Cryptocurrencies like Bitcoin have no dedicated IFRS standard, so companies use existing rules by analogy. In 2019, the IFRS Interpretations Committee (IFRIC) ruled that because crypto is not government-issued legal tender or a contractual financial claim, it does not qualify as cash or a financial instrument. Thus, companies account for crypto as intangible assets (IAS 38) by default, or as inventory (IAS 2) only if held for sale in the ordinary course of business. This IFRIC agenda decision (June 2019) effectively meant crypto must be treated as an IAS 38 intangible asset unless a firm trades it like a commodity broker (in which case IAS 2 applies).
Measurement of Cryptocurrencies
Under IAS 38 (Intangible assets), digital currencies are initially measured at cost. Thereafter a company can choose either the cost model or the revaluation model:
- Cost model: Carry crypto at historical cost less any impairment. No amortization is needed because cryptocurrencies have an indefinite useful life. However, firms must test crypto assets for impairment under IAS 36. In practice, this means recognizing losses if market value falls (impairment) but not recording gains when prices rise. Notably, IFRS does allow an impairment write-down on intangibles to be reversed if value later recovers.
- Revaluation model: If an active market exists (e.g. quoted exchange prices for Bitcoin), a company may revalue the crypto for each period to fair value (IAS 38, para 75). In that case, increases go to equity (OCI) and decreases go to profit or loss, subject to prior revaluation surpluses. In practice, few companies use revaluation for crypto, partly because of volatility and the treatment of gains in OCI (which can understate profits).
Under IAS 2 (inventory), crypto is measured at the lower of cost and net realizable value. Importantly, there is a special exception for commodity broker-traders (such as crypto exchanges): such entities can carry crypto inventory at fair value less costs to sell, with changes in value recognized in profit or loss. In other words, an active crypto dealer could mark holdings to market each period (similar to how a commodities trader account for oil). For most other entities (e.g. companies holding crypto as an investment or for use in operations), the IAS 38 intangibles model applies, typically with a cost model that limits unrealized gains on the balance sheet.
Disclosure Requirements under IFRS
Whether treated as an intangible or inventory, companies with crypto must provide robust disclosures to help users understand the accounting:
- IAS 38 disclosures (intangible assets): When crypto is classified as an intangible, companies should disclose its nature, carrying amount, amortization policy (or rationale for indefinite life), and any impairment losses (IAS 38, para 118–128).
- IAS 2 disclosures (inventory): If crypto is inventory, firms disclose their accounting policy, total carrying amount of crypto inventory, and amounts recognized in cost of sales (IAS 2, para 36–39).
- Fair value (IFRS 13) disclosures: Any crypto measured at fair value (either via the IAS 38 revaluation model or as broker-trader inventory) triggers IFRS 13 disclosure rules. This means explaining the valuation technique, inputs used, and the level of the fair value hierarchy. For most large cryptos (e.g. Bitcoin, Ether) there is an active market, so fair value is Level 1 (quoted price), simplifying disclosures.
- Significant judgments (IAS 1): IFRS requires firms to explain the critical judgments in applying accounting policies (IAS 1, para 122). In practice, companies should clarify how they decided crypto is intangible vs inventory and why they chose cost vs revaluation measurement (IFRS Interpretations Committee, 2019). For example, if a firm claims broker-trader status to use fair value accounting, that judgment should be disclosed.(Note: IFRS 18 is not yet effective therefore IAS 1 will be followed until IFRS 18’s effective date).
- Subsequent events (IAS 10): Because crypto prices can swing dramatically after year-end, firms must consider IAS 10. If post-balance-sheet price changes are material and could influence decisions, management should disclose fair values at the statement date or at issue date. Many companies voluntarily report updated market values of crypto to inform investors of the gap between carrying amount and current value (Luo & Yu, 2024).
In summary, IFRS not only prescribes the accounting standards but also demands transparent notes. Regulators like European Securities and Markets Authority (ESMA)have emphasized this, in practice, IFRS reporters often include detailed disclosures on crypto policies, valuation methods, and sensitivity (Deloitte, 2018; KPMG, 2018).
IFRIC Agenda Decision
The June 2019 IFRIC agenda decision “Holdings of Cryptocurrencies” is authoritative guidance for IFRS reporters (though not a new standard). It reinforced that crypto assets are generally outside the definitions of cash or financial assets under IFRS. In particular, IFRIC noted that no cryptocurrency was used as the functional currency or pricing unit in contracts, so none qualified as cash or cash equivalent at that time. The Committee therefore confirmed the “intangible or inventory” approach: if crypto is held for sale in the ordinary course, treat it as inventory (IAS 2), otherwise as an intangible (IAS 38). This interpretation effectively eliminated the option of treating crypto as a financial instrument (e.g. under IFRS 9). IFRIC also cautioned that crypto can only be classified as “cash” if it is legal tender (like in El Salvador), crypto remains outside cash equivalents.
The IFRIC decision urged companies to align policies accordingly. Since 2019, most IFRS firms have reclassified crypto holdings either as intangibles or as inventory as appropriate. The Committee did not create a new standard, but its agenda decision guides how IAS 38 and IAS 2 apply.
