An article published in Korea Times on Sept 23 has revealed that an international body of accounting – the International Financial Reporting Interpretations Committee (IFRIC) has declared that Bitcoin is not cash or equity, but an intangible asset.
IFRIC Labels Cryptocurrencies as “Intangible Assets”
International Financial Reporting Interpretations Committee (IFRIC) is a not-for-profit international interpretative body of accounting practices associated with International Financial Reporting Standards (IFRS) Foundation under the International Accounting Standards Board (IASB). IFRS standards are required to be followed across different financial institutions and companies in several countries including Canada, Russia, Australia, Denmark, Brazil, Mexico and most of Europe.
According to IFRS’ website, their mission is to
“develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world.”
IFRIC’s recent announcement on cryptocurrencies states that they are “not cash nor an equity instrument of another entity,” and they do not “give rise to a contractual right for the holder and it is not a contract that will or may be settled in the holder’s own equity instruments.”
Instead, cryptocurrencies have been defined as “intangible assets”. According to International Accounting Standards (IAS), intangible assets are ‘an identifiable non-monetary asset without physical substance’. Cryptocurrencies have been categorised as intangible assets because they “are capable of being separated from the holder and sold or transferred individually” and they “do not give the holder a right to receive a fixed or determinable number of units of currency.”
Implications of IFRIC’s Interpretation on the Accounting Treatment of Crypto
The decision of IFRIC will become an international standard in bookkeeping for countries that use IFRS standards. It will enable regulatory authorities to develop a legally sound framework for taxing cryptocurrency businesses and legitimising them.
Do you think that this is a step forward in the regulation of cryptocurrencies? Let us know what you think in the comments below!