Financial Sector Asks For Rules Around Crypto Accounting

Morgan Blogs Part 2

With the continuing rise in popularity of cryptocurrency, accountants and money managers are urging lawmakers to help regulate the assets.

Big-name companies like carmaker Tesla Inc. and business intelligence firm MicroStrategy Inc. have swapped billions of dollars in cash for bitcoin in the past few years.

Federal and global agencies have been reluctant to name bitcoin and other cryptocurrency as an actual currency. Therefore, it falls into a murky gray zone — outside the standards of traditional assets and how they are regulated.

Despite the fact that many companies are leery of investing in bitcoin due to its market volatility, there is a contingent of financial officers asking the SEC and the Financial Accounting Standards Board for further guidance.

How do you account for cryptocurrency?

Currently, there are no binding U.S. accounting requirements for digital assets.

Questions remain over how companies financially account for crypto assets and how they pay taxes on the investments.

Currently, companies with crypto holdings classify them as indefinite-lived intangible assets—similar to trademarks and website domains—following nonbinding guidelines from the Association of International Certified Professional Accountants.

An alternative to that process is to allow companies to apply fair-value accounting rules for certain digital assets if the fair value can be determined readily.

Under fair-value accounting, companies recognize losses and gains in value immediately and treat the digital assets as financial assets, not as intangibles.

“This approach captures the value of digital assets more accurately,” said Dan Amiram, a vice dean and accounting professor at Tel Aviv University. “But, because it incorporates both gains and losses, fair-value accounting can create even more volatility on companies’ income statements,” he said.

Outside the United States, cryptocurrency is accounted for differently.

While the world waits for more regulatory input, following the nonbinding suggestions from the AICPA is your best bet.

If you need help with your company bookkeeping, ask the experts at Morgan & Associates to clean up your books. Don’t wait until the year ends to try and play catch up!

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