Australian standard setter releases staff paper on government carbon accounting

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08 Feb 2013

The Australian Accounting Standards Board (AASB) has released a paper prepared by its staff dealing with government sector accounting for Australia's carbon pricing mechanism.

The release of the government paper follows on from a similar paper released by the AASB in July 2012, dealing with accounting for carbon by emitting entities under Australia's carbon pricing mechanism (CPM).

Both papers focus on financial reporting issues that may arise during the initial fixed price phase of the CPM (often referred to as a 'carbon tax'), whereby emitters effectively pay a fixed price per unit of carbon emitted (the AASB has previously stated that it will consider the accounting for the subsequent flexible price phase when the IASB progresses its project on emissions trading schemes).  Under the CPM, some entities are eligible for 'free' permits which can be used to effectively extinguish their liability arising under the scheme.

The most recent staff paper considers the implications for the Australian Government, in accordance with Australian Accounting Standards.   The standards applicable to the Australian government sector are based on IFRS, but are modified for specific public sector and not-for-profit issues, and supplemented by additional requirements.  Accordingly, these entities cannot make a statement of compliance with IFRS in the same way as for-profit entities fully complying with Australian Accounting Standards.

The staff paper considers such issues as:

  • the nature of the Government impost
  • accounting for sold permits
  • accounting for buy-back arrangements of free permits
  • the nature of the Government liability in relation to offsetting emission debt with free permits and 'Australian Carbon Credit Units' (ACCUs)
  • accounting for shortfall charges imposed on those emitters that are unable to deliver sufficient permits to meet their obligations under the CPM
  • the classification of associated cash flows in the cash flow statement from the government's perspective
  • Generally Accepted Accounting Principles/Government Finance Statistics (GAAP/GFS) harmonisation issues.

The staff paper notes that is has no authoritative standing.  Click for access the the paper (link to AASB website).

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