Accounting firms are ramping up activities
on carbon emissions with KPMG UK releasing a paper on carbon

Accounting for Carbon looks at the
accounting and reporting issues that businesses involved in the
market for carbon emissions allowances and credits will need to
address. Released by the Big Four firm’s carbon advisory group, the
guide bundles businesses into five broad categories including
emitters at the EU and UK level, creators, traders and investors,
and looks at how accounting policies can affect financial results
in each of the groups. A checklist helps companies tick off the
areas that need attention.

Carbon trading is a rapidly expanding market,
with research from carbon analysts New Carbon Finance suggesting
the global carbon market almost doubled to $118 billion last year.
It also predicted that the market would grow 27 percent in 2009,
despite the slowing global economy.

The paper said possible accounting approaches
could lead to effects on financial statements in matters such as
timing of recognition of assets, liabilities, profits and losses;
measurement of balance sheet items at nominal value; current and
deferred tax and VAT implications; and presentation and

The guide said there was an absence of
authoritative IFRS accounting guidance after the withdrawal of
IFRIC 3 on Emission Rights in June 2005, which has led to a diverse
range of accounting treatments being created.

The guide said, despite the withdrawal of
IFRIC 3, there remains a number of existing IFRS standards that
provide authoritative guidance on accounting for carbon allowances
including IAS 2, 20, 37, 38 and 39.

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The International Accounting Standard Board
and the Financial Accounting Standards Board have launched a joint
project on carbon emission accounting models but have not yet
published a conclusion.