The Certified Public Accountants of California, U.S. have called for the need for ‘accounting and disclosures rules for cryptocurrencies.’ This will enable citizens to manage their cryptocurrency investments efficiently. It will also enable efficient tax collection and allow efficient use of the rules to obtain rebates related to such investments.
The open letter was brought to notice of the crypto-community by Drew Hinkes, who also stated that no rules have been established until now because the FASB (Financial Accounting Standards Board) presumed that ‘cryptocurrency will be gone in 5 years.‘
However, the CalCPA Committee have expressed otherwise in their letter. Nancy Rix, the Chair of California CPAs Accounting Principles and Assurance Services Committee, said in the letter,
“We believe the usage of cryptocurrencies will not dimish over time, and it will continue to expand in both volume, and fields of application.” She also said, “We antipcipate it will not be long before major public companies strt using cryptocurrencies, as illustrated by JPMorgans’ decision to issue JPM coin in February 2019.”
While things are more transparent for direct investors, the ambiguity in accounting principles in created when evaluating the profit and cost statements of not-for-profit and technology companies that might have used cryptocurrency in carrying out internal or external operations.
The Association needs clarity on the “how the cryptocurrencies must be view”; this creates a discrepancy in the accounting world as to a choice between “lower of cost or market” approach or “fair value approach” and as an intangible asset, valued at historical cost less impairment.
Moreover, they also pointed to the rule ASC 350: on intangibles- goodwill and others, that has been generally accepted as an appropriate accounting rule that applies to cryptocurrency. However, it too creates a problem for firms which plans to use for shorter periods of time.
The Accounting Committee comprises of 54 members who represent over 42,600 members of CalCPA. The accounting difference has been reported mainly in not-for-organization, which receives a donation in Bitcoin or other cryptocurrencies. Hence, the Committee has requested the addition of a new agenda to FASB (Financial Accounting Standards Board) goals.
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Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com