I have a question regarding whether company should be recognizing crypto assets and liabilities that it holds on behalf of the clients.
There are a lot of guidance from PWC and EY etc regarding whether to shown in the balance or off (quite helpful is https://www.pwc.com/gx/en/audit-service ... -depth.pdf), but is there a clear text in the IFRS standards that states the requirements/criterias for recognition of the liability on the balance of off it.
IFRS states that :
A liability is a present obligation of the entity to transfer an economic resource as a result of past events.
IAS 39 requires that all financial assets and all financial liabilities be recognised on the balance sheet. IAS 39 requires recognition of a financial asset or a financial liability when, and only when, the entity becomes a party to the contractual provisions of the instrument, subject to the following provisions in respect of regular way purchases.
The way I see this is not much different from holding cash on behalf of clients. It all comes down to where the crypto assets are being held. I believe -- and correct me if I'm wrong -- each crypto asset does not "have your name on it". They are fungible assets, meaning that you cannot really tell which crypto asset within a wallet belong to whom. What you do is keep a record saying that x amount of crypto assets belong to clients Y and Z. The unit of account is thus the account/wallet where you hold the crypto assets. If you are comingling crypto assets within the same wallet, then you need to determine who controls the wallet. Most likely you control the wallet, thus you need to recognise that asset. You then should keep records (liabilities) of the amounts you owe to each individual client.
If I understand correctly, if I buy the crypto assets on behalf of my client, it gives me a contractual right to receive cash, hence, it became a financial instrument and recognised as a client receivable. Is that right ?
Hi guys,
Actually all the EY, PWC guidances day that you should shows both assets and liabilities related to crypto in the balance if you are responsible for it. There is a list of questions/criterias in order to help you decide that.
Are the crypto assets of different clients commingled in the same wallet/account?
I've seen different combinations. Both holding them segregated and not segregated. If not-segregated, there more there is a chance that you have to show them in the balance (according to guidance by Pwc, EY)
The accounting entry most common i've see is> D. Stock (or smohing similiar if crypto is used for operating activity) C Other liabilities ST
But i was wondering - does the IFRS standards states whether liability should be recongised in BS or off it.
one for the technical bods but would it be possible to identify/ringfence a specific unit of bitcoin which is held for a specific customer? or just be drawn from a common pool once requested to withdraw?