COMPARISON OF SLOVAK ACCOUNTING REGULATION AND INTERNATIONAL FINANCIAL REPORTING STANDARDS IN THE AREA OF ACCOUNTING AND RECOGNITION OF EMISSION RIGHTS

In February 2005, the Kyoto Protocol to the UN Framework Convention on Climate Change entered into force. Its aim was to reduce emissions of greenhouse gases and other pollutants during the period 2008 to 2012. The validity of the Kyoto Protocol has been extended for another five years. From 31st of January 2005 emissions trading were introduced. The principle of tradable allowances consists in issuing of allowances for polluting enterprises to produce maximum quantity of emissions for a given period. Governments of countries may emissions allowances of polluting enterprises allocate for free or sell. According to Slovak accounting regulations for emissions allowances are to be considered as short-term financial assets. International Financial Reporting Standards IFRS indicate emissions allowances as intangible assets. These standards allow three approaches for accounting and recognition of emissions allowances: according to the interpretative framework IFRIC 3 - Emission rights, according to the method of Net Liability Approach, and to the method of Government Grant Approach. The aim this paper is comparing of the Slovak accounting regulation and all of the above mentioned methods of accounting and reporting of emission rights and their impact on the financial statements of the company. The accounting and reporting of emission rights has a direct impact on the financial analysis of companies and economic decisions of relevant parties. Conclusion of the contribution provides the proposals for a suitable emissions allowances accounting and reporting solution for polluting firms.