At the end of the two transactions described in 9.1.1 and 9.1.2, the two-reporting entity own the same asset. Their total assets and liabilities are the same. The only difference is that reporting entity A have book 100 CU as “Unpaid-Carbon acquired by the company”. While reporting entity B have booked the same 100 CU as “Unpaid-Carbon used by the company”.

This reflects the fact that whole they own a similar asset, reporting entity A did not take part in the decision that led to the production of the asset and to the emission of carbon. It merely acquired an existing asset. While reporting entity B decided to produce the asset and took an active part in the emission of carbon during the production process.

At the end of the two transaction described in 9.2.1 and 9.2.2, both entity A and entity B have sold their asset.

However, while entity A ends up with an empty balance sheet (with no asset or liability), entity B still carries a 100 CU “Unpaid-Carbon liability used by the company” and an equivalent negative equity of 100 CU.

This reflects the facts that across all the transaction described, entity A never took an active part in any process that resulted in carbon emission, and as such never itself emitted carbon.

On the other hand, entity B, took an active part in producing an asset and emitted carbon in that process. As such its “Unpaid-Carbon liability used by the company” remains on its Carbon balance sheet, even though the asset its produced using that carbon was sold