Unscripted: Accounting for Cryptocurrency



The value of the cryptocurrency market topped $2 trillion for the first-time last week thanks to heated interest in Ethereum and, over the past two months, huge corporations such as Tesla and MicroStrategy have invested billions in the biggest name in crypto, Bitcoin according to CNBC. The accounting profession is nothing if not adaptable, but as more corporations and companies invest in virtual currencies and investment banks explore routes for their clients to dip their toes into virtual currency markets, financial advisors and accountants will need to ensure they have a solid understanding on just what a bitcoin is and more importantly, how it can impact a client’s bottom line1.

Cryptocurrency is accounted for as an intangible asset. Reuters reports that companies record the value of virtual currency at the time of purchase. If the value of that currency rises, gains are not logged until time of sale. In the event that value is lost, however, that loss is recorded as an impairment charge. Outside of the U.S., the approach to cryptocurrency differs. According to Reuters:

“Companies that own digital coins for sale as part of their normal business hold them as inventories at cost price. Others, such as broker-traders, can hold such inventories at market value, said the International Financial Reporting Standards Foundation, which sets rules for most non-U.S. corporations.

Other companies hold their cryptocurrencies as intangible assets, like in the United States. Yet they can reverse any writedowns back to original cost if the value of the coin rises again. In some other cases, companies that record crypto as intangible assets can gauge the value of their crypto holdings at market value2.”

As of the writing of this article, the Financial Accounting Standards Board (FASB) has yet to publish anything official regarding specific Generally Accepted Accounting Principles (GAAP) rules on virtual currency accounting. According to Forbes, however, there is an AICPA digital assets practitioner guide available3. Until the FASB and GAAP can catch up to this quickly evolving currency market, financial advisors, CFOs and other accounting professionals will want to make sure they are doing their best to work with the tools at hand.

The MICPA will continue to bring you updates related to virtual currency as new developments occur. Follow us on social media and look out for more coverage on this topic and others in our weekly enewsletter!

  1. Kharpal, Arjun. “Cryptocurrency Market Value Tops $2 Trillion…CNBC. 6 Apr. 2021. Accessed on 13 Apr. 2021.
  2. Wilson, Tom., et al. “Explainer: Bitcoin on Your Balance Sheet?Reuters. 8 Mar. 2021. Accessed 13 Apr. 2021.
  3. Chandrasekera, Shehan. “How Are Cryptocurrencies Classified in GAAP Financials?Forbes. 21 May 2020. Accessed on 13 Apr. 2021.

Source: MICPA

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