# ASC 818-30: Environmental Credits and Environmental Credit Obligations — Environmental Credit Obligations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/818/30/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:42:35.777Z to 2026-09-10T01:43:08.971Z Record version: sha256:82f948f9e1ec8dc94ebd95e208b90ff5a28f2d0883a1a83d0a069d6be0aec978 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30: Environmental Credits and Environmental Credit Obligations — Environmental Credit Obligations ### Machine-generated study aids ```json { "summary": "ASC 818-30 governs when and how an entity recognizes, measures, presents, and discloses an environmental credit obligation — a liability to remit environmental credits (e.g., emissions allowances, renewable energy certificates) under a regulatory compliance program. A liability is recognized when events on or before the reporting date would require remitting credits assuming the reporting date were the end of the compliance period (818-30-25-1). The liability is split into a funded portion, measured at the carrying amount of compliance environmental credits on hand under Subtopic 818-20 costing methods (818-30-30-2), and an unfunded portion, measured at fair value of the needed credits unless the entity intends to settle in cash or with credits from an unconditional commitment or right (818-30-30-3).", "key_points": [ "Recognize a liability when events occurring on or before the reporting date result in an environmental credit obligation, determined as if the reporting date were the end of the regulatory compliance period, even if the compliance period ends later (818-30-25-1).", "Costs of the obligation are recognized in earnings or, if appropriate, capitalized as part of another asset under another Topic (818-30-25-1; presentation of changes and derecognition gains/losses must be consistent, 818-30-45-3 through 45-4).", "Apply Subtopic 818-20's recognition and measurement to the credits first; the funded portion is measured using the carrying amount of compliance environmental credits expected to be derecognized, using the same costing method (FIFO, average cost, etc.) applied under 818-20-35-2 (818-30-30-1 through 30-2).", "Noncompliance credits, credits never recognized as assets (818-20-25-1), and previously derecognized credits (818-20-40-2) are excluded from the funded portion, and only credits held at the reporting date count (818-30-30-2; 818-30-55-5).", "The unfunded portion is measured at the fair value of credits needed at the reporting date, unless the entity intends to settle in cash (then the program's cash settlement amount) or with credits from an existing unconditional purchase commitment or unconditional right (then the estimated cost basis, which may differ from the contract price) (818-30-30-3).", "Expected future activities that could increase, reduce, or eliminate the obligation may not be considered in measurement (818-30-30-4; 818-30-55-16); a right is not unconditional if contingent on future performance such as continuing to operate in the jurisdiction (818-30-55-7).", "Present obligation liabilities separately from compliance environmental credit assets, classified current/noncurrent (818-30-45-1 through 45-2); derecognize under Subtopic 405-20 (818-30-40-1); annual disclosures include program activities and settlement terms, unfunded measurement approach, funded/unfunded current and noncurrent amounts, total expense and income statement line, and capitalized amounts (818-30-50-1 through 50-4)." ], "categories": [ "Recognition", "Initial measurement", "Subsequent measurement", "Disclosure" ], "audience_level": "intermediate", "student_note": "The signature rule is the \"as if the reporting date were the end of the compliance period\" test: you measure the obligation on facts existing now and ignore forecast emissions or future fuel-efficient sales that might wipe it out. A common error is netting the credit asset against the obligation or measuring the whole liability at fair value — the funded portion carries the credits' historical carrying amount, and only the shortfall is fair valued (or measured at the cash settlement amount or committed cost basis).", "related_topics": [ "818-10", "818-20", "405-20", "805-50", "820", "220-40" ], "key_concepts": [ "environmental credit obligation", "funded portion", "unfunded portion", "compliance environmental credits", "regulatory compliance program", "unconditional purchase commitment", "cash settlement mechanism", "reporting date as end of compliance period assumption" ] } ``` Source downloaded (UTC): 2026-09-10T01:42:35.777Z to 2026-09-10T01:42:35.777Z Record version: sha256:cd3be17c7e70943496bcf4005129224d5a9769448610874df0f3a11b8680ab71 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/818/30/#00-status) SEC content: no ##### [818-30-00-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:42:35.777Z to 2026-09-10T01:42:35.777Z Record version: sha256:6cb99c8ec8fb537887ccd1f6863a70ac7bd48721ffb49eff0909a6b7a3f6fc75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Compliance Environmental CreditAddedAccounting Standards Update No. 2026-0205/19/2026
Environmental CreditAddedAccounting Standards Update No. 2026-0205/19/2026
Environmental Credit ObligationAddedAccounting Standards Update No. 2026-0205/19/2026
ExchangeAddedAccounting Standards Update No. 2026-0205/19/2026
Fair Value (2nd def.)AddedAccounting Standards Update No. 2026-0205/19/2026
Financial AssetAddedAccounting Standards Update No. 2026-0205/19/2026
Income TaxesAddedAccounting Standards Update No. 2026-0205/19/2026
Market ParticipantsAddedAccounting Standards Update No. 2026-0205/19/2026
Noncompliance Environmental CreditAddedAccounting Standards Update No. 2026-0205/19/2026
Nonreciprocal Transfer (1st def.)AddedAccounting Standards Update No. 2026-0205/19/2026
Operating CycleAddedAccounting Standards Update No. 2026-0205/19/2026
Orderly TransactionAddedAccounting Standards Update No. 2026-0205/19/2026
