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Determining the Appropriate Accounting Treatment of Cryptocurrencies Based on Accounting Theory

Author

Listed:
  • Nicolette Klopper

    (School of Accountancy, Stellenbosch University, Stellenbosch 7600, South Africa)

  • Sophia Magaretha Brink

    (School of Accountancy, Stellenbosch University, Stellenbosch 7600, South Africa)

Abstract

The International Financial Reporting Standards (IFRS) do not make explicit provisions, in terms of a specifically dedicated standard, for the accounting treatment of cryptocurrencies. This creates uncertainty, and guidance is therefore required in terms of accounting for such investments. Accounting theory has the potential to provide the foundation for this guidance. This study aimed to determine the most appropriate accounting treatment for cryptocurrencies based on the International Accounting Standards Board’s (IASB) Conceptual Framework for Financial Reporting (as a form of accounting theory) that results in decision-useful information. The research further investigated the proposed accounting treatment in terms of IFRS and sought to determine whether this treatment was aligned with the IASB’s conceptual framework. This qualitative study conducted a non-empirical interpretative analysis of the literature (focusing specifically on accounting theory) to address the research aim. The conceptual framework indicated that the most appropriate way to account for cryptocurrencies was to recognise an asset at fair value. This accounting treatment aligns with accounting for assets under International Accounting Standard (IAS) 2 commodities held by broker-traders and the IAS 38 revaluation model. Addressing the problem of accounting for cryptocurrencies with reference to accounting theory makes this study novel. The guidance provided could reduce uncertainty among entities holding investments in cryptocurrencies and could increase the decision-usefulness of financial information.

Suggested Citation

  • Nicolette Klopper & Sophia Magaretha Brink, 2023. "Determining the Appropriate Accounting Treatment of Cryptocurrencies Based on Accounting Theory," JRFM, MDPI, vol. 16(9), pages 1-16, August.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:9:p:379-:d:1223578
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    References listed on IDEAS

    as
    1. Boon Seng Tan & Kin Yew Low, 2017. "Bitcoin – Its Economics for Financial Reporting," Australian Accounting Review, CPA Australia, vol. 27(2), pages 220-227, June.
    2. Tatiana Morozova & Ravil Akhmadeev & Liubov Lehoux & Alexei Valerievich Yumashev & Galina Vladimirovna Meshkova & Marina Lukiyanova, 2020. "Crypto asset assessment models in financial reporting content typologies," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 2196-2212, March.
    3. Asheer Ram & Warren Maroun & Robert Garnett, 2016. "Accounting for the Bitcoin: accountability, neoliberalism and a correspondence analysis," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 24(1), pages 2-35, April.
    4. repec:eme:marpps:10222529200800001 is not listed on IDEAS
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