity obtained the environmental credits (acquired, granted, internally generated, 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."))
    
2.  b
    
    How the entity intends to use the environmental credits (to settle [environmental credit obligations](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."), 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, to use in a nonreciprocal transfer, or to meet voluntary environmental initiatives)
    
3.  c
    
    The accounting policies used to account for the environmental credits in accordance with Topic 235 on notes to financial statements (for example, whether the environmental credits are subsequently measured using the average cost; first-in, first-out; or specific identification costing methods)
    
4.  d
    
    Significant estimates and judgments used in applying the guidance.

##### [818-20-50-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-2)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:908d9636e460e2ffffa0308931ba0ce4cbcead312400421158133431756b173a

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)For annual reporting periods, an entity shall disclose, if not separately presented on the entity’s balance sheet, the current and noncurrent assets portion of both of the following:

1.  a
    
    [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.")
    
2.  b
    
    [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.").
    

An entity also shall disclose the line item or items on the balance sheet that include the current asset and noncurrent assets portion of the amounts in (a) and (b).

##### [818-20-50-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-3)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:c75a0527558f9d2a91bab424771402a50534d78864201dba7ec3f0f40123c609

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)For annual reporting periods, an entity shall disclose all of the following:

1.  a
    
    Total expense recognized for environmental credits not initially recognized as an asset in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) or subsequently derecognized in accordance with paragraph [818-20-40-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-2).
    
2.  b
    
    Total impairment expense recognized during the reporting period, the nature of the environmental credits that were impaired, and a description of the facts and circumstances giving rise to the impairment.
    
3.  c
    
    The line item or items in the income statement that include the amounts in (a) and (b).
    

See paragraphs

[220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21)

for additional disclosure requirements.

##### [818-20-50-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-4)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:24ad6af7f818138f5766e28e03a3f0cf24de4837b60315b8a6d0a5a07ac1875b

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)For annual reporting periods, if as a result of applying the guidance in paragraphs

[818-20-35-3 through 35-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-3)

and paragraph [818-20-40-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-2) an entity changes its use or intended use of its environmental credits, it shall disclose the nature of that change as of the date that it occurs and the related effect on earnings on that date, if any.

##### [818-20-50-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-5)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:277294329a5f3416d0cda9e3ca1c99208dda828eb6acf624a59147e664e46906

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 apply the [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.") disclosure requirements in Topic 820 for any fair value measurements made in accordance with this Subtopic.

##### [818-20-50-6](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-6)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:28.544Z to 2026-09-10T01:42:28.544Z

Record version: sha256:532b91d227b35170aca2c679b96ac867e9f01397a88814bd8d91a13cdecf1a1c

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 paragraph [818-20-55-14](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-14) for an illustration of the quantitative disclosures required by this Subtopic.

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:44908961c9820432ed30af1dee5ef9dbdef0b043bf28f26a55814e10df029187

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 818-20-55: 55 Implementation Guidance and Illustrations

[Read section](https://asc.understandingaccounting.org/asc/818/20/#55-implementation-guidance-and-illustrations)

SEC content: no

#### Implementation Guidance

##### [818-20-55-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-1)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:af92dba7fd4ad04f03483d7da91b336df2fe67478afe9aa7d4ca21d79490d044

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 following flowchart illustrates the accounting requirements for [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."). The flowchart is a supplement to the guidance in this Subtopic, and it should not be interpreted to change any requirements of this Topic or be considered a substitute for those requirements.

![](https://asc.understandingaccounting.org/asc-img/GUID-0C65DE53-5368-443F-9DF3-E479655BD2EE-low.gif)

At the date the credit is obtained Is it probable that the environmental credit (EC) will be used to settle an environmental credit obligation (ECO), transferred in an exchange transaction, or used in a nonreciprocal transfer (paragraph 818-20-25-1)? "No " "Recognize the cost of the EC as an expense as incurred (paragraph 818-20-25-1)." Yes Recognize an asset, classify, and measure as a compliance environmental credit or noncompliance environmental credit in accordance with paragraphs 818-20-25-2 and 818-20-30-1 through 30-3. At each reporting date For all ECs recognized as assets, is it still probable that the EC will be used to settle an ECO, transferred in an exchange transaction, or used in a nonreciprocal transfer (paragraph 818-20-35-1)? "No " "Derecognize the carrying amount of the EC through earnings (paragraph 818-20-40-2)." Yes Is it probable that the EC will be used to settle an ECO (paragraph 818-20-35-3)? Yes No "EC is classified as a compliance environmental credit and is not remeasured (no impairment testing)1,2 (paragraph 818-20-35-3)." "EC is classified as a noncompliance environmental credit and is tested for impairment1,2 (paragraph 818-20-35-4)." "1 If the classification of the EC changes from a previously determined classification, the EC is tested for impairment before it is reclassified (paragraph 818-20-35-5). 2 The flowchart assumes an entity has not made an accounting policy election to remeasure noncompliance environmental credits at fair value at each reporting period (paragraph 818-20-35-7)."

