Climate in US GAAP financial statements

Does US GAAP have climate rules?

No specific ones. In March 2021 the FASB staff published an educational paper on how environmental, social and governance matters intersect with existing standards, showing that companies must consider them wherever they affect recognition, measurement or disclosure. The only new topic is ASC 818, Environmental Credits and Environmental Credit Obligations, added by ASU 2026-02 in May 2026, which applies to public business entities for annual periods beginning after 15 December 2027 and to others a year later. See accounting for carbon credits and climate risk in the financial statements.

Which ASC topics does climate affect?

Climate in US GAAP in practice: a refinery's impairment test

A refiner's asset group has a carrying amount of US$900 million. Tighter fuel standards in its main market are an impairment indicator, so it tests the group, including carbon costs in its forecasts. All figures are in US$ million.

Step one of the ASC 360 test compares the carrying amount with the undiscounted cash flows over the remaining life: US$950 million exceeds US$900 million, so the group is recoverable and no impairment is recognised, even though its fair value is only US$640 million. Under IAS 36, the carrying amount would be compared with the recoverable amount, here a value in use of US$680 million based on discounted cash flows, giving an impairment of US$220 million. Although no loss is recorded, the company reviews the group's remaining useful life and depreciation, as ASC 360 requires when an asset is tested for recoverability, and discloses the estimate under ASC 275. See climate impairment testing, climate and useful lives and ASC 360 impairment.

How does US GAAP differ from IFRS on climate?

• Impairment: US GAAP's undiscounted recoverability test delays impairment of long-lived assets compared with IAS 36, and US GAAP never reverses impairment of assets held and used.
• Provisions: ASC 450 recognises a loss when it is probable, generally a higher threshold than IAS 37's more likely than not, and US GAAP has no general concept of a constructive obligation.
• Retirement obligations: ASC 410 requires a legal obligation, including by promissory estoppel; IAS 37 also covers constructive obligations, such as a published commitment that others rely on.
• Guidance: the IASB has published illustrative examples on climate-related and other uncertainties; the FASB has its 2021 staff paper.

See climate provisions and IAS 36 and US GAAP impairment compared.

Where do the SEC climate rules stand?

The SEC's 2010 interpretive guidance asks companies to consider climate effects in their business description, risk factors, legal proceedings and MD&A. Its March 2024 rules would also have required notes in the financial statements, for example disclosing the costs of severe weather events above 1% of pre-tax income or equity, and the costs of carbon offsets and renewable energy credits material to climate targets. The SEC stayed the rules in April 2024 pending litigation, stopped defending them in March 2025, and on 29 May 2026 proposed rescinding them, with comments due by 3 August 2026. See sustainability reporting explained.

What should preparers do?

Check that the assumptions in impairment tests, useful lives, retirement obligations and deferred tax forecasts are consistent with the company's climate targets, transition plan and risk disclosures, including any California SB 253 or SB 261 reports. Document why climate matters are or are not material to each estimate, and explain significant judgements in the notes. Auditors and the SEC staff compare the financial statements with what the company says elsewhere. See connecting sustainability disclosures with the financial statements and climate-related tax incentives and deferred tax.

This guide is general information. It is not tax or legal advice for your situation.