First, the ECA must be evaluated to determine whether or not it meets all the characteristics of a (incorporated) derivative. In this context, a controversial point could be the criterion of performance of the contract on the basis of an «underlying» value, given that the final volume of the purchase is often measured only after the actual generation. It is obvious that it is not possible to accurately predict this volume for a wind farm and, therefore, a sufficient determination of the contract volume has generally not been considered to have been fulfilled in the past. However, IFRS 9 contains transposition directives (IFRS 9.IG. B.8) which now contain an example in which the quantity of a derivative is also not determined in advance. In the case of a ECA, the generally available waiting values for wind performance can therefore be used. In the absence of substantial acquisition payments, an ECA should be able to meet all the criteria of a derivative in accordance with IFRS 9. At this stage, the exemption from self-use under IFRS 9 should be verified. If the ECA`s electricity is physically billed and used for the customer`s operational activity, it turns out that it applies to an ongoing purchase contract. In that case, it would not be accounted for and would only be considered in respect of potentially chargeable contracts in accordance with IAS 37. As renewable energy technology continues to improve, it has become cheaper and increasingly popular to buy.
Renewable energy – mainly sun and wind – is usually obtained through a power purchase agreement (ECA). The nature of the ECA, its structure and pricing depend, among other things, on the client`s objectives, the specific market (and whether the market is regulated or unregulated) and the needs and financial objectives of the project promoter/owner. All the variables in these agreements raise a number of accounting issues that need to be examined. Below is a discussion of some of the accounting issues that can arise from a client`s perspective. In the case of a virtual PPA or «VPPA», the project is usually in another network, often in another state, and the customer never takes over the physical supply of energy. On the contrary, the electricity produced by the project is routed to the grid, where it cannot be distinguished from electricity produced from other sources (including non-renewable sources) and is sold to others at the current market price. The buyer is entitled to a share of the profit or loss from the sale of electricity and generally obtains the rights to renewable energy certificates (or RECs) associated with the VPPA, which gives the customer credit for the use of renewable energy. However, in the case of a derivative, the green electricity customer may, by using speculative accounting, avoid the declaration of a change in the fair value reported through profit or result. Indeed, even in the case of non-physical billing of the electricity supplied, it may be possible to link a ECA as a price guarantee activity to the risk of a volatile supply of electricity in the future. The accounting challenges posed by electricity capture contracts for wind PPAs can be quite complicated and pose some unique and interesting accounting challenges. This electronic newsletter takes into account certain factors relevant to readers` notoriety.
In this respect, the accounting of 2As is not an option, but a consequence of the specific contractual provisions. . . .