##### [818-20-55-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-2)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:d933e16c7676b9b975a3aca8b1f852d7874614a5310f803b17309dbda2352fe4

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)Paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) requires that an entity recognize an environmental credit 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."). That assessment of probability is a collective assessment whereby the evaluation is made on the probability of any of those events occurring. For example, an entity purchases an environmental credit that it will use to either settle an environmental credit obligation or transfer in an exchange transaction. The entity determines that there is a 50 percent likelihood that the environmental credit will be used to settle an environmental credit obligation and a 50 percent likelihood that the environmental credit will be transferred in an exchange transaction. Therefore, an asset would be recognized because collectively the likelihood of those outcomes occurring is probable.

##### [818-20-55-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-3)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:9e6dbe92fd1ed0b11b55c6557f46e8a052dcc81bbb5fc1b5833c81605d7baf67

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 does not need to have recognized an environmental credit obligation liability in accordance with Subtopic 818-30 to determine that it is probable that the entity will use an environmental credit to settle an environmental credit obligation because the liability may be recognized in a future period. In most instances, an entity will be able to readily determine whether it is probable that an environmental credit will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. The following factors may be helpful in determining whether it is probable that an environmental credit will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer:

1.  a
    
    The entity’s purpose for acquiring the environmental credit
    
2.  b
    
    The quantity of environmental credits the entity owns compared with existing and expected environmental credit obligations
    
3.  c
    
    Expected events and activities that may change the entity’s need 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.") in future periods
    
4.  d
    
    The entity’s past uses of environmental credits
    
5.  e
    
    Whether the entity would be committed to transfer in an exchange transaction any environmental credits in excess of those needed to satisfy an environmental credit obligation
    
6.  f
    
    An entity’s internal emission reduction initiatives.

##### [818-20-55-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-4)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:ee35936865e5fb752c4b30251534624c7f629347cd0a4875e5cca339c24aecd8

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)In accordance with paragraph [818-20-25-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-5), an entity is not required to apply the recognition requirements in paragraphs

[818-20-25-1 through 25-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1)

at the individual environmental credit level. For example, if an entity acquires 1,000 Class A renewable energy certificates, it evaluates whether it is probable that the renewable energy certificates will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. The entity determines that it is probable that it will use 900 of those renewable energy certificates to settle an environmental credit obligation and that it is not probable that it will use the remaining 100 renewable energy certificates to settle an environmental credit obligation, transfer the renewable energy certificates in an exchange transaction, or use the renewable energy certificates in a nonreciprocal transfer. Therefore, the entity recognizes 900 Class A renewable energy certificates as environmental credit assets, and the remaining 100 Class A renewable energy certificates are expensed as incurred.

##### [818-20-55-5](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-5)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:7127a776b8551d025c775f8a55d6711a7faaf1e05be74bf06fa0c4e67aec8708

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)Paragraph [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1) requires that an entity initially measure an internally generated environmental credit or an environmental credit received through a grant from a regulator or its designee(s) at the transaction costs incurred, if any. Transaction costs include costs such as those that are necessary to validate, register, or authenticate an environmental credit so that the environmental credit may be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer. If an entity does not incur transaction costs, the initial measurement of those environmental credits should be zero. That initial measurement should not affect whether an asset is recognized in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) or whether the environmental credit is classified as a compliance environmental credit or a [noncompliance environmental credit](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.") in accordance with paragraph [818-20-25-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-2). For example, a renewable energy certificate granted to an entity by a regulator that is determined to be probable of being used to settle an environmental credit obligation when received would be recognized as an asset and classified as a compliance environmental credit at initial recognition. That compliance environmental credit would be measured at zero if the entity does not incur transaction costs. Additionally, when that environmental credit is used to measure the funded portion of an environmental credit obligation liability, the liability also would be measured at zero.

