Topic: Crypto Assets - Accounting and Disclosure requirements - Snapshot! (Read 114 times)

Yes, apart from reporting requirements, there are many ambiguities on the taxability of gain arising out of sale of Crypto Assets. While many are of the opinion that it may have to treated in line with sale of equity, while some are of the opinion that such may gain may have to be considered as other income, unless your principal business is trading of crypto-assets, in which case the same may have to considered as Business Income. Without having a particular set of rules in these aspects might trigger tax scrutiny in future days.

This is very aptly documented.

I believe that the need of the hour is to recognize the cryptocurrencies as legal assets/services depending upon the circumstances and provide a legal framework for the same. Instead of some countries outlawing cryptocurrencies, they could proceed to legalize the same with certain legal, taxation and financial laws/regulations. This article, in my opinion, is one of the building blocks for such laws/regulations.

Couldn't agree more. The major concern here i feel is that many of the corporates are involved heavily in the crypto-assets but without having a proper reporting requirements in place, I'm afraid, they might be questioned in the future and might discourage future participants. Hence, it is high time that the companies take this seriously and try to adhere to such reporting and disclosure requirements to the extent feasible. But again, considering the high volatile market rates, at which value they need to recognize the crytpo-assets is also needs to be brainstormed.

Thanks for such kind words. Yes, I'm a Chartered Accountant which is similar to CPA here in India.

That's an excellent piece of advice. Are you CPA or something?
Now talking about merely crypto assets in the balance sheets of the corporates I think they well suited under IAS38 as they satisfy all the conditions of an Intangible Assets.

But a major debate here could be whether it could fit in IFRS 109 and IAS32. It actually cannot be said as a financial asset because there is obligation of payment by the other person in any case of a coin. They generally are more like investments which do have a market value but don't have a realisable value. So I think most of the cryptos would go on as an Intangible Asset in the balance sheets however this regime isn't being followed by most of the corporates so far.

Hello everyone,

Considering the popularity of crypto assets, it is relevant for every crypto holding entity to consider its disclosure requirements. While, it is still an evolving topic, I have given a brief summary of such requirements as per International Financial Reporting Standard (‘IFRS’) as below. 

   Crypto-assets have varied terms and conditions. The intent for holding crypto-assets also differs among the entities, and even among business models within the same entities, that hold them. Hence, the accounting treatment will depend on the particular facts and circumstances and, hence, the relevant analysis could be complex:

   In order to be considered cash, a crypto-asset would need to be generally accepted as a medium of exchange and considered a suitable basis on which a holder could measure and recognize all transactions in its financial statements.

   Some contractual crypto-assets could meet the definition of a financial asset if: they entitle the holder to cash, another financial instrument, or the right to trade financial instruments under favorable terms; or they are, in effect, electronic share certificates that entitle the holder to the net assets of a particular entity.

   Some contracts to trade crypto-assets are accounted for as derivatives, if the contract can be settled net or if the underlying crypto-asset is readily convertible to cash, despite the crypto-asset itself not being a financial instrument, provided that certain criteria are met.

   Many crypto-assets would meet the relatively wide definition of an intangible asset. However, not all crypto-assets that meet the definition of an intangible asset are within the scope of (‘International Accounting Standard’) IAS 38 Intangible Assets, as the standard is clear that it does not apply to items that are in the scope of another standard. For example, some entities could hold crypto-assets for sale in the ordinary course of business and, as such, would be able to recognize these as inventory. Commodity broker-traders, who acquire and sell crypto-assets principally to generate profit from fluctuations in price or broker-traders' margin, also have the option of measuring their crypto-asset inventory at fair value less costs to sell.

   The holder of crypto-assets will need to consider the general disclosures required by IAS 1 Presentation of Financial Statements when compliance with the specific requirements of the relevant IFRS is insufficient to enable users of financial statements to understand the impact of crypto-assets on the entity’s financial position and financial performance.