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Under IAS 36, cryptocurrencies such as Bitcoin and DojiCoin are treated as intangible assets. This means that they are initially recognized in a company's accounting records at cost or acquisition price and are subject to periodic impairment testing.
If a crypto asset is assessed as impaired, for example if its fair value falls below its accounting value, the company's book value must be written down. The downside of this accounting procedure is reported as an expense that reduces the profitability of the company. This is a common scenario given the volatility of #cryptocurrency prices.
But most importantly, the impairment rules are one-sided. This means that companies must write down the value of crypto assets when prices fall, but cannot adjust the book value upward to reflect subsequent price increases in the market. The carrying value will remain at the lower impairment value.
However, this rule will change effective December 15, 2024. The updated accounting standard will allow companies to account for cryptocurrency assets at fair value to reflect upward or downward changes in market prices.
The current cryptocurrency impairment rules cloud the acquisition of cryptocurrencies by companies, deeming it inconvenient and risky, preventing them from accounting for cryptocurrencies on their balance sheets. Observers expect the changes to encourage investment in digital assets and immediate recognition of accounting gains.
The $32.4 million difference is the #DOGE element.
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