Category Archives: Accounting

Accounting for Carbon Credits

Sorry folks for the long delay in posting! Hereafter I will ensure that I am at least posting short articles frequently. Accounting for Carbon Credits or perhaps, carbon credit itself is one of the most debatable topics. After the implementation of Kyoto Protocol, Carbon Credits emerged as a distinct commodity by itself capable of being bought, sold or offset (used). Since Carbon Credits do not have a physical existence, the accounting and financial reporting of the same has aroused many interesting issues and challenges.  Before going into the detailed accounting treatment of carbon credits it would be apt to go into a small introduction about what carbon credit is and its nature.


What is Carbon Credit?

As everyone is aware, Carbon – di –oxide (CO2) is the major contributor to global warming. Everyday more and more CO2 and other Green House Gases (GHGs) are pumped into our atmosphere. This is causing rapid climatic changes, much against human welfare. To address this issue of global warming, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992.  To supplement the UNFCCC, the Kyoto Protocol was enforced to limit the maximum amount of GHGs a country can emit into the atmosphere. This limit is at present is applicable only to 41 developed countries which are party to the Kyoto Protocol. These countries are also called Annex I countries. India being a developing country the emission commitment is not applicable.

In order to enforce this emission limit, the concept of Carbon Credit was proposed. According to this concept, each carbon credit is equal to 1 Metric Tonne of CO2 or an equivalent amount of other GHGs. Each Annex I country should hold one carbon credit in order to emit 1 Metric Tonne of Carbon into the atmosphere. In simple terms a carbon credit is a license / permit to emit 1 Tonne of Carbon into the atmosphere. Carbon emission credits are issued by the UNFCCC in demat form. Therefore they can be traded just like shares in stock / commodity exchanges. As per the Kyoto Protocol there are three types of carbon credits to serve three different purposes: Continue reading Accounting for Carbon Credits

Paper on ‘Inflation Adjustment’

I am very happy to share with everyone, the paper which won me the ‘Best Paper Presenter’ award at the Nation Convention of CA Students held at Kolkata. Click to view the power point presentation on Inflation Adjustment.


Inflation adjustment has gained increased importance considering the fact that India is registering double digit inflation. In economics, inflation is considered to be a rise in the general level of prices of goods and services in an economy over a period of time. Inflation and the monetary unit or currency of a particular country or region is just inseparable. Inflation in other terms may be considered as the depreciation in the purchasing power of any given currency. As inflation increases, money buys less and less goods and services.


Inflation is usually estimated using the Inflation rate. Inflation rate is usually calculated as the percentage change in a Price Index year on year. Usually Consumer Price Index is considered the ideal price index for calculating inflation rate. But in India Wholesale Price Index or WPI released by the Reserve Bank of India is considered for calculating the Inflation rate of the Indian National Rupee. For instance, in January 2007, the U.S. Consumer Price Index was 202.416, and in January 2008 it was 211.080. The formula for calculating the annual percentage rate inflation in the CPI over the course of 2007 is

(211.080-202.416) X 100 = 4.28%


From this it is very clear that Inflation measures how costly goods and services have become over a period of time.


There is a general perception that any inflation is really harmful to the economy and the consumers. But inflation though is a measure of price rise is not always harmful. Continue reading Paper on ‘Inflation Adjustment’