Lesson 96 - Advanced Accounting Course

Lesson 96: Cryptocurrency Accounting – Bitcoin and Beyond

💡 What Are Cryptocurrencies?

Cryptocurrencies are digital assets that use blockchain technology to enable secure, decentralized transactions. Popular examples include:

• Bitcoin (BTC) 🟠
  
  

• Ethereum (ETH) 💠
  
  

• Tether (USDT) 💵
  
  

• Solana (SOL) 🌞
  
  

• Ripple (XRP) 🌊
  
  

Cryptos are not issued by any government, and they are often used for trading, investment, and even as a method of payment.

🤔 Why Is Crypto Accounting Challenging?

• 📉 Volatility: Prices change rapidly, which affects valuation
  
  

• 🧾 Lack of clear guidance: Most accounting standards don’t fully address crypto yet
  
  

• 🏛️ Regulatory uncertainty: Governments and regulators differ in how they treat digital assets
  
  

• 🔍 Classification issues: Is it cash? Inventory? Investment? Intangible?
  
  

📚 How Are Cryptocurrencies Classified in Accounting?

Under current accounting standards:

💬 Note: If a business holds crypto for trading purposes, under IFRS it might be classified as inventory.

🧾 Accounting Treatment: Key Points

1. Initial Recognition

• Measured at cost (purchase price + transaction costs)
  
  

• Example: If a company buys 1 Bitcoin at $30,000 with $200 in fees → Asset value = $30,200
  
  

2. Subsequent Measurement

• Under GAAP, crypto is treated like an intangible asset:
  
  

  • Not revalued upward if market value increases
    
    

  • But if value drops → Impairment must be recognized
    
    

🔻 Impairment Example

Company buys Bitcoin at $30,000 → price drops to $20,000 → must write down asset to $20,000

Even if price goes back to $35,000 → value stays at $20,000 (no reversal allowed) ❌

3. Disposal (Selling Crypto)

• When sold, the difference between sale price and book value is a gain or loss.
  
  

• Example:
  
  

  • Bought at $30,000 → Impaired to $20,000
    
    

  • Sold at $32,000 → Gain = $12,000

📊 Summary Table: Crypto Accounting Treatment

🔐 Crypto in Practice: Use Cases

• 📈 Tesla held Bitcoin on its balance sheet as an investment
  
  

• 🛍️ Overstock.com accepts Bitcoin payments
  
  

• 🌍 MicroStrategy uses Bitcoin as a treasury reserve asset
  
  

⚠️ Key Risks and Considerations

🧠 What Should Accounting Students Learn?

• Cryptocurrencies are not cash under current standards
  
  

• Must be able to identify correct classification and measurement
  
  

• Crypto accounting is an emerging field with new guidance expected
  
  

• Ethical handling of valuation, disclosure, and tax reporting is crucial
  
  

• Be flexible and tech-aware: Crypto is part of the future of finance 💡