ProbableAddedAccounting Standards Update No. 2026-0205/19/2026
Related PartiesAddedAccounting Standards Update No. 2026-0205/19/2026
818-30-05-1AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-15-1AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-25-1AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-25-2AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-30-1 through 30-5
AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-35-1AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-40-1AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-45-1 through 45-4
AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-50-1 through 50-6
AddedAccounting Standards Update No. 2026-0205/19/2026
818-30-55-1 through 55-21
AddedAccounting Standards Update No. 2026-0205/19/2026
Source downloaded (UTC): 2026-09-10T01:42:38.699Z to 2026-09-10T01:42:38.699Z Record version: sha256:7580a7eea3c929ba840342a032a37fef7423f41870f358960e808507b03e2e3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/818/30/#05-overview-and-background) SEC content: no ##### [818-30-05-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-05-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:38.699Z to 2026-09-10T01:42:38.699Z Record version: sha256:f6d2897813ce0e5be2552ff1583b44a0686dcb7f6565f34bb72c9e68cac601e7 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)This Subtopic addresses the accounting for 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."). Paragraph [818-30-55-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-1) provides a flowchart of the recognition and measurement requirements of this Subtopic. Source downloaded (UTC): 2026-09-10T01:42:42.261Z to 2026-09-10T01:42:42.261Z Record version: sha256:2b29cb19da4eca922565e4d613b4c2a29f09c1a55b6950c1fa35f69aff5e40b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/818/30/#15-scope-and-scope-exceptions) SEC content: no ##### [818-30-15-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-15-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:42.261Z to 2026-09-10T01:42:42.261Z Record version: sha256:6437ff740c4a3eb1d4b0418dcf6f062f8a84f100ee17b9d71bc0380fc0ae19c7 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)This Subtopic follows the same Scope and Scope Exceptions as the Overall Subtopic. Source downloaded (UTC): 2026-09-10T01:42:47.889Z to 2026-09-10T01:42:47.889Z Record version: sha256:d7bf96a341fbd691bff0b46f78e4924bad3bec6888378828f79517ce4be418c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/818/30/#25-recognition) SEC content: no ##### [818-30-25-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-25-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:47.889Z to 2026-09-10T01:42:47.889Z Record version: sha256:7975d40a40c472282f1119ef16085f5eb845a720d913653a469da8455917f23e 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 a liability when events that occur on or before a reporting date result in an [environmental credit obligation](https://asc.understandingaccounting.org/glossary/e/#environmental-credit-obligation "(P) December 16, 2027; (N) December 16, 2028818-10-65-1A regulatory compliance obligation arising from existing or enacted laws, statutes, or ordinances represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. Obligations within the scope of Subtopic 410-30 are not environmental credit obligations."). When evaluating whether a liability should be recognized, an entity shall determine whether [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.") would be due assuming that the reporting date is the end of the regulatory compliance period, regardless of whether the regulatory compliance period ends after the reporting date. An entity shall recognize the costs associated with an environmental credit obligation liability either in earnings or, if appropriate, as part of another asset accounted for in accordance with another Topic. ##### [818-30-25-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:47.889Z to 2026-09-10T01:42:47.889Z Record version: sha256:62dfa7427871a5fe329262b0bc6fa46f3e309d9639289778433c1a5810d5f114 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 [818-30-55-2 through 55-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-2) for implementation guidance on the application of recognition requirements. Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:354e9239087e9928d5cd0d7850294dd132d20d9800963acd632a2cad73fbd4d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/818/30/#30-initial-measurement) SEC content: no ##### [818-30-30-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:659b91b981faf5929c48c556fbfd99b58c213887b86821fc532bddecc0c253b5 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 recognition and measurement requirements of Subtopic 818-20 before applying the measurement requirements of this Subtopic on [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."). An environmental credit obligation liability may have a funded portion and an unfunded portion to be measured in accordance with paragraphs [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) and [818-30-30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3), respectively. ##### [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:3903381e026e4abe6b69740ea2d3d8655d082320fc707509f38b5d04dc46c420 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 funded portion of an environmental credit obligation liability is the portion for which an entity has associated [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."). An entity shall measure the funded portion using the carrying amount of the compliance environmental credits expected to be derecognized upon settlement of the liability using costing methods consistent with those applied when subsequently measuring its compliance environmental credits in accordance with Subtopic 818-20. When measuring the funded portion of an environmental credit obligation liability, an entity shall not consider any of the following: 1. a [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.") 