##### [818-20-55-6](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-6)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:2fdc9670fcf8d1abdd9b18cf3552c305b5a886b9fa44af437599d859a22ae1ba

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)Paragraph [818-20-30-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-2) requires an entity that obtains an environmental credit in a transaction initially measured in accordance with another Topic to follow the initial measurement requirements of that other Topic. For example:

1.  a
    
    A renewable energy certificate received as consideration in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") that is within the scope of Topic 606 on revenue from contracts with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") should be initially measured in accordance with paragraphs
    
    [606-10-32-21 through 32-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21)
    
    .
    
2.  b
    
    A carbon offset or renewable energy certificate received in a nonreciprocal transfer from an investee in a transaction that is within the scope of Topic 845 on nonmonetary transactions should be initially measured in accordance with that Topic.
    
3.  c
    
    An environmental credit received in a nonreciprocal transfer between entities under common control should initially be measured in accordance with paragraphs
    
    [805-50-30-5 through 30-6](https://asc.understandingaccounting.org/asc/805/50/#805-50-30-5)
    
    .

##### [818-20-55-7](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-7)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:411cd486c5b9a014e7d4b742cd6f51840856bbd8da585b14b7309533fa95f647

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)Paragraphs

[818-20-35-7 through 35-10](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-7)

permit an entity, as an accounting policy election, to subsequently measure a class of eligible noncompliance environmental credits at [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.") at each reporting date, with changes recognized in earnings. An entity should determine what constitutes a class based on its facts and circumstances. Eligible noncompliance environmental credits are those obtained in an exchange transaction, received in a nonreciprocal transfer that is not a grant from a regulator or its designee(s), or acquired in 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."). Environmental credits generated by the entity or received through a grant from a regulator (or its designee(s)) are ineligible for fair value measurement. For example, an oil refinery acquires 100 renewable identification numbers in an exchange transaction and is granted 20 similar renewable identification numbers from a regulator. The oil refinery determines that it is not probable that it will use the environmental credits to settle an environmental credit obligation because the entity intends to transfer in an exchange transaction all 120 of those noncompliance environmental credits. The 100 acquired renewable identification numbers are eligible for fair value measurement, and the 20 granted renewable identification numbers are not.

##### [818-20-55-8](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-8)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:e5b3e692fd8bfa91801f439d1831649054d8b764c2a318101367547e9e6500af

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 environmental credit subsequently measured at fair value in accordance with an entity’s accounting policy election should continue to be measured at fair value at each reporting date until the environmental credit is derecognized. For example, assume that an entity elects an accounting policy to subsequently measure a class of 600 eligible noncompliance renewable identification numbers at fair value at each reporting date. If the entity subsequently determines that it is probable that a portion (or all) of those 600 noncompliance renewable identification numbers will be used to settle environmental credit obligations, those renewable identification numbers would be reclassified as compliance environmental credits and would continue to be measured at fair value at each reporting date until derecognized. Therefore, measuring those compliance environmental credits at fair value would affect the measurement of the related funded portion of an entity’s environmental credit obligation liability measured in accordance with paragraph [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2).

#### Illustrations

##### [818-20-55-9](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-9)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:32205601be46f6889af6a656df7f721773f642c4ab4deb01128986c194b91b74

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)Examples 1 through 4 illustrate the application of the recognition and measurement requirements of this Subtopic.

##### [818-20-55-10](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-10)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:93dd3d1346f252dd8e6270591c82486ead7223c99506ef9e29084f881a0a4dc7

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 industrial manufacturing entity is subject to a cap-and-trade regulatory compliance program that mandates the remittance of emissions allowances to a regulator by March 31, 20X5, based on the amount of the entity’s emissions for a compliance year ending on December 31, 20X4. On January 1, 20X4, the entity purchases 10,000 emissions allowances at a regulator-sponsored auction for $1,000,000 ($100 per allowance) and pays $25,000 in auction fees. At initial recognition, the entity determines that it is probable that it will use those emissions allowances to settle its 20X4 cap-and-trade environmental credit obligation because it estimates that its emissions during 20X4 will require the remittance of 15,000 emissions allowances. The entity classifies the 10,000 emissions allowances as compliance environmental credits, initially measured at $1,025,000, in accordance with paragraph [818-20-30-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-3). Those emissions allowances are not remeasured if they continue to be classified, at each reporting date, as compliance environmental credits.

