Crypto Asset Accounting

What is Crypto Asset Accounting?

The starting point is the IFRIC's June 2019 agenda decision, which confirmed that a cryptocurrency holding meets the definition of an intangible asset under IAS 38.8: it is identifiable, non-monetary, lacks physical substance, and is not a financial asset. IAS 38 therefore applies as the default classification. The entity then chooses between the cost model and the revaluation model as its accounting policy. Under the cost model (IAS 38.74), the asset sits at cost less accumulated impairment. Under the revaluation model (IAS 38.75), fair value is used, but only if an active market exists for that specific crypto asset.

An exception applies when the entity holds crypto for sale in the ordinary course of business. IAS 2.3 captures that scenario. Broker-traders who buy and sell crypto in the near term measure their holdings at fair value less costs to sell under IAS 2.3(b), with changes flowing through profit or loss. The distinction between IAS 38 and IAS 2 hinges entirely on intent and business model, which forces the auditor to evaluate management's stated purpose under ISA 540.13(a) and test whether actual trading behaviour supports the classification.

Worked example: O'Sullivan Tech Ltd

Client: Irish SaaS company, FY2025, revenue €8M, IFRS reporter. In March 2025, O'Sullivan purchased 12 Bitcoin at a weighted-average cost of €58,000 each (total €696,000) as a treasury reserve. The company does not trade crypto and has no plans to resell in the short term.

Step 1 — Classify the holding: O'Sullivan holds the Bitcoin as a long-term treasury asset, not for sale in the ordinary course of business. IAS 2 does not apply. The holding meets the IAS 38.8 definition of an intangible asset (identifiable, non-monetary, lacking physical substance, not a financial asset). The entity classifies the 12 Bitcoin under IAS 38.

Documentation note: record the board resolution authorising the purchase as a treasury reserve, management's stated holding intent, and the classification conclusion referencing the IFRIC June 2019 agenda decision. Retain evidence that the entity is not a broker-trader.

Step 2 — Select the measurement model: O'Sullivan adopts the cost model under IAS 38.74. The revaluation model (IAS 38.75) is available because Bitcoin trades on active markets, but management prefers cost-model simplicity. The 12 Bitcoin are initially recognised at €696,000 with an indefinite useful life (IAS 38.107 applies because crypto assets have no foreseeable expiry).

Documentation note: record the accounting policy election, the rationale for cost model over revaluation model, and the indefinite-useful-life determination. No amortisation is recorded; instead, impairment testing is required annually under IAS 36.10.

Step 3 — Test for impairment at year-end: At 31 December 2025, Bitcoin's quoted price is €51,200. The recoverable amount of the holding is €614,400 (12 x €51,200). Carrying amount is €696,000. The impairment loss is €81,600 (€696,000 less €614,400), recognised in profit or loss under IAS 36.59.

Documentation note: record the year-end quoted price (source and date), the impairment calculation, and the journal entry (Dr: Impairment loss €81,600 / Cr: Intangible asset €81,600). Reference IAS 36.59 for recognition in profit or loss.

Step 4 — Evaluate reversal restriction: In February 2026, Bitcoin recovers to €62,000 before the financial statements are authorised for issue. Under the cost model, IAS 38.75 does not permit recognition of unrealised gains above the original cost of €696,000. A reversal of the impairment loss is permitted under IAS 36.114 only up to the original carrying amount, not beyond it. If Bitcoin had already recovered by 31 December 2025, no impairment would have been recorded, but no gain above cost would appear either.

Documentation note: record the post-year-end price as a non-adjusting event per IAS 10.21 if it does not indicate conditions at year-end. Confirm the reversal policy is consistent with IAS 36.114 and that the carrying amount does not exceed original cost under the cost model.

Conclusion: the €614,400 carrying amount at year-end is defensible because the impairment test uses a Level 1 quoted price, the classification rests on the IFRIC agenda decision, and the cost model's upward measurement restriction is applied correctly.

What reviewers and practitioners get wrong

• Teams frequently skip the classification analysis entirely, defaulting to IAS 38 without documenting why IAS 2 does not apply. When the entity's actual trading activity contradicts the stated "hold" intention (for instance, frequent purchases and disposals within the period), the IAS 38 classification is unsupported. ISA 540.18 requires the auditor to evaluate whether the assumptions underlying the accounting treatment are reasonable, which includes verifying that the business model matches the chosen classification.
• Under the cost model, practitioners sometimes reverse impairment losses to reflect market price recoveries above the pre-impairment carrying amount. IAS 36.124 prohibits reversal of impairment losses on goodwill, but it does permit reversal on other assets up to the original carrying amount. The error is recording a reversal that exceeds the original cost, which IAS 38.74 does not allow under the cost model.

Related terms

Frequently asked questions