Basics of Accounting for cryptocurrency

The Recent Boom in cryptocurrencies gives rise to various concerns about cryptocurrency ranging from legal status and How to do Accounting for cryptocurrencies and what type of taxes and levies are to be paid on holding and owning these digital currencies.

IFRS and GAAP various standards help understand the nature and category under which cryptocurrency should be categorized.

What to expect from the reading:

  • Why is crypto an Intangible Asset?

  • Why not cash or cash equivalent?

  • Possible double entries and tax treatment.

Here is a little background, and a later section will explain Accounting entries for recording.

The cryptocurrency is often perceived as a cash and cash equivalent or monetary item; as it acts as a medium of exchange, but here is why cryptocurrency does not fall in cash and cash equivalent.

The IFRS standards IAS-07 and GAAP standards explain cash and cash equivalent as;

  1. Readily convertible to cash and has a relatively known value.

  2. And are subjected to low or zero risk.

Under the provision of these standards, cryptocurrency cannot be categorized as cash and cash equivalent as cryptocurrency is subjected to high risk and is extremely volatile in nature.

It might appear that crypto can also be accounted for as a financial asset at the fair market through profit and loss. IFRS 9 explains financial assets to be contracts that establish the right to receive cash or other financial assets. It also is not debt security or equity instrument of another entity.

However, cryptocurrency falls under the definition of an intangible asset explained by IAS 38 and GAAP standards. These standards explain intangible assets as non-monetary, separately identifiable assets without physical form. Separately identifiable means it can be divided from an entity and can be sold, transferred, rented, or exchanged separately or in contract with other assets.

It also corresponds with the IAS 21 'Effect of foreign exchange rate', which states that an essential feature of non-monetary assets is the absence of the right to receive determinable units of currency.

Thus under both these conditions, it appears that cryptocurrency should be treated as an intangible asset.

Accounting for Crypto:

Initially, when crypto is acquired, it is measured at cost, as an intangible asset subjected to a major change in its value is checked for impairment. However, there is a difference in how intangible assets are accounted for in IFRS and GAAP.

Accounting as per GAAP:

After initial measures, the cryptocurrency is impaired to its fair value when the value changes. When the value of crypto decreases, the books are updated for that increase, and an impairment loss is recorded. According to GAAP standards for an intangible asset, the impairment losses, once recorded, are never reversed. The later increased amount is accounted for as capital gain, and subsequently taxable as a capital gain.

Consider that you have purchased crypto for $400000 fiat money or through a bank you will debit a particular crypto asset and credit cash or bank by $400,000. Now, if after a certain time it devalues to $200000, you will reduce the crypto asset by crediting the asset by $200000 and debiting loss by $200000.

Now consider you paid your vendor through crypto at that time; the crypto value was $400,000; as per GAAP, you will debit expenses by $400000 and credit asset by book value which in this case is $200,00. And then for the other $200000, you will credit capital gain.

Crypto Mining and other areas subjected to normal income tax:

There are other transactions that give rise to income and are taxable under normal income tax that are:

  1. Mining: Mining should be recorded as mining income, and the mined asset should also record.

  2. Crypto stacking

  3. Interest. These are to be accounted for as income under their heads.

Here is a table for journal entries: 

This is based on the example above:

Journal entries





Account Nature

At Acquisition

Crypto Asset





Cash or Bank










Impairment loss



Account in P&L


Crypto Asset









sale/transfer and exchange

Cash/ Other Crypto /Asset





Crypto Asset at book value





Capital gain









Crypto Income






Crypto asset (mined)





Mining income
























Mining Equipment purchased

Mining Equipment









Accounting under IFRS:

According to IFRS, intangible assets are initially recorded at cost and then reduced by amortization and impairment loss. Subsequently cost, or revaluation model is followed. If there is any increase or decrease in fair value, the asset is revalued to that amount. 

Revaluation loss is recorded in profit and loss. However, the loss should be recorded to other comprehensive income if there is a balance in revaluation surplus for this asset. An increase in value is recorded in other comprehensive income, but an increase in value is recorded in profit and loss up to the extent to offset the previously recorded loss.

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