IntroductionThis document examines the implications of using different approaches when it comes to accounting for carbon emissions. This essay provides a brief introduction to the Kyoto Protocol. Then we delve into the issue of carbon accounting. The starting point to address was how to account for carbon credits and free allowances, then there was the obligation. The paper next examines the current practices for carbon accounting, such as the IFRIC 3 approach, the net liability approach and the government grant recognition approach, followed by the fact that it is necessary to allude to other important issues for when takes carbon into account.. Finally, this document attempts to formulate an ideal framework for how to report carbon into the accounts. Brief contextCarbon accounting has become more and more of a problem as time has passed. With the introduction of the Kyoto Protocol, carbon trading markets have been developed across a wide range of sectors. The Kyoto Protocol was a treaty adopted to ensure the reduction of greenhouse gas emissions. The European Union Emissions Trading System (hereinafter referred to as the EU ETS) is a mechanism used to reduce greenhouse gases. The EU ETS is a cap-and-trade system, under which companies are told how much CO2 they can emit (the cap) and, if they emit less than the limit, they have a surplus to sell. If they emit more than the set cap, they can purchase credits from other firms that are within their cap (trade) (Ratnatunga and Balachandran, 2009)IssuesWhat type of resource is a carbon credit? A carbon credit can be accounted for in many ways. different ways. The two main approaches used by companies as found by Lovell,...... half of the document......ounting, Organizations and Society, 34 (3), 499--534.Lovell, H. , Bebbington, J., Larrinaga, C. and Sales De Aguiar, T. 2013. Putting carbon markets into practice: a case study of financial accounting in Europe. Environment and Planning C, 31, 741--757.MacKenzie, D. (2009). Making things equal: gas, emissions rights and the politics of carbon markets. Accounting, Organizations and Society, 34 (3), 440--455.Pricewaterhousecoopers/ International Emissions Trading Association (PWC/IETA) (2007), Trouble- Entry Accounting- Revisited, London.Ratnatunga, J., Balach & Ran, K (2009). Corporate carbon accounting: The impact of global warming on the cost and management accounting profession. Journal of Accounting, Auditing and Finance, 24(2), 333--355. Smith, R. (2007). Development of the SEEA 2003 and its implementation. Ecological economy, 61 (4), 592--599.