2. b [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.") that were never recognized as assets in accordance with paragraph [818-20-25-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-25-1) 3. c Environmental credits that were previously derecognized in accordance with paragraph [818-20-40-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-40-2). ##### [818-30-30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:7eeaf858a358e485695936caada42af452eaf97eeb08c0eeaf3c77f49216b27a 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 entity does not have sufficient compliance environmental credits to satisfy an environmental credit obligation liability at a reporting date, the unfunded portion of its environmental credit obligation liability shall be measured using 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.") of the environmental credits necessary to settle that portion of the liability at the reporting date, unless an entity intends to settle (or partially settle) the unfunded portion by remitting any of the following: 1. a Cash. An entity that intends to settle the unfunded portion by remitting cash shall measure the unfunded portion using the cash settlement amount specified by the regulatory compliance program. 2. b Environmental credits that will be received before the settlement of the liability from either an existing unconditional purchase commitment for a fixed quantity of environmental credits at a fixed price or an unconditional right to receive a fixed quantity of environmental credits as part of a regulatory compliance program or contract for which environmental credits will be received as consideration. For purposes of applying the requirements in this paragraph, an unconditional right exists when an entity has satisfied all performance requirements of the regulatory compliance program or contract necessary to receive environmental credits as of the reporting date. An entity that intends to settle the unfunded portion using environmental credits from those unconditional commitments or rights shall measure the unfunded portion using the estimated cost basis of the environmental credits to be obtained (which may differ from the fixed price per the contract). ##### [818-30-30-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:8bd36cf9b2d61d7407937fa4fdbe82a996a1bb64dbc48b402b50dcfaad93bb0d 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 consider expected future activities that may increase, reduce, or eliminate its environmental credit obligation liability when applying paragraph [818-30-30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3). ##### [818-30-30-5](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:51.424Z to 2026-09-10T01:42:51.424Z Record version: sha256:35a778c6c204e12354e48b00c149834920b9edf5b6c8b9e4a92ec236357b826a 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 [818-30-55-5 through 55-7](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-5) for implementation guidance on the application of initially measuring environmental credit obligation liabilities. Source downloaded (UTC): 2026-09-10T01:42:54.958Z to 2026-09-10T01:42:54.958Z Record version: sha256:dce19a0d22f9f6d35b70964846c0e18d76119f442b71dbc8637d442d86ab372c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/818/30/#35-subsequent-measurement) SEC content: no ##### [818-30-35-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-35-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:54.958Z to 2026-09-10T01:42:54.958Z Record version: sha256:f182bc26a52c2593d865b483540655187c3cc73fc15fe959817aaa75a59c4744 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 apply the initial measurement guidance in paragraphs [818-30-30-2 through 30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) and recognize any changes in an [environmental credit obligation](https://asc.understandingaccounting.org/glossary/e/#environmental-credit-obligation "(P) December 16, 2027; (N) December 16, 2028818-10-65-1A regulatory compliance obligation arising from existing or enacted laws, statutes, or ordinances represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. Obligations within the scope of Subtopic 410-30 are not environmental credit obligations.") liability through earnings or as part of another asset accounted for in accordance with another Topic as required by paragraph [818-30-25-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-25-1). Source downloaded (UTC): 2026-09-10T01:42:58.763Z to 2026-09-10T01:42:58.763Z Record version: sha256:fb841651f3bb8aaba00ba50e28565c825e5255d43e3c10dbb03edd2724fc36f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/818/30/#40-derecognition) SEC content: no ##### [818-30-40-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-40-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:42:58.763Z to 2026-09-10T01:42:58.763Z Record version: sha256:8bc608fcac74d21f95b7d757714f26e3c1bbcd80912f6ac9e6928816aecaf789 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 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.") liability in accordance with Subtopic 405-20 on extinguishments of liabilities. Source downloaded (UTC): 2026-09-10T01:43:00.521Z to 2026-09-10T01:43:00.521Z Record version: sha256:2d2cee3782891ff5b0e78d1f76b961ad73990ab5356491fe4ad695138b52f818 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/818/30/#45-other-presentation-matters) SEC content: no #### Balance Sheet ##### [818-30-45-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-45-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:00.521Z to 2026-09-10T01:43:00.521Z Record version: sha256:a592ed95debddb6888dea6a09cf4f50ae8c6c6b754531bd8076ed409f11eb8e1 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 its [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 separate from its [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.") recognized as assets in accordance with Subtopic 818-20 on its