![]() ![]() ![]() Without going to deep into things here, the point is that for financial assets companies might get forced to value them at fair value (depending on the concrete sub-classification) while for intangibles companies can opt for fair value measurement but usually they carry them at cost less impairment (the latter is the Tesla way). The question of classification of cryptocurrencies is highly relevant because the rules of ongoing valuation (subsequent measurement) differ a lot from asset class to asset class. And some also argue that it could be a commodity under certain circumstances but then still be accounted for like inventory (see the description in the Footnotes Analyst article HERE) The situation according to US-GAAP is by the way quite similar to IFRS. It is also worth noting that cryptocurrencies can be seen as inventory according to IAS 2 if they are held for sale in the ordinary course of business but this is rather not the case in a Tesla-like case. They do, however, fit into the definition of IAS 38 intangibles as described in the graph above. They are not financial instruments other than cash or cash equivalents because there is no contractual right behind them. They are not cash equivalents as they are not subject to an insignificant risk of changes in value. The IFRS classification problem is shown in the following graph (the definitions overlap a bit but this is essentially what the conclusion is about).Ĭryptoassets (or cryptocurrencies) are not cash because they are not a medium of exchange for all transactions (though perhaps for a certain subset of transactions). The longer answer is: Because the usual suspects (Cash, Currency, Financial Instruments) do not apply here, and the technically applicable category (intangibles) is not made for what you want to do with cryptocurrencies. To my knowledge, only the brilliant Footnotes Analyst ( HERE) argues on level and adds some interesting news to the debate.īut what is the point with bitcoins in accounting? Why is this such a tricky topic? The short answer is: Because it does not fit into our well-kown accounting system. But most comments just stay at the surface of the discussion. In the comments Tesla seems to be the baddie that wants to cheat the world. ![]() Now, with Tesla’s 1.5 bn USD investment in bitcoin and its accounting treatment of this investment (intangible asset) there is tremendous outcry in the press and amongst investors. But since then not so much happened in standard setting… We have been knowing for years that the day will come where cryptoassets become a relevant topic from an investment point of view in some companies and where we will face the accounting question the hard way. ![]() Based on lots of interesting analyses the paper basically comes down to the following statement: IFRS is not ready for properly dealing with cryptocurrencies (and without explicitly mentioning the paper also implicitly says that US-GAAP is not ready, neither)! This paper should have been a wake-up call – and one with a long run-up. (Not only) in my opinion, the seminal and still most relevant paper about bitcoin accounting practice was written about three years ago by Deloitte Australia Partner and former IASB member Henri Venter: Digital currency – A case for standard setting activity – A perspective by the Australian Accounting Standards Board (AASB). ![]()
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