Background

In 2018, the International Accounting Standards Board (Board) and the IFRS Interpretations Committee (Committee), respectively, discussed holdings of cryptocurrencies.

Based on the staff analysis that was agreed in the Committee's November 2018 meeting and the Board's November 2018 meeting, cryptocurrencies do not meet the definition of financial assets in IFRS 9 or cash equivalents in IAS 7, and the entity would account for holdings of cryptocurrencies applying IAS 38, unless it is determined that they are within the scope of another IFRS Standard (e.g. IAS 2 when entities hold cryptocurrencies for sale in the ordinary course of business). In the Board's November 2018 meeting, the Board decided not to add this matter to its work plan but instead asked the Committee to consider publishing an agenda decision.

Comment letters were received in response to the tentative agenda decision. Some respondents agree with the Committee's technical analysis while some of them have comments on it. A few respondents also suggest changes in wordings. On the other hand, more than half of respondents suggest the Board consider undertaking standard-setting in addition to the agenda decision.

Staff analysis

Some respondents consider cryptocurrencies can be used as a medium of exchange in certain transactions and so meet the definition of cash and one respondent suggests the Board consider a project to review and update the definition of cash in IFRS Standards. The staff continue to agree with the analysis of why cryptocurrencies are not cash as discussed in previous meetings. Another respondent suggests the Committee consider including in the agenda decision the presentation requirements such as current versus non-current and classification as disposal group under IFRS 5, but the staff analyse the application shall follow the requirements in the existing IAS 1 and IFRS 5. Certain respondents suggest including IAS 1 and the Conceptual Framework in the agenda decision however the staff analyse they are not applicable because it is not an extremely rare circumstance for departing from the existing IFRS requirements and there are requirements in IFRS Standards dealing with similar and related issues as cryptocurrencies.

Regarding the wording suggestions from the respondents, the staff suggest amending the definition of cryptocurrencies to be clear that all the characteristics set out in the agenda decision shall be met. One respondent suggests changing one of the characteristics of cryptocurrencies ("a cryptocurrency is not issued by a jurisdictional authority or other party") to "a cryptocurrency is issued to the public by other than a sovereign authority authorised to issue currency or similar organisation", however the staff consider acknowledging such interpretation departs from most market participants. Another respondent suggests including a reference to IAS 1:17(c) in the agenda decision but the staff consider this may imply IFRS Standards would not result in a fair presentation of holdings of cryptocurrencies, and instead recommend including reference to IAS 1:112 in the agenda decision.

In its November 2018 meeting, the Board decided not to undertake standard-setting but instead to monitor developments in crypto-assets based on the technical analysis performed by the staff and discussions in the Committee. The staff has not changed the technical analysis and conclusions in this subject matter and view that application of existing IFRS Standards provides useful information to financial statement users.

Staff recommendation

The staff recommended finalising the agenda decision with the above-mentioned change and certain editorial changes.

Discussion

Before going to the discussion, the Chair has highlighted again that the Board decided not to undertake standard-setting and the discussion should be carried out on this basis. Despite this, some Committee members still expressed their views on the need for standard-setting. Other than that, in general, the Committee members agreed with the thought process in the staff analysis that reflects their understanding to the existing requirements and can at least reduce diversity in practice.

The Committee decided, by a majority of votes, to adopt the wording in the agenda decision.