Accounting and reporting for crypto intangible assets (2024)

FAQs

Accounting and reporting for crypto intangible assets? ›

Reporting entities should evaluate their specific facts and circ*mstances. In accordance with ASC 350-60-45-2, the gain or loss associated with remeasurement of crypto assets is reported in net income separately from changes in the carrying amount of other intangible assets each reporting period.

Cryptocurrencies as intangible assets are initially recorded at cost (i.e., the price they were bought for). Later on, their value is adjusted by subtracting amortization over time (if any) and losses due to value drops. Any increase in value after a drop is considered income.

Many of the most common digital assets (e.g. bitcoin, ether, solana, cardano) are accounted for as intangible assets under US GAAP (crypto intangible assets).

Under IFRS, where an entity holds cryptocurrencies for sale in the ordinary course of business, the cryptocurrencies are considered to be inventory and should be accounted for in terms of IAS 2 Inventories. Inventories are typically measured at the lower of cost and net realisable value.

For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2023 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses.

The IRS generally mandates the use of the First In, First Out (FIFO) method unless you can accurately track the tax lots of your crypto transactions. With TokenTax, you can track each tax lot, enabling you to use methods beyond FIFO for your crypto accounting.

Investment in cryptocurrencies is accounted for as an indefinite-life intangible asset under both IFRS and US GAAP, as – in most instances – it does not meet the definitions of other asset classes such as cash and cash equivalents, financial instruments or inventories.

Since crypto has no tangible value, you should account for it on the balance sheet as an intangible asset. This means that you should document crypto at its purchase price, and not as its fair market value.

Accounting under IAS 38

Accounting for cryptocurrencies under IAS 38 means: Entities can recognise them using the cost or revaluation model, although the latter is only permitted if they can measure fair value by reference to an active market.

How do you record cryptocurrency transactions in accounting? ›

How Is Crypto Activity Recorded in Accounting? There are a few steps to the crypto accounting process: Record the book value of assets from the cost basis of the transactions for each asset under the intangible assets section of the balance sheet (with the date and time of the transaction)

Crypto assets will often meet the definition of intangible assets. The ASC master glossary defines intangible assets. Intangible Assets: Assets (not including financial assets) that lack physical substance.

Generally Accepted Accounting Principle (GAAP) considers cryptocurrency as an intangible asset that needs to be recorded at cost, and impairment of the cost needs to be recorded. This means the digital asset value can be reduced on the balance sheet but might not reflect the company's economic value.

Anyone who sold crypto, received it as payment or had other digital asset transactions needs to accurately report it on their tax return.

You owe taxes on any amount of profit or income, even $1. Crypto exchanges are required to report income of more than $600, but you still are required to pay taxes on smaller amounts.

Since the role of crypto within a financial firm is to generate income, you should record crypto as an investment on your balance sheet. This means that unlike an intangible asset, you should record crypto at its fair value, separate from its purchase price.