Current issues in accounting for cryptocurrencies
The IFRS Blog is a series of topical issues, common issues and live cases in IFRS Standards and financial reporting.
Current issues in accounting for cryptocurrencies by Ahmad Samadi, Accru Melbourne, Australia
This type of transaction is not specifically addressed within the IFRS standards and therefore entities need to look at the substance of the transaction and determine the most appropriate accounting policy in accordance with IAS 8.
Asset definition
The first step in formulating the accounting policy is to consider whether the cryptocurrencies purchased or created meet the accounting definition of an asset. The Conceptual Framework contains the definition of an asset as a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits
Based on these definitions, cryptocurrency held would meet the definition of an asset if an entity determined that future economic benefits would flow through receipt of cash or cryptocurrency in return for the sale of the assets.
Type of asset
If we determine that an asset is held, the next step is to identify the type of asset that has been created or purchased:
Asset Type |
Relevant Standard |
Conclusion |
| Inventory | IAS 2 |
Inventories are assets held for sale in the ordinary course of business and therefore inventory may be appropriate with the assets being held at the lower of cost and net realisable value, depending on the purpose of holding the cryptocurrency. Note the following exemption in IAS 2: Commodity broker-traders are required to measure inventory at fair value less costs to sell which may be relevant for entities who are in the business of acquiring and selling cryptocurrencies. |
| Intangible assets | IAS 38 |
Whilst the assets are non-monetary without physical substance they would seem to meet the definition of intangible assets and will be measured at either cost or fair value (if the entity believe an active market exists). Note that IAS 38.3a has a scope exemption for intangible assets held by an entity for sale in the ordinary course of business since these assets are likely to be inventory. |
| Financial asset | IFRS 9 |
Generally, cryptocurrency does not meet the definition of a financial asset since there is not a contractual right to receive or exchange cash or another financial asset. |
| Cash equivalents | IAS 7 |
Does not meet the definition since they are not investments which are readily convertible to a known amount of cash and subject to insignificant risk of change in value. |
| Cash | IAS 7 |
The tokens are generally not accepted as legal tender and are not backed by a government and therefore would not qualify as cash. |
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