Accounting Treatment for Carbon Emission Rights

In light of the growing demand for sustainable behavior and the special interest that has emerged regarding the social and environmental impact of firms, the purpose of this research is to analyze the determinants of the accounting treatment of emission rights. To achieve that purpose, we use a sample composed of 119 firms worldwide from different countries and activity sectors for the period 2011. Our findings show different accounting treatments depending on a series of factors. Specifically, firms pertaining to countries that have adopted Environmental Trading Schemes (ETS) tend to account for emission rights through provisions, investments, or as inventory. For their part, firms that issue indicators that appear in the report drawn up by KPMG and GRI (2007) tend to account for these entries as expenses, especially as R + D expenses. Finally, firms located in countries that signed the Kyoto protocol have a tendency to not account for carbon emission rights. The findings of this work can be considered of great interest on the international level because our research contributes to the scant previous literature regarding the accounting treatment of emission rights.