European Aeronautic Defence and Space Company EADS N.V. (2010)
Notes to the Consolidated Financial Statements (IFRS) [extract]
2.1. Basis of Presentation [extract]
2. Summary of significant accounting policies [extract]
Emission rights and provisions for in-excess emission
Under the EU Emission Allowance Trading Scheme (EATS) national authorities have issued on 1st January 2005 permits (emission rights), free of charge, that entitle participating companies to emit a certain amount of greenhouse gas over the compliance period.
The participating companies are permitted to trade those emission rights. To avoid a penalty a participant is required to deliver emission rights at the end of the compliance period equal to its emission incurred.
EADS recognises a provision for emission in case it has caused emissions in excess of emission rights granted. The provision is measured at the fair value (market price) of emission rights necessary to compensate for that shortfall at each balance sheet date.
Emission rights held by EADS are generally accounted for as intangible assets, whereby
i) Emission rights allocated for free by national authorities are accounted for as a non-monetary government grant at its nominal value of nil.
ii) Emission rights purchased from other participants are accounted for at cost or the lower recoverable amount; if they are dedicated to offset a provision for in excess emission, they are deemed to be a reimbursement right and are accounted for at fair value.