Recognition of cryptocurrency transactions: Challenges and perspectives

Abstract

The greatest challenge facing modern financial reporting is the question of accounting treatment for transactions involving cryptocurrencies. In the absence of specific regulations, business entities rely on existing professional accounting standards that may apply to these transactions. Considering factors such as term, volatility, characteristics, and purpose, cryptocurrencies meet the criteria for intangible assets and, in certain cases, can also be recognized as inventory. According to professional accounting standards defining intangible assets or inventory, business entities have two valuation models for cryptocurrencies: cost and fair value. Financial information about cryptocurrencies that business entities should disclose in their financial statements includes a description, characteristics, holding purpose, risks associated with holding, and materiality considerations of cryptocurrencies. These disclosures would assist investors and other stakeholders in assessing investment in the entity or making decisions regarding the continuation or initiation of business partnerships.