Accounting for Australian Carbon Credit Units (ACCUs): Your questions answered

Over the past 12 months we’ve published a number of articles on accounting for Australian Carbon Credit Units (ACCUs). In response to these articles, we’ve received various queries from readers. In this article we address some of the more popular queries we’ve received on the accounting for ACCUs.

Question 1: If an entity purchases ACCUs from a renewable energy provider, why can’t the purchaser account for the ACCUs under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance?

The scope of IAS 20 is limited to the accounting by private sector for-profit entities for government grants and other forms of government assistance. Accordingly, to account for an acquisition of ACCUs under IAS 20, the entity acquiring the ACCUs must have:

• Acquired the ACCUs from a government, government agency or similar body, whether local, national or international, for ‘below market’ consideration, and
• Received the ACCUs from the government entity in return for past or future compliance with certain conditions relating to the activities of the entity.

Despite the purchaser of the ACCUs having previously agreed with the renewable energy provider to acquire the ACCUs, the Clean Energy Regulator will attribute the ACCUs to the renewable energy provider’s Australian National Registry of Emissions Units (ANREU) account in the first instance. This is normally because the renewable energy provider is the registered owner of the facility to which the ACCUs are attributed.

The purchaser is acquiring the ACCUs from an entity other than a government, typically at or near market price for the ACCUs, and is not required to comply with any past or future requirements specified by the government entity regarding the ACCUs.

Therefore, entities acquiring ACCUs from renewable energy providers don’t typically meet the necessary criteria to account for the ACCUs under IAS 20. 

Question 2: IAS 20 Accounting for Government Grants and Disclosure of Government Assistance gives a renewable energy provider a choice of accounting for the ACCUs initially at cost or fair value. Are there any reasons why a provider would prefer applying fair value over cost?

Paragraph 23 of IAS 20 states:

As ACCUs are non-monetary in nature, under IAS 20, entities that generate renewable energy or are otherwise entitled to receive ACCUs from the Australian Government have an accounting policy choice with respect to the initial measurement of ACCUs.

As discussed previously, entities that have facilities subject to the Safeguard Mechanism would be expected to initially account for ACCUs they have generated themselves from other parts of their business at fair value, principally to demonstrate to users of their financial statements that they have resources available to meet any obligation arising from their Safeguard Mechanism obligations.

For those entities that generate ACCUs but don’t have any potential Safeguard Mechanism obligations, they may also be inclined to initially account for any ACCUs received at fair value, principally to convey to users the value of the resources available to them.

Question 3: Our previous article noted that renewable energy project developers could sell the resulting ACCUs into the Commonwealth government’s reverse auction process or to other entities. Is this arrangement still available to renewable energy project developers?

Since we prepared that article, a number of changes have been enacted around the Australian Government purchasing ACCUs. In July 2022, the Australian Government appointed an independent panel led by Professor Ian Chubb to review the integrity of ACCUs under the ACCU Scheme. The Final Report of the Independent Review of Australian Carbon Credits was published in December 2022 and comprises 16 recommendations. The Australian Government accepted in principle all 16 recommendations from the review.

Recommendation 3.3 of the Final Report proposed that responsibility for the Australian Government’s purchasing of ACCUs should be moved out of the Clean Energy Regulator and into another Australian Government body to avoid actual or perceived conflicts of interest. Consequently, the Clean Energy Regulator no longer holds ACCU Scheme auctions on behalf of the Commonwealth, and participants can no longer enter into new carbon abatement contracts with the Regulator. The Department of Climate Change, Energy, the Environment and Water is currently implementing the findings of the Independent Review. As part of this process, the Department is considering how ACCU Scheme purchasing processes will be conducted in the future.

While new carbon abatement contracts are not currently available, entities that have active carbon abatement contracts with the Commonwealth Government are able to sell ACCUs to the Government, subject to the terms of their contract. ACCUs can also be sold on the secondary market or to private buyers.

Need assistance?

You can find more information about accounting for ACCUs in our upcoming webinar. If you need assistance accounting for ACCUs, reach out to our IFRS & Corporate Reporting team for help.