IAS 1 para 67 states that the standard uses the term ‘non-current’ to include tangible, intangible and financial assets of a long-term nature. Intangible assets are generally classified as non-current assets on the balance sheet on the basis that they are usually consumed over a long term. However, unlike IAS 16, IAS 38 does not prescribe that intangible assets are expected to be used during more than one period. When entities hold carbon offsets with an expectation to retire them within 12 months (or the entity’s normal operating cycle) from the reporting date, such carbon offsets will meet the requirement under IAS 1 para 66 to be classified as current intangible assets on the balance sheet.

An entity may hold carbon offsets with the expectation that some of them will be retired within 12 months (or the entity’s normal operating cycle) from the reporting date and some will be retired later. Neither IAS 1 nor IAS 38 provides explicit guidance on the unit of account for determining current and non-current classification and therefore judgement needs to be applied. In such cases the carbon offsets can be split into current intangible assets and non-current intangible assets based on the expected timing of consumption.