Measurement mismatch between the assets and liabilities arising from emission rights (withdrawal of IFRIC 3)

In June 2005 the International Accounting Standards Board (IASB) decided to withdraw IFRIC 3 Emission Rights with immediate effect. IFRIC 3 was developed to explain how to apply existing International Financial Reporting Standards (IFRS) to ‚cap and trade emission rights schemes. However, IFRIC 3 created an unsatisfactory consequence of the interaction of IAS 38 and IAS 37, in the concrete a measurement mismatch between the assets and liabilities recognized in accordance with IFRIC 3, and a mismatch in the location in which the gains and losses on these assets and liabilities are reported. This paper analyses the consequences of this in detail and proposes treatment, how to supersede it.