FASB Approves First-Ever U.S. Accounting Rule for Environmental Credits
What Businesses Need to Know
At Funds To Function, we closely track accounting changes that impact U.S. businesses , and this is one for the history books.
The Financial Accounting Standards Board (FASB) has issued its first-ever accounting standard for environmental credits such as renewable-energy certificates, carbon offsets, and cap-and-trade credits. This landmark rule is designed to bring transparency, consistency, and comparability to how companies record these credits in their financial statements.
What the New Rule Says
From 2028 for public companies (and 2029 for private companies), businesses must:
- Recognize environmental credits when they’re likely to be used to settle an obligation or be sold.
- Record the credit at cost, and if unused, test for impairment.
- Disclose any change in usage and the financial impact on the income statement.
Why It Matters
Until now, U.S. accounting rules provided no standard way to treat these credits , leaving investors with inconsistent information. As FASB Chairman Rich Jones put it:
“Consistent accounting is the best way to improve transparency with all stakeholders.”
While the new standard improves clarity, FASB scaled back last year’s proposal, removing the requirement for companies to disclose the total amount of environmental credits they hold. Businesses, including Ford Motor Co., had expressed concerns about cost, competitive risks, and potential volatility in reported results.
Our Take at Funds To Function
For companies engaged in renewable energy, compliance programs, or sustainability initiatives, this is a game-changer. While disclosure requirements are lighter than first proposed, the need for accurate measurement, valuation, and impairment testing remains critical.
We recommend U.S. businesses start preparing early, reviewing current credit tracking processes, internal controls, and valuation methods to avoid compliance headaches down the road.
📌 Bottom Line: This rule marks a significant shift in U.S. accounting, setting a precedent for future sustainability reporting standards. At Funds To Function, we help businesses stay compliant, informed, and financially clear, even as regulations evolve.
9 Replies to “FASB Approves First-Ever U.S. Accounting Rule for Environmental Credits”
Billy
Great update! This new FASB rule marks an important milestone for environmental accountability in financial reporting. Standardizing how companies recognize and report environmental credits will bring more transparency and trust to sustainability driven business practices. A very informative read. Thanks for sharing!
Williams
Great read! Environmental credit accounting is becoming a crucial part of corporate reporting. This new FASB rule will help create consistent frameworks for measuring impact and accountability. Thanks for sharing such valuable information.”
Billy
This is an excellent and timely update! The FASB’s step toward standardizing environmental credit accounting is a big win for transparency and sustainability reporting. It’s encouraging to see financial standards evolving with global environmental priorities.
Jonny
Great coverage! This rule is a much-needed advancement for companies involved in environmental projects. It helps bring structure, comparability, and accountability to how businesses report their environmental impact.
Shemooz
This update highlights the growing connection between finance and environmental responsibility. Standardized accounting for environmental credits will improve both accuracy and transparency in sustainability reports. Thanks for breaking this down so clearly!
Suzanne
Very insightful post! The introduction of this new FASB rule is a major step toward standardizing sustainability reporting. It’s encouraging to see accounting frameworks adapting to environmental realities. A must-read for professionals tracking ESG developments!
Saim
Insightful update! This new FASB rule is a significant milestone for the accounting industry. It promotes consistency in reporting environmental credits and encourages more transparent sustainability disclosures. A much-needed move toward green accountability.
Harry
Fantastic insight! At Funds To Function, we strongly support initiatives that promote transparency and sustainability in accounting. The FASB’s new rule on environmental credits is a game-changer for how companies measure impact and value. Excellent coverage!
Robbin
Great read! This milestone by FASB brings the financial and environmental worlds closer than ever. Clear rules on environmental credits will boost accountability and help businesses report their green initiatives with confidence. Well explained!