Open AccessInstitutional Determinants of Carbon Financial Accounting Practices
Author(s) -
Varsha Kashyap,
Jill Hooks,
Md. Sadique Rahman,
Md. Borhan Uddin Bhuiyan
Publication year - 2020
Language(s) - English
Resource type - Reports
DOI - 10.34074/ocds.084
Subject(s) - allowance (engineering) , carbon accounting , accounting , leverage (statistics) , business , carbon fibers , accounting information system , greenhouse gas , listing (finance) , finance , economics , ecology , operations management , materials science , machine learning , composite number , computer science , composite material , biology
This paper investigates how and why firms affected by Emissions Trading Schemes (ETSs) are financially accounting for carbon in a voluntary setting. Using institutional theory, the authors seek to identify the determinants of a firm’s decision to adopt a particular carbon financial accounting practice. We identify the recognition and measurement practices for carbon-emission allowances using data gathered from the annual reports of ETS-affected firms in Australia. These practices are identified in the five stages of carbon-emission allowance transactions, namely, when these are: (1) received for free, (2) purchased, (3) used, (4) sold, and (5) surrendered. Inconsistencies in carbon financial accounting practices are observed. The findings reveal that carbon-emission allowances are recorded as intangible assets, but most firms provide incomplete information on their carbon financial accounting practices. Firms also exhibit inconsistencies in specifying how they are ‘recognising’ and ‘measuring’ carbon-emission allowances. The results provide evidence of coercive (regulation) and mimetic (size, leverage, and listing status) pressures being the main determinants of carbon financial accounting practice.