BDO Comment Letter - Environmental Credits and Environmental Credit Obligations

In December 20024, the Financial Accounting Standards Board issued a proposed accounting standards update on an entity’s accounting for environmental credits (ECs) and obligations in its financial statements in accordance with U.S. GAAP. Read more about the FASB’s proposal in BDO’s publication, Environmental Credit Program (FASB Proposal).

In our comment letter, we said that we support the goals of this project given the diversity in practice. However, while we believe the proposal generally is clear, we believe intent-based models can be challenging to apply in practice.  We would prefer a model that recognizes all environmental credits, including those used to meet compliance obligations and to achieve voluntary goals, at cost less impairment. However, providing additional guidance could enhance the operability of the proposed model if the Board proceeds with an intent-based model.