Crypto in the books!

 


Alright, accountants, let's talk about something that's not going away anytime soon..

 cryptocurrency,Bitcoin, Ethereum, Dogecoin... whatever coin is trending this week, they're here to stay, and we better know how to handle them in the books.


Here's the deal: The big guys like IAS and IFRS haven’t exactly handed us a clear rulebook for crypto. So, we have got to get creative and apply existing standards to these digital assets.


Step One: Is it a Currency?


Nope. Cryptocurrencies don’t meet the definition of cash under IAS 32. It’s not “legal tender” since you can’t pay your taxes with Bitcoin (unless you’re in El Salvador). So, don't slap it under "cash or cash equivalents."


Step Two: What the Heck Is It Then?


Cryptocurrency is usually treated as an intangible asset under IAS 38, unless you’re a trader and treating it as inventory under IAS 2. Why intangible? Because you can’t physically touch Bitcoin, but it’s still worth something (at least, until Elon Musk tweets about it).


If it’s an intangible asset, that means you are stuck with either the cost model or revaluation model, but good luck with revaluation there’s not a big market for fair value accounting on most coins.


Step Three: Watch Out for Impairment


If you’re holding crypto, you better keep an eye on that impairment test. Why? Because cryptocurrencies are volatile. One minute you are a millionaire, the next you are crying over your coffee. So, if the value tanks, you’ll need to recognize a loss under IAS 36.


Step Four: Revenue Recognition (IFRS 15)


If you’re selling crypto, treat it like any other good or service. Recognize revenue when the control is transferred. It’s just like selling widgets except these widgets live in the cloud and might be used to buy NFTs or virtual cats.


Other Tokens (Because Why Stop at Crypto?)


Utility Tokens: Think of these like gift cards. You’re going to apply IFRS 15 to recognize revenue when the service or product is provided.


Security Tokens: These are basically digital stocks. Apply IFRS 9 for financial instruments here.



In short, cryptocurrencies and crypto assets are not a magical exception to accounting rules. They fit (somewhat awkwardly) under existing IAS and IFRS standards. While we are waiting for more guidance, treat them like any other asset but keep your eyes on the volatility. And remember: If the value crashes, don’t forget the impairment loss!


That’s it. Now go forth, and may your Bitcoin be profitable and your impairment tests painless.











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