Company Analysis : Polluter Corp, An Sec Registrant Granted Emission Allowances ( Ea ) Essay

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Polluter Corp is an SEC registrant granted emission allowances (EA’s) by the U.S. government. EA’s allow us to emit specified levels of pollutants. These EA’s are to be used between the years 2010 and 2030 and vary in their vintage year designation. Vintage years are the appropriated years that each EA will be used. The EA’s must be allocated over the three manufacturing facilities that we own in the U.S. to cover greenhouse gases emitted by these facilities. EA’s can be fungible, which means they are mutually interchangeable, if they have the same vintage year designation. We have chosen to record EA’s as intangible assets with a cost basis of zero. Intangible assets are described as “assets (not including financial assets) that lack physical substance. (The term intangible assets is used to refer to intangible assets other than goodwill)” (Accounting Standards Codification 350-10-20, Glossary). We are required to offset our emissions by turning in adequate EA’s or paying a fine at the end of each compliance period. Currently, our greenhouse gas emissions are significantly higher than we would like them to be. To diminish our emission levels, we have decided to upgrade our facilities in 2014. We believe that we will need extra EA’s for the fiscal years prior to the upgrade of our facilities, which is 2010 – 2014. The forecasted cost of the facilities upgrade is $15 million. We entered into two separate transactions, which will impact our statement of cash

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