Identifying Issues in Accounting work for Cryptocurrencies

It is essential for virtual asset exchange operators and virtual asset deposit service providers to identify cryptocurrencies for accounting purposes whether they are:

• cash, cash equivalents;

• currency;

• commodities;

• stocks, financial investments;

• intangible assets, etc.

The problems of crypto assets as accounting objects will be identified in this article below.

Despite the lack of legal and regulatory framework for us­ing the attributes of the digital economy, the emphasis is placed on the need to generate the accounting status of crypto assets.

There are currently defined problems that we have interacted with:

1. of documentary evidence of transactions performed with crypto assets;

2. identification of the type of assets to which certain tokenized assets should be attributed;

3. determination of the method for evaluating crypto assets in order to ensure a reliable reflection of their value;

4. and ensuring an adequate system of internal control of transactions with crypto assets.

There is an assumption that applying a universal approach to reflecting crypto assets in the accounting system is problematic due to their diversity and varied functions. Accounting for crypto assets is acknowledged to be methodologically complex but presents a new and promising challenge that needs a comprehensive solution in practice.

Cryptocurrencies are one area where there are no current accounting standards that exist in the real world.

And thus many different interpretations may occur, such as a Cryptocurrency could be an intangible digital token that is recorded using a distributed ledger infrastructure, often referred to as a blockchain. These tokens provide various rights of use. For example, cryptocurrency is designed as a medium of exchange. While other digital tokens provide rights to the use other assets or services or can represent ownership interests.

These tokens are owned by a company that owns the key that lets it create a new entry in the ledger. Access to the ledger allows the re-assignment of the ownership of the token. These tokens are not stored on a company’s IT system as the company only stores the keys to the Blockchain (as opposed to the token itself). They represent specific amounts of digital resources which the company has the right to control, and whose control can be reassigned to third parties.

With the growth of interest in the crypto service industry, the number of intermediaries interested in the purchase, sale and storage of these assets will also grow. This increases the importance of implementing a balanced accounting policy and ensuring its consistent application for similar transactions, as well as appropriate disclosure in financial statements to inform users.

In the absence of special standards and directives in order to identify the crypto received in exchange for goods or services as a certain type of asset and accurately value it, the company must make a decision guided by professional judgment or seek qualified help from specialists. In order to determine the fair value of the crypto held.

There is no doubt that each crypto asset service should be considered according to its specific characteristics.

There are a range of significant aspects that require further research, while digital technologies and virtual markets continue to develop dynamically the accounting practices have proven unprepared for the challenges of the crypto industry and we invite any market participant to contribute to the creation of such standard internally or by regulatory mechanisms. We think, one way to start is by introducing a written Accounting Policy.