Accounting Treatment of Recs
Financial aspects and Accounting Treatment of Renewable Energy Certificates (RECs)
At present, there is no specific guideline in respect of Accounting Treatment of Renewable Energy Certificates (RECs). In absence of such specific guideline, the Accounting Principles in respect of Certified Emission Reductions (CERs), prescribed by The Institute of Chartered Accountants of India in “Guidance Note on Accounting for Self-generated Certified Emission Reductions (CERs) (Issued 2012)” may be followed for the accounting treatment in respect of RECs. As per the same guidance Note, Accounting Treatment in respect of RECs may be as follows:
Whether REC is a ‘asset’
Upto the stage of Issuance of the REC certificate by National Load Despatch Centre (NLDC), it is a ‘Contingent Asset’ as per AS29. Accounting in respect of Contingent Asset is not required.
Once the certificate of REC is issued by NLDC to the generating entity, it becomes an ‘Asset’ belongs to the generating entity. Now Accounting is required.
What type of assets is a RECs
As per AS 26, RECs is come into the definition of ‘Intangible Asset’ but the purpose of holding it is sale, due to which, AS 2 will be applied on REC’s. RECs are inventories of the generating entity as they are generated and held for the purpose of sale in the ordinary course of business. Therefore, even though CERs are intangible assets, these should be accounted for as per the requirements of AS 2.
Measurement of RECs
As per AS 2, RECs should be measured at cost or net realisable value, whichever is lower.
Cost of REC’s
Various cost are incurred by the generating entity to operate and generate RECs. These may includes the followings :
1. Fees of registering with NLDC, IEX, PXIL and any other authority, if required, 2. Cost incurred for issuance of REC’s Certificates, 3. Fee paid to NLDC for validation and verification etc., 4. Any other operating cost incurred in respect to RECs. As
At present, there is no specific guideline in respect of Accounting Treatment of Renewable Energy Certificates (RECs). In absence of such specific guideline, the Accounting Principles in respect of Certified Emission Reductions (CERs), prescribed by The Institute of Chartered Accountants of India in “Guidance Note on Accounting for Self-generated Certified Emission Reductions (CERs) (Issued 2012)” may be followed for the accounting treatment in respect of RECs. As per the same guidance Note, Accounting Treatment in respect of RECs may be as follows:
Whether REC is a ‘asset’
Upto the stage of Issuance of the REC certificate by National Load Despatch Centre (NLDC), it is a ‘Contingent Asset’ as per AS29. Accounting in respect of Contingent Asset is not required.
Once the certificate of REC is issued by NLDC to the generating entity, it becomes an ‘Asset’ belongs to the generating entity. Now Accounting is required.
What type of assets is a RECs
As per AS 26, RECs is come into the definition of ‘Intangible Asset’ but the purpose of holding it is sale, due to which, AS 2 will be applied on REC’s. RECs are inventories of the generating entity as they are generated and held for the purpose of sale in the ordinary course of business. Therefore, even though CERs are intangible assets, these should be accounted for as per the requirements of AS 2.
Measurement of RECs
As per AS 2, RECs should be measured at cost or net realisable value, whichever is lower.
Cost of REC’s
Various cost are incurred by the generating entity to operate and generate RECs. These may includes the followings :
1. Fees of registering with NLDC, IEX, PXIL and any other authority, if required, 2. Cost incurred for issuance of REC’s Certificates, 3. Fee paid to NLDC for validation and verification etc., 4. Any other operating cost incurred in respect to RECs. As