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FASB weighs possibility of standards for digital currencies

  • FASB (US Financial Accounting Standards Board) (lt blue) Image

Jul 11, 2017

On July 11, 2017, Thomson Reuters released an article where they discuss how the Financial Accounting Standards Board (FASB) is considering developing guidance for digital currencies and is researching the issue. As digital currencies, such as bitcoin, gain momentum, some advocates say inconsistent accounting standards are becoming a problem.

In addition to being used as a form of payment, digital currency also is held as an asset by businesses, which can sell the currency when its value goes up. The increased presence in the market indicates the need for consistent accounting guidance, the Digital Chamber of Commerce said.

Some financial professionals believe digital currency should be accounted for under Topic 305, Cash and Cash Equivalents; others say Topic 825, Financial Instruments, applies to electronic money; while others consider Topic 350, Intangible Assets, or, Topic 330, Inventory, the more appropriate accounting guidance.

The conflicting views — and lack of authoritative accounting guidance — leads to auditing questions, which can turn off investors, and, in turn, research and development.

This is similar to a position the Australian Accounting Standards Board took in December 2016 when it presented a paper to the IASB’s main advisory panel, the Accounting Standards Advisory Forum (ASAF), suggesting the international board investigate consistent accounting for digital currency.

The paper’s author, Henri Venter, director in Deloitte Australia’s National Accounting Technical Team, said the lack of clear guidance in international accounting standards meant digital currencies were accounted for either under IAS 2, Inventory , or IAS 38, Intangible Assets, but the measurement guidance in neither standard provides sufficient information to analysts and investors about the value of the electronic money.

Review the article on Thomson Reuters' website.

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