Best intro to accounting for cryptocurrencies in 1 view

Best intro to accounting for cryptocurrencies

the basics provides guidance on some of the basic issues encountered in accounting for cryptocurrencies, focussing on the accounting for the holder.

The popularity of cryptocurrencies has soared in recent years, yet they do not fit easily within IFRS’ financial reporting structure.

For example, an approach of accounting for holdings of cryptocurrencies at fair value through profit or loss may seem intuitive but is incompatible with the requirements of IFRS in most circumstances. Here the acceptable methods of accounting for holdings in cryptocurrencies are discussed while touching upon other issues that may be encountered.

Relevant IFRS

IAS 38 Intangible AssetsIAS 2 InventoriesIFRS 13 Fair Value Measurement

What is a cryptocurrency?

Cryptocurrency is digital or ‘virtual’ money, which uses cryptography to secure its transactions, to control the creation of additional currency units, and to verify the transfer of assets. Cryptography itself describes the process by which codes are written or generated to allow information to be kept secret.

In contrast to traditional forms of money which are controlled using centralised banking systems, cryptocurrencies use decentralised control. The decentralised control of a cryptocurrency works through a ‘blockchain’, which is a public transaction database, functioning as a distributed ledger.

This has advantages in that two parties can transact with each other directly without the need for an intermediary, saving time and cost.

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IFRS 7 applies to all recognised and unrecognised financial instruments (including contracts to buy or sell non-financial assets) except:

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Statement of financial position

Statement of

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Fair Value Measurement under IFRS 13:Fair value measurement

  1. defines fair value;
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  3. requires disclosures about fair value measurements.

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The … Read more

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Summary of significant financial instruments accounting policies

1 Financial assets and liabilities

1.1 Summary of measurement categories

The insurer classifies its financial assets into the following categories:

Business model and cash flow characteristics

Type of financial instruments

Classification

Hold to collect business model and solely payments of principal and interest

Cash and cash equivalents

Amortised cost (AC)

Hold to collect and sell business model and solely payments of principal and interest

Government bonds

Fair value through other

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Classification of financial assets

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Overview  IFRS 13 understand inputs to valuation techniques

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Business model >  Hold to collect Hold to collect and sell Other
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Other FVPL FVPL
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