FSS: "Increase in Greenhouse Gas Emission Allowance Assets and Liabilities Last Year... Improvement in Financial Disclosure Level"

[Asia Economy Reporter Lee Jung-yoon] As the domestic greenhouse gas emissions trading market continues to grow, it has been confirmed that the emission allowance assets and liabilities of major listed companies allocated these allowances increased by 42.5% and 17.8%, respectively, compared to the previous year.

On the 15th, the Financial Supervisory Service (FSS) announced that after reviewing the financial disclosures related to emission allowances of major listed companies that received allocations, emission allowance assets recorded 746.4 billion KRW and emission liabilities 835.7 billion KRW last year. These figures represent increases of 42.5% and 17.8% compared to the previous year. The increase in paid allocations from 3% to 10% led to the rise in related assets and liabilities.

Among the 30 listed companies subject to the review, 26 disclosed in their financial statement notes that they apply the Korean Generally Accepted Accounting Principles (K-GAAP) for emission allowance-related accounting policies. Of these, 16 companies utilized the exemplary disclosure cases for notes published by the FSS last year.

The number of listed companies disclosing emission allowance details in notes increased compared to the previous year, and the overall level of financial disclosure improved. The number of listed companies disclosing all K-GAAP note requirements ? ▲free allocation quantity ▲held emission allowances quantity ▲changes in emission allowance assets and liabilities ▲estimated emission volume ? increased by six to a total of 12 companies, with the number of companies disclosing each item also rising compared to the previous period.

Previously, the government set a target to reduce total emissions by 40% by 2030 compared to total emissions in 2018, establishing a total greenhouse gas emission allowance and deciding to allocate and sell emission allowances to companies, permitting emissions only within that range. According to the national emission allowance allocation plan, during the third implementation period from last year to 2025, more than 10% of total emission allowances will be allocated on a paid basis. During the first implementation period from 2015 to 2017, all allowances were free, and during the second implementation period from 2018 to 2020, 3% were allocated on a paid basis.

Currently, listed companies apply K-GAAP or develop accounting policies for accounting treatment as there is no International Financial Reporting Standard (IFRS) regulating emission allowance trading. Accordingly, the FSS prepared and provided exemplary disclosure cases for emission allowance notes in April last year to encourage consistent and faithful disclosures.

The FSS plans to promote faithful financial disclosures related to emission allowances. An FSS official stated, "Many companies are utilizing the FSS exemplary disclosure cases, which is evaluated to have improved information usefulness and comparability," and added, "We will continuously monitor the disclosure status related to emission allowances and guide more companies to use the exemplary cases to encourage faithful financial disclosures."

He further added, "Regarding the Sustainability International Reporting Standards being prepared for introduction, we plan to identify and provide guidance on accounting treatment or note disclosure considerations related to matters that can be linked with financial information."

This content was produced with the assistance of AI translation services.