balance sheet. ##### [818-30-45-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-45-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:00.521Z to 2026-09-10T01:43:00.521Z Record version: sha256:8c2dda2d547dda6e27982484470542e198ff154fb078a7833152c007b787400d 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 credit obligation liabilities reasonably expected to be settled 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 used for applying paragraph [818-20-45-1](https://asc.understandingaccounting.org/asc/818/20/#818-20-45-1), if longer) as a current liability. All other environmental credit obligation liabilities shall be classified as noncurrent liabilities. #### Income Statement ##### [818-30-45-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-45-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:00.521Z to 2026-09-10T01:43:00.521Z Record version: sha256:492bdeb722655111a075bf5756cbe52b516cff18baa50f07669e7fe48255da34 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 any changes in an environmental credit obligation liability in the income statement in a manner consistent with the recognition and measurement of that liability. ##### [818-30-45-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-45-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:00.521Z to 2026-09-10T01:43:00.521Z Record version: sha256:1b7042482fe795af5bcdb88d75878acb7d1010881c1b5f6047e9bdc4a4ccc1da 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 any gain or loss recognized upon derecognition of an environmental credit obligation liability in the income statement in a manner consistent with the recognition and measurement of that liability. Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:47afdc0a8c223b91b9b7f225fd1338e37869fdb8a6095c83e23ce677c426eec0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/818/30/#50-disclosure) SEC content: no ##### [818-30-50-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:1dc63d5e2123a8454fee5fd1d9d4d699ca77c749b5ff236a4f5e45343f40ee51 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 about regulatory compliance programs that result in the entity’s [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: 1. a The activities or events that result in environmental credit obligation liabilities under those programs, including the nature and timing of settlement provisions 2. b The accounting policies used to account for the environmental credit obligations in accordance with Topic 235 on notes to financial statements 3. c How the unfunded portion of an environmental credit obligation liability is measured in accordance with paragraph [818-30-30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3) 4. d Significant estimates and judgments used in applying the guidance. ##### [818-30-50-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:d9a4c8b34a731b219c453d16ee727fe5607db218a03ad1111ebfc94fae6ecb09 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 not separately presented on an entity’s balance sheet, an entity shall disclose the current and noncurrent portions of both of the following: 1. a The funded portion of an environmental credit obligation liability 2. b The unfunded portion of an environmental credit obligation liability. An entity also shall disclose the line item or items on the balance sheet that include the current and noncurrent portions of amounts in (a) and (b). ##### [818-30-50-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:97a95a433c07b74e8a4374246c09a46d8debb4e20701b737340db8da80f6f51b 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 total expense recognized for environmental credit obligation liabilities during the reporting period and the line item in the income statement that includes that amount. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. ##### [818-30-50-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:aa7382e71e832aa486f0459e2573d454a278e2850cda1d299fda1db1f92548a6 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 both of the following: 1. a The total costs associated with environmental credit obligation liabilities that are capitalized in the carrying amount of another asset during the reporting period in accordance with another Topic 2. b A description of the other asset. ##### [818-30-50-5](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:ebe643c65b96fbcec73c7634cc6dce741a8899acdf6a09ebb2ed20ccbd0d03e4 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. ##### [818-30-50-6](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-6) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:04.563Z to 2026-09-10T01:43:04.563Z Record version: sha256:251aee47929fc7bfbf1116f93573353340d7a2452642072d866e14014077b7bb 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 [818-30-55-21](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-21) for an illustration of the quantitative disclosures required by this Subtopic. Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:8cc605d3d88a2d103c4d1e20088c6daa62c5796ddb6895c597a62e9719db09e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 818-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/818/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [818-30-55-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:2ee1ca739929dfe06b286e90e761ade088f43345bb41436f63cf7a134a02062a 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 of this Subtopic for [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."). The flowchart is a supplement to the guidance in this Subtopic. 