Financial aspects and Accounting Treatment of Alternative energy Certificates (RECs)
At present, there is not any specific guideline in respect of Accounting Treatment of Alternative energy Certificates (RECs). In absence of such specific guideline, the Accounting Principles in respect of Authorized Emission Savings (CERs), prescribed by The Commence of Chartered Accountants of India in " Advice Note in Accounting intended for Self-generated Certified Emission Cutbacks (CERs) (Issued 2012)вЂќ can be followed for the accounting treatment in regards to RECs. As per the same advice Note, Accounting Treatment in respect of RECs may be as follows:
Whether REC is known as a вЂasset'
Upto the stage of Issuance with the REC license by Nationwide Load Send off Centre (NLDC), it is a вЂContingent Asset' as per AS29. Accounting in respect of Broker Asset can be not required.
After the certificate of REC is definitely issued by simply NLDC to the generating organization, it becomes an вЂAsset' belongs to the generating enterprise. Now Accounting is required.
Which kind of assets is actually a RECs
As per AS 21, RECs is definitely come into the meaning of вЂIntangible Asset' however the purpose of keeping it is sale, due to which, AS two will be applied on REC's.
RECs happen to be inventories in the generating entity as they are made and organised for the purpose of deal in the common course of business. Therefore , although CERs will be intangible possessions, these needs to be accounted for as per the requirements of AS 2 .
Measurement of RECs
According to AS a couple of, RECs must be measured for cost or perhaps net realisable value, whatever is lower.
Expense of REC's
Numerous cost happen to be incurred by generating organization to operate and generate RECs. These may includes the followings:
1 . Fees of registering with NLDC, IEX, PXIL and any other power, if required, 2 . Expense incurred pertaining to issuance of REC's Records,
3. Payment paid to NLDC to get validation and verification etc ., 4. Some other operating cost incurred in respect to RECs.