How Cryptocurrencies Are Reported Differently Around the World ⁉️

Cryptocurrencies are digital assets that use cryptography to secure transactions and control the creation of new units. They have become increasingly popular in recent years, attracting the attention of investors, regulators, and researchers. However, there is no clear guidance on how to account for and report cryptocurrencies in financial statements. This can lead to inconsistencies and distortions in the financial information that users rely on to make decisions.

Researchers* compared and contrasted the accounting and financial reporting practices for cryptocurrencies under US and international accounting frameworks. They analyzed the financial statements of 40 global companies that have exposure to cryptocurrencies, such as purchases, mining, payments, trading, and investments in ICOs and early-stage blockchain ventures. They found that the current accounting standards lead to inconsistencies and distortions in assessing the firms' asset value, liquidity, profitability, and cash-generating abilities.

For example, some firms report cryptocurrencies as intangible assets, while others report them as inventory or cash equivalents. Some firms measure cryptocurrencies at cost, while others measure them at fair value. Some firms recognize gains or losses from cryptocurrency transactions in income, while others report them in other comprehensive income or equity. These differences can affect the comparability and reliability of the financial information across firms and jurisdictions.

The article suggests that understanding the financial and valuation implications of these new virtual assets is vital for future accounting research and professional practice. It also calls for more guidance and standardization from accounting standard setters and regulators to address the challenges and opportunities posed by cryptocurrencies.

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*Luo, M., Yu, S. Financial reporting for cryptocurrency. Rev Account Stud (2022).