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-C7A1B943-AF39-4A5E-AF2F-F0FF2AC37AF5-low.gif) Have events occurred on or before the reporting date that result in an environmental credit obligation (ECO) liability (paragraph 818-30-25-1)? "No" ECO measurement requirements are not applicable. Yes Recognize an ECO liability and measure the liability as follows: Funded Portion Unfunded Portion Measure the funded portion of the ECO liability using the carrying amount of compliance environmental credits at the reporting date (paragraph 818-30-30-2). "Measure the unfunded portion using the fair value of the environmental credits necessary to settle that portion at the reporting date (paragraph 818-30-30-3), unless:" The entity intends to settle the unfunded portion in cash. The entity intends to settle the unfunded portion using environmental credits from either (a) an existing unconditional purchase commitment (fixed quantity at a fixed price) or (b) an unconditional right to receive a fixed quantity of environmental credits as part of a regulatory compliance program or contract for which environmental credits will be received as consideration. Measure the unfunded portion using the cash settlement amount specified by the regulatory compliance program (paragraph 818-30-30-3(a)). Measure the unfunded portion using the estimated cost basis of the environmental credits to be obtained (paragraph 818-30-30-3(b)). ##### [818-30-55-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:81cd9924137ee9bc727a736fd7156c4e379f5a555569e3b8e14cdd25e12a4973 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 some regulatory compliance programs, the qualifying events or activities that trigger an obligation to remit 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.") (which is often emissions as they occur) are established and specified by the program. In those programs, an entity typically cannot reduce the quantity of environmental credits that it is obligated to remit to the regulator at a point in time through future performance. For those programs, an entity should recognize an environmental credit obligation liability upon the occurrence of each qualifying event or activity. For example, if a utility company is required to remit one renewable energy certificate for every one megawatt-hour of electricity delivered to customers, the entity would recognize an environmental credit obligation liability for the obligation to remit one renewable energy certificate upon the delivery of one megawatt-hour to a customer. ##### [818-30-55-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-3) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:c8962bf4ab615cb3bb794b724af6a653a64f6d145d6bdb5bfcd8e46781bc1dea 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 other regulatory compliance programs that result in environmental credit obligations, an entity is obligated to remit environmental credits to a regulator after it exceeds an established threshold of emissions. After exceeding the established threshold, each qualifying activity results in an incremental obligation to remit an environmental credit to the regulator at the settlement date specified by the program. For example, a regulatory compliance program obligates an entity to remit one emissions allowance for each metric ton of greenhouse gas emitted over 1,000 metric tons. An entity subject to that program should recognize an environmental credit obligation liability after its emissions exceed 1,000 metric tons. Because the entity is not obligated to remit an environmental credit until the threshold is exceeded, a liability should not be recognized before excess emissions occur. Therefore, when the entity emits above the 1,000 metric ton threshold, it should recognize an environmental credit obligation liability for each emissions allowance due thereafter. ##### [818-30-55-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:bd81d2ba4b7a27bbaa463817fbf5e2a6a22ff7b64f8a1b1e63bf960fb19a8ae2 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)Some regulatory compliance programs determine an entity’s environmental credit obligation by considering activities over a period of time. Under those programs, an entity’s future performance or actions may increase, reduce, or eliminate the need to remit environmental credits to a regulator at the settlement date. For those regulatory compliance programs, an entity should recognize an environmental credit obligation liability at a reporting date when activities or events occurring on or before that date obligate the entity to remit an environmental credit to the regulator assuming that the reporting date was the end of the compliance period. This assumption should be applied regardless of whether the regulatory compliance period ends after the reporting date. For example, consider an automotive manufacturer subject to a regulatory compliance program that requires that an entity remit environmental credits if the fuel efficiency of vehicles sold over a multiyear compliance period does not satisfy a benchmark threshold for that compliance period. Under those programs, an entity may sell vehicles during a reporting period that indicates that an environmental credit obligation liability exists at one reporting date that can be reduced or eliminated upon future sales of more fuel-efficient vehicles and before the compliance period ends. The entity should recognize an environmental credit obligation liability at the reporting date based on the facts and circumstances existing at that date. An entity should not forecast future activities or events that may increase, reduce, or eliminate the need to remit environmental credits to a regulator at the settlement date when determining whether it should recognize an environmental credit obligation liability. ##### [818-30-55-5](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:62fc6d162befe2bfeae1825e2bb334d0f29dce9cad0ae1989bff7cd4f81a02e2 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)When applying paragraph [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) for the measurement of the funded portion of an environmental credit obligation liability, an entity should consider only [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.") recognized as assets at the reporting date, not those credits that will (or may) be obtained in future