Search within this section
Select a section below and enter your search term, or to search all click Utilities and power companies
Favorited Content
21.7 Renewable energy credits (RECs)
Publication date: 07 Feb 2023
us Utilities guide
21.7.1 Presentation
The financial statement presentation of RECs generally follows the nature of the utility’s activities.
Figure UP 21-2 summarizes the presentation alternatives for RECs in the balance sheet, income statement, and statement of cash flows. The classification of activities related to RECs within the financial statements should be supported by the underlying business activities and should be consistently applied.
Figure UP 21-2
Financial statement presentation of RECs
Financial statement presentation of RECs
Purpose for holding |
Balance sheet |
Income statement |
Statement of cash flows |
Held for use
|
Inventory
|
Cost of compliance is an operating expense; proceeds from sales of excess RECs should be classified as a contra-expense.
|
Activity should be included in operating cash flows because cost of compliance is an operating expense.
|
Held for use
|
Intangible assets
|
Classification is the same as RECs held for use and classified as “inventory.”
|
Activity should be included in investing cash flows because amounts relate to an intangible asset.
|
Held for sale
|
Generally inventory
|
Sales should generally be classified as part of revenue.
|
Activity should be included in operating cash flows because the sales are in the normal course of business and part of operating income.
|
Active buying and selling as part of a trading operation to generate profit
|
Inventory
|
Sales should be classified as part of trading revenue; reporting entities should assess the appropriateness of net versus gross presentation.
|
Activity should be included in operating cash flows because it is in the normal course of business and part of operating income.
|
21.7.2 Disclosure
US GAAP does not include any specific disclosure requirements for RECs. However, reporting entities should make appropriate disclosures based on how the RECs are classified (e.g., if RECs are classified as inventory, any required disclosures for inventory should be included in the financial statements). In addition, the applicability of other disclosures about RECs should be considered, including:
- Policy regarding whether RECs are treated as output
- Policy regarding whether RECs are treated as inventory or intangibles
- Revenue recognition policies
- Early warning disclosures if there is an anticipation of potential impairments or lower-of-cost-or-market adjustments
The utility should also disclose its policy for accounting for its compliance obligation (if applicable). In addition, any potential fines and penalties should be disclosed within the contingencies footnote.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Link copied
