Purchase And Sale Under Ifrs

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Purchase and Sale Under IFRS
Like under FASB, the purchase and sale of emission allowances would, by definition, be considered an investment activity involving long-term, intangible assets. International Accounting Standards (IAS) 7 Statement of Cash Flows, Paragraph 16 states the nature of investing activities on a cash flow statement under IFRS. The paragraph explains, “The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows.“ Following the paragraph are sections that list examples of what is to be considered a cash flow from an investment activity. The purchase
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The sale and purchase of EAs, however, do not meet any of these exceptions. Therefore, the transactions should be recorded separately at the gross amount as they are reported in a statement of cash flows under U.S. GAAP.
Emissions allowances are considered intangible assets in accordance with IAS 38. Paragraph 10 of IAS 38 describes that an asset is intangible if it holds, “identifiability, control over a resource and existence of future economic benefits. “ Identifiability, is defined in Paragraph 12(b), which states, “an asset is identifiable if it is separable, i.e., is capable of being separated or divided from the entity and sold, transferred…” EAs match this criterion for they can be sold and purchased between companies. Paragraph 13 defines control as “the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits. “ Columbia Corporation has the ability to strictly retain the benefit of EAs if they so chose. Finally, Paragraph 17 states, “the future economic benefits flowing from an intangible asset may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity. “ EAs have the ability to provide all these benefits. If sold, they could provide revenue. If bought or used efficiently, EAs could save money by decreasing an
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