Accounting for Cryptocurrencies under IFRS

From June 11th to the 12th the International Financial Reporting Standards (IFRS) Interpretations Committee met to discuss several topics, including the determination on how to account of cryptocurrencies.

The Committee defined cryptocurrencies to be a subsection of cryptoassets with the following characteristics:

  • A digital or virtual currency recorded on a distributed ledger that uses cryptography for security
  • Not issued by a jurisdictional authority or other party
  • Does not give rise to a contract between the holder and another party

The Committee determined that cryptocurrencies do not currently have the characteristics of cash, in accordance with International Accounting Standards (IAS) 32, such as being a medium of exchange for measurement and recognition of all transactions within the financial statements. The Committee then determined that cryptocurrency may be classified as either inven­­tory or an intangible asset.

Inventory (IAS 2): If held for sale in the ordinary course of business, cryptocurrency should be classified as inventory. Cryptocurrencies classified as inventory are measured at the lower of cost and net realizable value. If the cryptocurrency holder acts as broker-trader, the asset should be measured at fair value less cost of sale.

Intangible Asset (IAS 38): If IAS 2 is not applicable, cryptocurrencies should be classified as intangible assets. According to IAS 38, cryptocurrency should initially be measured at cost. Subsequent to initial recognition, cryptocurrency should be measured at cost less accumulated amortization. If the cryptocurrency`s fair value can be determined, its fair value should be used instead (IAS 2 Inventories).

In addition to the standard IFRS disclosures required entities must also disclose the following:

Additional information:  Any additional information relating to cryptocurrency not otherwise noted but relevant to the understanding of the financial statements should be disclosed within the financial statements

Management Judgements: An entity must disclose any management judgements related to the holding of cryptocurrencies if those judgements had a sufficient impact on the amounts disclosed within the financial statements.

Subsequent events: Entities must disclose in the notes to the financial statements any material non-adjusting events that occurred subsequent to the financial statement date, including fluctuations in the fair value of the cryptocurrencies. Disclosure should include the nature of the event and an estimate of its financial effect.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
IFRS 16, Leases - Lessee Perspective
IFRS Conversion Considerations: Revenue Recognition
IFRS Conversion Considerations: Provisions, Contingencies and Subsequent Events
IFRS Conversion Considerations: Foreign Currency
IFRS Conversion Considerations: Financial Reporting
IFRS Conversion Considerations: Employee Benefits
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.