4.1.1.     Initial recognition

Embedded carbon is the carbon footprint of all goods, material, assembly, that is emitted during the process of “producing” an asset. Under the model, carbon is initially recorded as an asset when assets are (i) produced or (ii) acquired from a third party.  

An Embedded Carbon asset is recognized in case when:

(a) An asset is recognized under the GAAP used by the reporting entity as a result of a transaction with a third party via a market transaction or otherwise and that transaction does not in itself generate carbon emissions;

or

(b) An asset is recognized under the GAAP used by the reporting entity after being produced by the reporting entity, or in a transaction with a third party in a process that generate carbon emissions,

or

(c) The remaining useful life of an existing asset under the GAAP used by the reporting entity is increased through a process that generates carbon emission,

In case of (a) the embedded carbon asset shall be recognized through (i) Embedded Carbon Asset at Fair Value

In case of (b) or (c) the embedded carbon asset shall be recognized through (i) an Embedded Carbon Asset as a result of company’s activities

4.1.2    Initial Measurement

4.1.2.1. Embedded Carbon at fair value

Embedded carbon that qualifies for recognition as an asset under (a) above should be initially measured at its carbon fair value as measured in accordance with § 5.1

4.1.2.2.  Embedded Carbon as a result of company’s activities

Embedded carbon that qualifies for recognition as an asset under (b) and (c) above should be initially measured at its theoretical carbon cost, which is the product of the amount of carbon emitted to produce the asset (ton), times the market price for one ton of carbon at the time of production of the asset (EUR/ton). Each component will be described in more detail below.

Embedded carbon asset as a result of company’ s activities = c × p

Where:

c is the amount of carbon emitted to produce the asset.

A certain amount of carbon is emitted in the production of an asset. This amount can either be estimated by the reporting entity either as an aggregate (for example as the average carbon emission for the construction of a sqm of office) or using a specific carbon life cycle analysis for the asset is considered.  

p is the market price for one ton of carbon at the time of the production of the asset.

If the production of the asset takes place over a given period, the carbon price used shall be equal to the mathematical average of the market prices of carbon over the duration of the production.

4.1.3.     Subsequent Measurements

Embedded Carbon asset is always measured at fair value for any subsequent measurement in accordance with § 5.1

4.1.4.     Derecognition

An Embedded Carbon asset is derecognized when the corresponding asset is derecognized under the GAAP used by the reporting entity.