Accounting and reporting for crypto intangible assets (2024)

FAQs

Is cryptocurrency considered an intangible asset? ›

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).

For wages you receive as an employee, report the digital asset income on Form 1040, U.S. Individual Income Tax Return. For payments you receive as an independent contractor, report the digital asset income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).

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.

Proposed ASU, Accounting for and Disclosure of Crypto Assets, would create Subtopic 350-60 (crypto assets), specifying new accounting, presentation and disclosure requirements for crypto assets within its scope (e.g. bitcoin and ether).

The recognition principle under GAAP dictates that an item should only be recognized in the financial statements when it meets the definition of an element and can be measured reliably. Cryptocurrencies are recognized at their purchase price, which is a known and reliable figure.

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)

Cryptocurrency trading activities should be recorded similarly to those of stock trading activities. If one buys Bitcoin (BTC) or Ether (ETH), these digital assets can be added to the balance sheet at their fair market value on the date the assets were purchased. This will reflect as a debit on one's assets account.

Receiving Digital Assets Through Mining, Staking and Airdrops. Income received from mining, staking or airdrops is taxable and must be reported as ordinary income using the fair market value of the cryptocurrency at the time it was received.

You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.

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.

Is there an accounting standard for cryptocurrency? ›

On December 13, 2023, the Financial Accounting Standards Board (FASB) issued an accounting standards update (ASU 350-60) to improve the accounting for, and disclosure of, certain crypto assets.

You and your client will also need to keep track of:

Receipts of purchase and/or transfer of cryptocurrency. Exchange records. Records of accountant and legal costs. Digital wallet records.

US taxpayers can use crypto losses to offset taxes on gains from the sale of any capital asset and up to $3,000 in income, with carryover into the future. To report crypto losses on taxes, US taxpayers should use Form 8949 and 1040 Schedule D.

Cryptocurrency is an intangible digital token that is recorded using a distributed ledger infrastructure, often referred to as a blockchain.

Consultation description

The Cryptoasset Reporting Framework ( CARF ) and amendments to the Common Reporting Standard ( CRS2 ) is the latest AEOI package that ensures we close gaps in existing transparency rules created by developments in fintech.

Instead, crypto assets are strictly virtual assets that never become tangible themselves, though they can sometimes be exchanged for tangible goods.

An intangible asset is a non-physical asset such as a patent, brand, trademark, or copyright. Businesses can create or acquire intangible assets. An intangible asset like a brand name is considered indefinite.

Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).

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.