Physical PPA - Power Delivery (NPNS Exception)
Recording the sale of electricity under a long-term physical Power Purchase Agreement that qualifies for the Normal Purchase Normal Sale (NPNS) scope exception.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable - PPA Offtaker | Asset (+) | 310,000.00 | - |
| Revenue - Electricity Sales (Physical) | Revenue (+) | - | 310,000.00 |
💡 Accountant's Note
While long-term fixed-price contracts usually meet the definition of a derivative, physical power delivery contracts that the entity fully intends to fulfill (deliver physical electrons) qualify for the NPNS exception. Therefore, they avoid complex mark-to-market derivative accounting and are treated as normal revenue under IFRS 15 / ASC 606 upon delivery.
Practitioner & Systems Framework
💻 ERP Architecture
Standard Accounts Receivable billing process triggered by monthly meter reads.
⚠️ Audit Flags
Verification that the contract actually qualifies for NPNS (e.g., no net settlement clauses, entity has the physical capacity to deliver). If it fails NPNS, the entire contract must be marked-to-market.
📄 Required Documentation
Physical PPA contract, NPNS election memo, meter delivery data.
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