periods. ##### [818-30-55-6](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-6) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:9be9c609e1b1f2d30d72c953e9d0685fd79dd06acc226a1543c1d9d54ba92949 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 [818-30-30-3(b)](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3), if an entity intends to settle the unfunded portion of an environmental credit obligation liability using environmental credits to be obtained before the settlement date through an unconditional purchase commitment for a fixed quantity of environmental credits at a fixed price that exists at the reporting date, that liability should be measured using the estimated cost basis of the environmental credits to be obtained. For example, a contract specifying that an entity will purchase 10,000 renewable energy certificates each year for the next 5 years at a fixed price of $20,000 ($2 per renewable energy certificate) per year may be considered when measuring the unfunded portion. If the entity intends to settle the unfunded portion of an environmental credit obligation liability using environmental credits to be obtained under that commitment before the settlement date, that unfunded portion would be measured using a cost basis of $2 per renewable energy certificate. However, if those renewable energy certificates are obtained as part of a bundled arrangement (for example, a power purchase arrangement) that includes the related energy, the estimated cost basis of the environmental credits to be obtained may differ from the fixed price per the contract because the amount allocated to that renewable energy certificate in accordance with Subtopic 805-50 on asset acquisitions may be different from the fixed price per the contract. In that scenario, an entity would measure the environmental credit obligation liability using the estimated cost basis of the renewable energy certificates to be obtained based on the estimated amount to be allocated to the renewable energy certificates in accordance with Subtopic 805-50. ##### [818-30-55-7](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-7) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:5d5b928df504e59e50657574ed3c71ad8b98e64a993061ef2d480f98c6732a77 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)Also in accordance with paragraph [818-30-30-3(b)](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3), if an entity has an unconditional right to receive a fixed quantity of environmental credits either from a regulator at a future date as part of a regulatory compliance program or as part of a contract for which the environmental credits are received as consideration, it should consider those environmental credits when measuring the unfunded portion of an environmental credit obligation liability if it intends to settle the obligation by remitting those credits. For example, if an entity is subject to a cap-and-trade program that specifies that the entity has an unconditional right on December 31, 20X4, to receive 1,000 emissions allowances on March 15, 20X5, the entity may consider those environmental credits to be received at a later date when measuring the unfunded portion if it intends to settle its environmental credit obligation by remitting those credits. That right would not be considered unconditional if the future grant is contingent on the entity’s future performance, including continuing to conduct business in the program’s jurisdiction after the reporting date. For example, if an entity subject to a cap-and-trade program specifying that an entity subject to the program as of December 31, 20X4, will receive 1,000 emissions allowances on March 15, 20X5, if the entity continues to operate in the program’s jurisdiction on that date, the entity should not consider those environmental credits when measuring the unfunded portion before March 15, 20X5. #### Illustrations ##### [818-30-55-8](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-8) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:09cefdd2b028f2cb5c3f4a665331be0d5cdee24fae1ceb1a93298a21335dcb06 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 3 illustrate the application of the environmental credit obligation liability recognition and measurement requirements in this Subtopic. ##### [818-30-55-9](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-9) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:7f68006bc2b083823ab8c95c4740b6bda1e9a5a109ec2c4b23e406a85bd768b7 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 manufacturing entity is subject to a cap-and-trade program that obligates the entity to remit emissions allowances to a regulator at a future settlement date with the quantity due determined based on greenhouse gas emissions for a calendar year. On March 31, 20X4, the entity determines that its 20X4 emissions to date would obligate it to remit 10,000 emissions allowances assuming that the March 31, 20X4 reporting date represents the end of the program’s compliance period. On that date, the entity has 20,000 emissions allowances accounted for as compliance environmental credits with a carrying amount of $206,000. The entity subsequently measures its emissions allowances using the first-in, first-out costing method in accordance with paragraph [818-20-35-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-2). Those 20,000 emissions allowances comprise 8,000 acquired in March 20X3 for $96,000 ($12 per allowance Vintage Year 20X2), 7,000 acquired in August 20X3 for $70,000 ($10 per allowance Vintage Year 20X3), and 5,000 acquired in January 20X4 for $40,000 ($8 per allowance Vintage Year 20X4). For purposes of this Example, vintage year refers to the year that the emissions allowances were issued or sold at auctions by the regulator of the cap-and-trade program. ##### [818-30-55-10](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-10) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:1ce4039152db4d51220740e718f340a99b3325706d52864b44ef20a707541ef2 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 