IMA FRC comment letter in response to proposed ASU on environmental credits and environmental credit obligations

May 6, 2025

IMA’s Financial Reporting Committee (the Committee) issued a comment letter to share its views on the Financial Accounting Standards Board’s (FASB) Proposed Accounting Standards Update, Environmental Credits and Environmental Credit Obligations.

Overall, the Committee is supportive of the FASB providing guidance on this topic. However, the Committee has mixed views on the accounting for credits purchased to meet voluntary environmental initiatives and the measurement of credits that a reporting entity generates as a by-product of its ongoing activities. The Committee said it has concerns that under the proposed update, environmental credit obligations that are payable when a specified threshold is exceeded would not be recognized until that threshold is met. In addition, the Committee said it believes the proposed disclosures of revenues or gains on sales of environmental credits not recognized as an asset under the proposed update are excessive.