Companies must determine whether a corporate AAE falls within the scope of derivative accounting in accordance with GAAP, IFRS or both standards. U.S. GAAP defines a derivative contract as a financial instrument or other contract with all the following characteristics: AAAs generally have three of the four characteristics mentioned above, so the accounting assessment depends on whether the contract has a fictitious amount. Often, these contracts can be structured so that there is no reliable fictitious amount. As a result, Corporate PPAs often escape US-GAAP derivative accounting, with no contractual or minimum volumes specified in the contract. PPAs can be quite complicated and represent some unique and interesting accounting challenges. This e-newsletter takes into account certain factors relevant to readers` awareness. As a result, corporate ASAs generally meet the definition of an IFRS derivative. Professional accounting IFRS should be aware of this difference from U.S.
GAAP, especially when it is necessary to double reports to US GAAP and IFRS standards. Many other contracts could be subject to derivative accounting. Virtual Power Management Agreements (VPPAs) can trigger specific accounting treatments and reporting obligations, which means it is important for sustainable development and energy supply managers to work closely with their accounting team before contract negotiations are concluded. To support these conversations, LevelTen has created a VPPA accounting guide that covers the information accounting teams need to approve and support the agreement. The nature of the AAE, its structure and pricing depend, among other things, on the objectives of the buyer, the specific market (and whether the market is regulated or unregulated) and the financial needs and objectives of the proponent/owner of the project. All the variables in these regulations raise a number of accounting issues that need to be addressed. Below is a discussion on some of the accounting issues that may arise from a client`s perspective.