Dear all,
A company plans to sell a digital assets to investors backed by its inventory under development.
A potential investor might buy a part of that inventory in the form of a digital assets.
Upon expiration date, when inventory is completed and sold out, the digital assets is redeemed at upsided price, as a company anticipates the increase of selling price.
An investor has a right to cancel the digital asset contract before maturity and get an invested cash.
Unfortunately I couldn't find any appropriate accounting treatment to that situation , including IFRS Committee agenda. Seems to me it should be treated as financial liability with elements of advances received but I'm not sure.
We are sorry if it could be treated as a debt.
I would appreciate any suggestions on the situation
Digital assets treatment
Re: Digital assets treatment
This scenario is a bit confusing, but I think I understand it. Please confirm if my understanding is correct:
- The company is issuing digital assets (i.e. cryptocurrency) to finance the development of a specific product
- One of the investors in those digital tokens is also the buyer of the specific product being developed
- If the price of the issued digital assets goes up, the investor will benefit from that increase as he will be buying the product at a fixed price (I assume the price is quoted in a normal currency) and will have a gain from the digital assets that will be redeemed for cash.
- However, if the price of the digital assets goes down, the investor has an option (put option) to sell those digital assets for the same cash invested.
If my understanding of the scenario is correct, this is a financial liability for the company as it cannot avoid paying cash.
- The company is issuing digital assets (i.e. cryptocurrency) to finance the development of a specific product
- One of the investors in those digital tokens is also the buyer of the specific product being developed
- If the price of the issued digital assets goes up, the investor will benefit from that increase as he will be buying the product at a fixed price (I assume the price is quoted in a normal currency) and will have a gain from the digital assets that will be redeemed for cash.
- However, if the price of the digital assets goes down, the investor has an option (put option) to sell those digital assets for the same cash invested.
If my understanding of the scenario is correct, this is a financial liability for the company as it cannot avoid paying cash.
Re: Digital assets treatment
Dear DJP,
thank you for your reply.
yes, your understanding is very accurate except for p.2, as the potential customer might be a different person. An investor i
benefits from increasing of the potential price.
We have discussed the scenario with a team and think it would be a financial liability.
Do you think we have an option to separate it from loans received and bonds issued in the statement of financial position?
thank you for your reply.
yes, your understanding is very accurate except for p.2, as the potential customer might be a different person. An investor i
benefits from increasing of the potential price.
We have discussed the scenario with a team and think it would be a financial liability.
Do you think we have an option to separate it from loans received and bonds issued in the statement of financial position?
Re: Digital assets treatment
Yes, you can present it separately on the face of the balance sheet. There is nothing in IFRS preventing you from doing so.
Re: Digital assets treatment
Make sure your company isn't breaking any laws when offering these securities.
Re: Digital assets treatment
Dear Marek, I will.
Thank you for opportunity to post questions
Thank you for opportunity to post questions
Re: Digital assets treatment
sounds like the Supply@MeCapital 'idea' we've discussed on these forums before
Re: Digital assets treatment
Many thanks! I will check