Practical Challenges
Although IFRIC and existing IFRS provide a framework, challenges remain in practice:
- Classification and comparability: Cryptocurrencies have hybrid traits (currency-like use, commodity speculation, intangible tech) and do not fit neatly in one box. Even with IFRIC’s guidance, similar holdings can appear under different line items. Some companies treating crypto as a long-term investment list it under non-current intangibles, while others view it as liquid and report it near cash. Researchers note inconsistent approaches globally, with calls for a dedicated crypto category to improve comparability (Alsalmi et al., 2023). Without a unique standard, two IFRS adopters might classify similar crypto holdings differently (investor vs. trading use).
- Measurement and volatility: The cost model (required under IAS 38 unless revaluation is chosen) can distort values in volatile markets. In a crypto rally, cost accounting understates asset values and omits big unrealized gains; in a downturn, it forces firms to write down assets. For example, if a company bought Bitcoin at $5,000 and it rose to $50,000, IFRS at cost would still report the original $5,000 (ignoring the $45,000 gain), reducing comparability to current economics (Ram et al., 2016; Parrondo, 2023). Conversely, sharp price drops lead to impairments. (As a benefit of IFRS, any impairment write-down could later be reversed if value recovers, limiting the downside.)
Large losses under cost accounting have already made headlines. Under US GAAP Tesla’s 2021 annual report showed it bought $1.5鈥痓illion of Bitcoin and took a $101鈥痬illion impairment write-down despite higher year-end market prices; MicroStrategy recorded over $1鈥痓illion of Bitcoin impairments (Crumbley et al., 2024). These cases highlight how the cost model can reduce net income in falling markets. Under IFRS, the accounting story would be similar except that future recoveries might be reinstated (IAS 36). Analysts note investors generally prefer seeing fair values, and global practice shows firms often supplement IFRS numbers with fair-value disclosures (Luo & Yu, 2024).
- No fair-value-through-profit unless trading: Under current IFRS, most holders cannot mark crypto to market in profit or loss. Only qualifying inventory (broker-traders) can use fair value through P&L. All other holders must use cost or OCI (revaluation). This asymmetry, unrealized losses but not gains in earnings, drives criticism that IFRS’s analogies may not fully capture crypto’s economics.
Overall, IFRS accounting for crypto is stable but conservative. It relies on the intangible-asset model (or trading inventory) and on cost-based measurement, supplemented by disclosures. Many practitioners feel the model understates value swings and erodes comparability. In response, bodies like the Australian Accounting standards Board (AASB) and European Financial Reporting Advisory Group (EFRAG) have suggested that fair-value accounting (even through profit) might give more relevant information (AASB, 2018; EFRAG, 2020). However, as of now IFRIC’s guidance remains the authoritative IFRS approach.
Conclusion
IFRS currently treats digital currencies using existing standards: intangible assets under IAS 38 or, if for sale, inventories under IAS 2 (IFRS Interpretations Committee, 2019). This means a generally cost-based approach with impairment testing, or fair-value treatment only for trading inventory. The International Accounting Standards Board has not yet issued a crypto-specific standard, so preparers and users depend on robust disclosures (IAS 1, IAS 10, IFRS 13) to fill information gaps. Going forward, many accountants argue that a dedicated IFRS standard would improve consistency and transparency (Alsalmi et al., 2023).
To enhance the discourse surrounding cryptocurrency accounting, it is beneficial to explore how various jurisdictions approach this complex topic, as understanding global best practices can yield valuable insights into diverse accounting methodologies. Engaging with professional networks or forums dedicated to cryptocurrency and accounting can further deepen one's understanding of the subject and its implications. Additionally, pursuing educational resources, such as webinars or workshops provided by accounting bodies, can clarify the intricacies of cryptocurrency accounting. Lastly, maintaining awareness of anticipated trends in cryptocurrency regulations and accounting standards is advisable, as staying informed about these developments will facilitate navigation of the evolving landscape with greater expertise and insight. Until then, enterprises should carefully apply IFRIC’s guidance, explain their assumptions (e.g. life and fair-value use), and note fair-value gaps so investors understand their crypto holdings’ true economic value.
References
Alsalmi, N., Ullah, S., & Rafique, M. (2023). Accounting for digital currencies. Research in International Business and Finance, 64, 101897.
IFRS Interpretations Committee. (2019). Agenda Decision: Holdings of Cryptocurrencies (June 2019). IFRS Foundation.
Luo, M., & Yu, S. (2024). Financial reporting for cryptocurrency. Review of Accounting Studies, 29(4), 1707-1740.
Parrondo, L. (2023). Cryptoassets: Definitions and accounting treatment under the current International Financial Reporting Standards framework. Intelligent Systems in Accounting, Finance and Management, 30(2), e1543.
Ram, A. J., Maroun, W., & Garnett, R. (2016). Accounting for the Bitcoin: Accountability, neoliberalism and a correspondence analysis. Meditari Accountancy Research, 24(1), 2–35.
Crumbley, D. L., Ariail, D. L., & Khayati, A. (2024). How should cryptocurrencies be defined and reported? An exploratory study of accounting professor opinions. Journal of Risk and Financial Management, 17(1), 3.