##### [818-20-55-11](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-11)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:35587f82083b6c38bb0960e7367acca1b890f61c63ab894fee31d95e9e728b5d

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 cloud-based software developer publicly announces its voluntary initiative to be carbon neutral for the fiscal year ending December 31, 20X4. The carbon neutral initiative of the cloud-based software developer does not represent an environmental credit obligation because it does not result from a regulatory compliance obligation under existing or enacted laws, statutes, or ordinances. Specifically, this voluntary initiative does not establish an environmental credit obligation. The entity purchases 1,000 carbon offsets for $50,000 on March 1, 20X4, to meet its voluntary initiative. Because it is not probable that the entity will use the acquired carbon offsets to settle an environmental credit obligation, transfer those carbon offsets in an exchange transaction, or use those carbon offsets in a nonreciprocal transfer, the entity recognizes the $50,000 as an expense as incurred on March 1, 20X4, in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1).

##### [818-20-55-12](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-12)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:f4ad4a5a0a3d2bbf6844472bc31226e7bf5a6fde0af9eeac34acc972cb12de23

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 owns a tree farm uses a nationally accredited third-party registry to certify the tree farm and issue carbon offsets. During January 20X4, the entity’s tree farm activities resulted in 30,000 carbon offsets issued to the entity by the registry. The entity pays $1 per carbon offset as an administrative fee to the registry. The entity determines that it is not probable that it will use the carbon offsets to settle an environmental credit obligation because it intends to sell all of the carbon offsets created as a result of its tree farm activities. The entity recognizes the carbon offsets as assets and classifies them as noncompliance environmental credits. Those noncompliance environmental credits are initially measured at $30,000, the amount of the transaction costs, in accordance with paragraph [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1). In accordance with paragraph [818-20-35-9](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-9), an entity’s internally generated environmental credits are not eligible for the fair value measurement accounting policy election.

##### [818-20-55-13](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-13)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:566847bfd9e7cddbf0f5785f3a8bd60355e78c14b8fd9bc2cc31d42fbae3ba25

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 U.S. oil refinery is subject to a regulatory compliance program represented to control fuel emissions. The program requires fuel produced by the entity to include a minimum volume of fuel generated from renewable sources. The entity refines crude oil and conventional biofuel (renewable). During October 20X4, the entity refines 100,000 gallons of conventional biofuel, which results in 100,000 renewable identification numbers granted to the entity by the regulator in accordance with the program. The entity incurred no transaction costs to obtain the renewable identification numbers. The entity determines that it is probable that the renewable identification numbers will be used to settle an environmental credit obligation, transferred in an exchange transaction, or used in a nonreciprocal transfer and recognizes an asset that is initially measured at zero, in accordance with paragraph [818-20-30-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-30-1). Environmental credits received through a grant by a regulator or its designee(s) are not eligible for the fair value measurement accounting policy election in accordance with paragraph [818-20-35-9](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-9).

##### [818-20-55-14](https://asc.understandingaccounting.org/asc/818/20/#818-20-55-14)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:42:30.771Z to 2026-09-10T01:42:30.771Z

Record version: sha256:0abbf20ce3c6e5c52f3f7c3a4e1d3f31729a9fc678edc03fa3ee94168a28c6a4

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 following is an illustration of the quantitative disclosures required by paragraphs

[818-20-50-2 through 50-4](https://asc.understandingaccounting.org/asc/818/20/#818-20-50-2)

for annual reporting periods. The format in the illustration is not a requirement, and the information should be formatted in the most understandable manner for an entity’s specific circumstances. This illustration does not illustrate comparative period disclosures.

![](https://asc.understandingaccounting.org/asc-img/GUID-7C921BE8-2DB2-4E2A-BCBC-04E7F9CE514D-low.gif)

As of December 31, 20X4 Environmental Credit Carrying Amount Classification Current portion $5,100 Compliance Current portion 500 Noncompliance Noncurrent portion 3,800 Compliance Noncurrent portion - Noncompliance Total $9,400 Environmental Credit Expense Information For the Year Ended December 31, 20X4 Expense for voluntary environmental credit costs(a) $118 Impairment expense(b) $15 (a) Expense for voluntary environmental credit costs is included in other expenses in the income statement. (b) Impairment expense is recorded because of a decline in the fair market value of Project A carbon offsets. Impairment expense is included in cost of goods sold in the income statement. Change in Use of Environmental Credit Information For the Year Ended December 31, 20X4 Expense for voluntary environmental credit costs(a) $100 (a) Certain compliance environmental credits were expensed because it was no longer probable that the credits would be used to settle an ECO, transferred in an exchange transaction, or used in a nonreciprocal transfer.