entity first applies the asset reassessment requirements in paragraph [818-20-35-3](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-3) and determines that all 20,000 emissions allowances continue to be [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") of being used to settle environmental credit obligation liabilities. Therefore, those emissions allowances remain classified and accounted for as compliance environmental credits. In accordance with paragraph [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2), the entity measures the environmental credit obligation liability for the 10,000 emissions allowances using the carrying amount of compliance environmental credits recognized on March 31, 20X4. When assessing the carrying amount of the related compliance environmental credits, the entity considers the costing method applied in accordance with the requirements in paragraph [818-20-35-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-2) and uses that method to determine its best estimate of the carrying amount of compliance environmental credits. ##### [818-30-55-11](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-11) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:4ed4033ebe74689dc95b190bae8e2e8dec80547ce36807d9313c2dd044ac093c 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)Therefore, the carrying amount of the 10,000 credits expected to be used to satisfy the regulatory compliance program is $116,000 (the sum of the 8,000 Vintage Year 20X2 allowances at $12 per allowance plus 2,000 of the Vintage Year 20X3 allowances at $10 per allowance). The entity recognizes an environmental credit obligation liability on March 31, 20X4, for 10,000 emissions allowances measured at $116,000. ##### [818-30-55-12](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-12) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:c4a989de4d3a884d63e785484d3a726f9e4049033dcfe1f4b77a777b2538edf1 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)Assume the same facts and circumstances as Case A except that the entity’s 20X4 emissions to date would obligate it to remit 14,000 emissions allowances. Additionally, assume that the entity subsequently measures the emissions allowances using an average cost method in accordance with paragraph [818-20-35-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-2). Vintage Years 20X2 through 20X4 emissions allowances are accepted methods of settlement for 20X4 cap-and-trade obligations, and the entity accounts for them as a single cost pool. ##### [818-30-55-13](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-13) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:879cffae84bfec2bf52c207bbcd7238b19a2b77d008953cbed18bb5687c7aca4 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)Regardless of the specific emissions allowances that the entity intends to transfer to the regulator, the entity will derecognize the environmental credits remitted at their average cost based on the entity’s previously elected accounting policy. Average cost is one of the three allowable costing methods that an entity can use for subsequently measuring similar environmental credits in accordance with paragraph [818-20-35-2](https://asc.understandingaccounting.org/asc/818/20/#818-20-35-2). On March 31, 20X4, the entity determines that the average cost is $10.30 per emissions allowance (the total cost of the emissions allowances of $206,000 divided by the total number of emissions allowances of 20,000). On that basis, the environmental credit obligation liability recognized for the 14,000 emissions allowances necessary to satisfy the liability at the reporting date is $144,200 in accordance with paragraph [818-30-30-2](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) (the average cost of $10.30 per emissions allowance multiplied by 14,000 emissions allowances necessary to satisfy the liability). ##### [818-30-55-14](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-14) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:fcf2a5c27e9fa09847f2cdc0ab0bc2eea031a9640e6f7b966abdd8ac6827e929 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 automotive manufacturer selling vehicles is subject to a regulatory compliance program represented to control greenhouse gas emissions by establishing minimum levels of average fuel economy standards for vehicles sold. The compliance period begins on January 1, 20X4, and ends on December 31, 20X7. The entity is obligated to remit 1 environmental credit per vehicle for each mile per gallon that the average fuel economy of all of its vehicles sold within a designated model year is less than 32 miles per gallon. The regulator grants the entity 1 environmental credit per vehicle for every mile per gallon that the average fuel economy of all vehicles sold exceeds 32 miles per gallon. The entity has not executed an unconditional purchase commitment to acquire environmental credits, and the regulatory compliance program does not permit an alternative cash settlement mechanism. The entity determines that it intends to settle the obligation by acquiring the necessary environmental credits from another automotive manufacturer. ##### [818-30-55-15](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-15) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:684bbb201cfb3b61e05ef16a26fbe961824bb4c1180fbcd93008c7a0cd345c73 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 the 3 months ending March 31, 20X4, the entity sold 100,000 20X4 model year vehicles with an average fuel economy of 30 miles per gallon. On that basis, the entity would be obligated to remit 200,000 environmental credits if the compliance period ended on March 31, 20X4. In accordance with paragraph [818-30-25-1](https://asc.understandingaccounting.org/asc/818/30/#818-30-25-1), the entity should recognize an environmental credit obligation liability on that date. The liability is initially measured in accordance with paragraphs [818-30-30-2 through 30-3](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-2) . On March 31, 20X4, the fair value of those environmental credits is $4 per credit. Therefore, the entity recognizes an unfunded environmental credit obligation liability of $800,000 on that date. ##### [818-30-55-16](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-16) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:c6889dc0806c81285ec11788882234b2a6fb9bf3656bef3e600c0cc2a6c6caa9 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)When measuring its March 31, 20X4 environmental credit obligation liability, the entity should not consider any activities or events that may increase, reduce, or eliminate the number of environmental credits that would be required at the reporting date. For example, if the entity intends to manufacture and sell more fuel-efficient vehicle models that result in environmental credits being granted to the entity before the settlement date, it should not consider the receipt of those expected future environmental credits when measuring the existing environmental credit obligation liability. ##### [818-30-55-17](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-17) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:ff7f6084f695ed0f053d9fbbfd02526476047d65a1e4e32b38e7f5c25e929ced 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)Assume the same facts and circumstances as in Case A except that the regulatory compliance program permits an alternative cash settlement mechanism that the entity intends to use because of a shortage of environmental credits associated with the program in the market. That alternative cash settlement mechanism allows the entity to settle its environmental credit obligation by paying $4.25 per environmental credit due to the regulator. In accordance with paragraph [818-30-30-3(a)](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3) and because the entity intends to use the alternative settlement mechanism, the entity recognizes an environmental credit obligation liability of $850,000 on March 31, 20X4. ##### [818-30-55-18](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-18) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:c4ba28acced85290ffdb56a518577698c094d90bfc46c0165406acfc364bf5b0 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)Assume the same facts and circumstances as in Case A except that during 20X3 the entity executed an unconditional purchase commitment for 500,000 environmental credits at $3 per credit to be received before the settlement date. On March 31, 20X4, the entity intends to settle its environmental credit obligation liability using environmental credits to be obtained from that purchase commitment. In accordance with paragraph [818-30-30-3(b)](https://asc.understandingaccounting.org/asc/818/30/#818-30-30-3), the entity recognizes an environmental credit obligation liability of $600,000. ##### [818-30-55-19](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-19) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:07727df9ee3c6d74cf7eda95e23ed312ad4af86a0c67642b58c16ec6fd189163 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 e-commerce retailer is subject to an annual regulatory compliance program that obligates it to remit 1 environmental credit for each metric ton of emissions in excess of 1,000,000 metric tons. The regulatory compliance program ends on December 31, 20X4. As of June 30, 20X4, the entity’s year-to-date emissions are 750,000 metric tons. At that date, the entity expects to emit 750,000 additional metric tons by December 31, 20X4. On that basis, the entity estimates that by the end of the regulatory compliance program, it will be obligated to remit 500,000 environmental credits to the regulator for its excess emissions. On June 30, 20X4, the entity does not recognize an environmental credit obligation liability because it is not obligated to remit any environmental credits assuming that date was the end of the compliance period. An environmental credit obligation liability is recognized under this program only after emissions exceed 1,000,000 metric tons. ##### [818-30-55-20](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-20) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:c3f1560d96602b6c35689978aeb203782d799893075d4a77eda43799f952e4e2 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 publicly states its voluntary initiative to reduce its net annual emissions by 50 percent by 20X0 by acquiring carbon offsets in addition to making infrastructure investments and process changes. Because the entity’s statement does not arise from a regulatory compliance obligation under existing or enacted laws, statutes, or ordinances, it is not an environmental credit obligation accounted for in accordance with this Subtopic. ##### [818-30-55-21](https://asc.understandingaccounting.org/asc/818/30/#818-30-55-21) Pending content: yes Source downloaded (UTC): 2026-09-10T01:43:07.088Z to 2026-09-10T01:43:07.088Z Record version: sha256:932d254f8fc7f6cf38556a2a9eca38b557ff83ace37886a7b3f76a5a8e0b173f 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 [818-30-50-2 through 50-4](https://asc.understandingaccounting.org/asc/818/30/#818-30-50-2) 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-E947093F-2943-40D4-A99C-7BD92CDD069E-low.gif) "As of December 31, 20X4" Environmental Credit Obligation Liability Funded Obligation Unfunded Obligation Total Obligation Current liability " $5,100 " " $1,400 " " $6,500 " Noncurrent liability " 3,800 " - " 3,800 " Total " $8,900 " " $1,400 " " $10,300 " Environmental Credit Obligation Cost and Expense Information "For the Year Ended December 31, 20X4" Expense recognized for environmental credit obligations(a) " $9,370 " Costs capitalized as part of inventory that are associated with environmental credit obligations " $2,000 " (a) Expense recognized for environmental credit obligations is included in other expenses in the income statement.