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A study from the Association of Chartered Certified Accountants (ACCA) and the University of Glasgow study urges urgent action from standard-setters, revealing inconsistencies in accounting treatments for carbon-related instruments and the need for a globally applicable guidance.
The study reveals the growing complexity and diversity in how companies account for these instruments, and the consequences for various stakeholders in the corporate reporting ecosystem.
The study states that there should be a standard to help companies determine the appropriate scope when accounting for each carbon-related instrument that faithfully represents its nature, function and intended use.
It should also help them understand when and how to recognise the instrument, the appropriate measurement approaches, and relevant disclosures to enable users to evaluate the financial effects of such an instrument on the company, including its nature, function and intended use.
ACCA has urged finance professionals, regulators, and standard-setters to explore the research report and articles and contribute to shaping the future of accounting for and reporting of carbon-related instruments.
Dr Ioannis Tsalavoutas, professor of accounting at the University of Glasgow, said: “Without guidance from standard setters, companies are developing their own accounting policies and providing information based on their own discretion. While the application of judgement when applying accounting policies is welcome, the use of substantially different accounting policies and different terms to describe these instruments, undermines transparency and comparability.”
Aaron Saw, head of corporate reporting insights – financial at ACCA, added: “Good quality information about carbon-related instruments would benefit a broad spectrum of stakeholders in the corporate reporting ecosystem. Our research provides a glimpse into the complex landscape and offers a starting point for purpose-driven accounting and reporting of carbon-related instruments.”
