The Australian Accounting Standards Board (AASB) has released a new paper which highlights a lack of clear guidance on digital currencies in International Financial Reporting Standard (IFRS) and calls for a new standard to deal with digital currencies such as bitcoin.
Authored by Deloitte director Henri Venter, the paper “Digital currency – A case for standard setting activity” comes ahead of a December meeting of members from the International Accounting Standards Board (IASB), CoinDesk reported.
According to the paper, digital currencies do not meet the definition of cash, cash equivalents and financial instruments. They, however, would be accounted for as either an Intangible asset under IAS 38 or as inventory under IAS 2.
Venter said that the accounting for digital currencies highlights a broader issue with IFRSs, pointing out that there is no accounting standard that deals with investments in intangible assets or other commodity type assets that are not financial instruments or inventory. He recommends the IASB to develop a standard that would address the accounting for investments in intangible assets and commodities.
“In our opinion, given the problems identified and the rapid growth of digital currencies, standard setting activity is required to provide clear accounting guidance for preparers and to ensure that financial statements provide relevant and useful information to users of those financial statements”, writes Venter.
To that end, the author suggests that the IASB could issue a new IFRS, amend the definition of cash or cash equivalents, amend the definition of a financial asset, or amend the measurement guidance in IAS 2 and IAS 38.
“In our opinion, the most appropriate course of action is a new IFRS that provides clear guidance on the accounting for digital currencies but that also addresses the larger problem of intangible assets and commodities held for investment purposes”, it added.
