• IAS 20 Accounting for Government Grants and Disclosure of Government Assistance (reformatted 1994)
  • IAS 36 Impairment of Assets (1998)
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets (1998)
  • IAS 38 Intangible Assets (1998)


  • Draft Interpretation D1 Emission Rights is IFRIC's first draft Interpretation.
  • IFRIC D1 Issued 15 May 2003
  • Comment Deadline 14 July 2003
  • Click for Press Release (PDF 29k).
  • The draft Interpretation was available publicly on the IASB's Website during the comment period.
  • IFRIC Interpretation 3 Emission Rights was issued in December 2004 but was withdrawn by the IASB in June 2005.

Deloitte Letter of Comment on IFRIC D1

Important: IFRIC D1 resulted in the final IFRIC Interpretation 3, issued in December 2004. IFRIC 3 was withdrawn by the IASB in June 2005. The information on this page reflects the IFRIC's discussions during the development of the final interpretation, including tentative decisions that were changed along the way. We have retained this page for historical purposes only.

Summary of IFRIC D1


In the light of the Kyoto agreement, several governments have, or are in the process of developing, schemes to encourage reductions in greenhouse gas emissions.

The draft Interpretation focuses on the accounting to be adopted by participants in a 'cap and trade' scheme, although its requirements also apply to other schemes that share one or more of the features of a cap and trade scheme.

Typically in cap and trade schemes, a government (or government agency) allocates participating entities rights (allowances) to emit a specified level of pollutant. The government may allocate the allowances free of charge or the participant may be required to pay for them). Participants in the scheme are able to buy and sell allowances and therefore, in many schemes, there is a liquid market for the allowances. At the end of a specified period, participants are required to deliver allowances equal to their actual emissions or incur a penalty.

Main Proposals in Draft Interpretation D1

  • Rights (allowances) to emit pollutant are intangible assets that should be recognised in the financial statements in accordance with IAS 38 Intangible Assets.
  • When allowances are allocated to a participant by government (or government agency) for less than their fair value, the difference between the amount paid (if any) and their fair value is a government grant that is recognised as deferred income in the balance sheet and subsequently recognised as income on a systematic basis over the compliance period.
  • As a participant emits pollutant, it recognises a provision for its obligation to deliver allowances or pay a penalty in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. This provision is normally measured at the market value of the allowances needed to settle it.
  • Even though this is a grant of a non-monetary asset, the Interpretation would prohibit measuring the grant at a nominal amount, which is an alternative allowed by IAS 20.

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