The FASB recently issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), to establish guidance for the accounting and financial reporting of environmental credits and environmental credit obligations. Due to a lack of specific authoritative guidance in U.S. GAAP in this area, entities have been analogizing to various Topics in the Codification, creating diversity in practice.
The amendments in ASU 2026-02 now provide recognition, measurement, presentation, and disclosure requirements for all entities that have either environmental credit transactions or regulatory compliance obligations that may be settled with environmental credits. The amendments create a new Codification Topic—ASC 818, Environmental Credits and Environmental Credit Obligations—which is organized into two subsections: ASC 818-20, Environmental Credits, and ASC 818-30, Environmental Credit Obligations.
The amendments are effective for annual reporting periods and interim reporting periods within those annual reporting periods beginning after December 15, 2027 for public business entities and after December 15, 2028 for all other entities. Early adoption is permitted as of the beginning of an annual reporting period.
Snapshot 2026-13 (PDF - 479.77KB) summarizes this new guidance, complete with citations and examples from ASC 818 as well as graphics and insights created by Grant Thornton professionals.
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Graham Dyer serves as Grant Thornton LLP’s Chief Accountant. In this role, he leads the firm’s national Accounting Principles Group, which is responsible for Grant Thornton’s interpretation of accounting matters in both US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS).
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