How businesses account for crypto holdings

When a business holds cryptocurrency on its balance sheet, it has to answer a deceptively simple question: what is that holding worth, and when should changes in its value show up in the financial statements? The answer depends on the accounting framework the business reports under, and the rules have changed meaningfully in recent years.

This article explains, at an educational level, how companies that prepare financial statements under US GAAP and under IFRS account for crypto holdings. It is not accounting or tax advice. Accounting standards and licensing regimes differ by jurisdiction and are updated over time, so consult a qualified accountant or auditor before applying any of this to a real set of books.

Why crypto was awkward to account for

Traditional accounting frameworks were written long before blockchain-based assets existed. A holding of Bitcoin or Ether does not fit neatly into the familiar buckets. It is not cash, because it is not legal tender issued by a central bank. It is usually not a financial instrument in the classic sense, because holding it does not give you a contractual right to receive cash or another financial asset from a counterparty. And it is not physical inventory in the ordinary case.

Because of that, standard-setters ended up treating many crypto holdings as intangible assets — the same broad category that covers things like trademarks and software licences. That classification had an important and widely criticised consequence, which the newer US rules were designed to fix.

US GAAP: the old cost-less-impairment model

Under long-standing US GAAP, crypto assets held by most companies were accounted for as indefinite-lived intangible assets. In practice that meant:

• The asset was recorded at its historical cost — what the company paid for it.
• It was tested for impairment. If the market price dropped below carrying value at any point, the company had to write the asset down to that lower value and record a loss.
• Crucially, the write-down could not be reversed while the asset was still held. Even if the price recovered, the balance sheet stayed at the impaired figure until the asset was sold.

This produced financial statements that many considered misleading. A company could hold crypto that had risen sharply in value, yet its books would still show the depressed impaired amount, while unrealised losses were captured immediately. The accounting told only half the story.

US GAAP today: FASB ASU 2023-08 and fair value

The Financial Accounting Standards Board (FASB) addressed this with Accounting Standards Update (ASU) 2023-08, Accounting for and Disclosure of Crypto Assets, issued in December 2023. It introduced a new Subtopic (ASC 350-60) and changed the measurement model for qualifying crypto assets.

The core change: in-scope crypto assets are measured at fair value, with changes in fair value recognised in net income each reporting period. That means both increases and decreases in value flow through the income statement as they happen, giving a more current picture of what the holding is worth.

Not every digital asset qualifies. To fall within the new subtopic, a crypto asset generally must meet several criteria, including that it:

• meets the accounting definition of an intangible asset;
• does not give the holder enforceable rights to, or claims on, underlying goods, services or other assets;
• is created or resides on a distributed ledger secured through cryptography;
• is fungible; and
• is not created or issued by the reporting entity or its related parties.

Widely held, fungible assets such as Bitcoin and Ether typically fall inside this scope, while non-fungible tokens (NFTs) and tokens the reporting entity issued itself generally do not, and continue to be assessed under other guidance. ASU 2023-08 also added presentation and disclosure requirements — for example, showing crypto holdings separately and disclosing significant holdings and activity. The standard is effective for fiscal years beginning after 15 December 2024, with early adoption permitted, so newly issued financial statements are increasingly prepared on the fair-value basis.

The contrast between the two US GAAP approaches is easiest to see side by side:

How fair value gets determined

Moving to fair value raises a practical question: fair value against what? Fair value in accounting is broadly the price to sell an asset in an orderly transaction between market participants at the measurement date. For a liquid crypto-asset that trades continuously on active markets, an observable market price is usually available, which places the measurement toward the more reliable end of the fair-value hierarchy. Less liquid or thinly traded assets can be harder to value and may require more judgement and disclosure about the inputs used.

This is one reason disclosure requirements accompany the measurement change. Users of the accounts need to understand not just the reported number but where it came from — which markets and prices were used, how significant the holding is, and what happened during the period. Two companies holding the same asset should, in principle, arrive at comparable fair values, which is part of the point of the reform.

IFRS: no dedicated standard, so existing ones apply

Companies reporting under International Financial Reporting Standards (IFRS) face a different situation: there is no crypto-specific IFRS standard. Instead, the IFRS Interpretations Committee published an agenda decision in June 2019, Holdings of Cryptocurrencies, explaining how existing standards apply to a holding of cryptocurrency that meets certain characteristics (a digital currency not issued by a government, not giving rise to a contract).

The decision concluded that such holdings are generally accounted for under one of two standards, depending on why the entity holds them:

• IAS 2, Inventories — if the cryptocurrency is held for sale in the ordinary course of business, for example by a broker-trader.
• IAS 38, Intangible Assets — in most other cases. IAS 38 permits either a cost model or, where an active market exists, a revaluation model.

Because IFRS routes crypto through these pre-existing standards rather than a single purpose-built one, two companies can arrive at different presentations for economically similar holdings, based on their business model and the measurement policy they adopt. This is one reason cross-border comparison of crypto accounting is difficult.

Beyond measurement: tax and disclosure are separate questions

It is worth stressing that how a holding is measured in the accounts is a different question from how it is taxed, and from how it is classified for securities-law purposes. A single token can be an intangible asset for accounting, property for tax, and — depending on the facts — a security or not for regulatory purposes. These systems do not have to agree, and frequently do not.

Disclosure obligations also matter. Investors and auditors want to understand custody arrangements (who holds the private keys, and how), concentration risk, and the valuation sources used to derive fair value. Robust records of acquisition dates, cost basis and wallet addresses make both the accounting and any later tax work far more manageable.

What this means

The direction of travel in accounting has been toward showing crypto holdings closer to what they are currently worth. Under US GAAP, ASU 2023-08 moved qualifying assets to fair value through net income, replacing the one-directional impairment model that had frustrated preparers and users alike. Under IFRS, there is still no bespoke standard, so the answer turns on whether a holding is inventory or an intangible asset and which measurement policy applies.

The practical takeaways for anyone learning this area:

• Identify your reporting framework first — US GAAP and IFRS diverge here.
• Check whether an asset is in scope of the specific rules; NFTs and self-issued tokens are often treated differently.
• Keep meticulous records; accounting, tax and regulatory classifications are separate and each needs its own evidence.

Standards in this area are relatively new and continue to evolve, and the treatment can differ significantly from one country to another. Because getting it wrong affects reported profit and tax, this is a topic to work through with a qualified accountant or auditor rather than from a general explainer alone.