Cryptocurrency accounting treatment

Hi,

 

Did anyone come across Cryptocurrency treatment? Here it is, 

 

It does not classify as a Financial instrument but suits best as an Intangible Asset.

 

An entity treats it as:

 

Initial Recognition: At cost 

Subsequent Measurement: At cost or Revaluation

 

If the entity uses Cost method on subsequent measurement, it is measured at Cost less Amortisation less Impairment if the Intangible Asset has finite life. If the Cryptocurrency has indefinite life, then it is measured at Cost less Impairment (tested annually).

 

Now when the entity uses Revaluation method on subsequent measurement Cryptocurrency, the fairvalue changes are treated in accordance with PPE standard.

 

A Crpto Trader will treat it as:

 

If Cryptocurrency is held to trade in the ordinary course of business, it is recognised as Inventory as per that standard. 

In the ordinary course of business the Cryptocurrency Inventory is valued at lower of COST or NRV.

But if the broker is planning to sell it in the near future, then it must be valued at FVLCS.

Txs.

Replies (2)
Quick Summary
This discussion explores the accounting treatment for cryptocurrencies, suggesting they are best classified as intangible assets rather than financial instruments. It outlines initial recognition at cost and subsequent measurement options, including cost less amortisation/impairment or revaluation. For crypto traders, it's treated as inventory valued at the lower of cost or net realisable value, or fair value less costs to sell if sold imminently. Tax treatment varies based on holding period, with short-term gains added to income and long-term gains taxed at 20% with indexation.

Mam,
Can you please guide tax treatment of such crypto currency

Sry for the delay, For example, you have bought some bitcoin units in August 2017 for Rs 50,000 and sold them for Rs 1,00,000 in November 2018. The holding period is under three years. The gains are short-term capital gains of Rs 1,00,000 – Rs 50,000 = Rs 50,000. It is added to your taxable salary and you are taxed as per your income tax bracket.

Suppose you had purchased some bitcoin units in January 2015 for Rs 1,00,000 and sold them in May 2018 for Rs 5,00,000. The holding period is above three years. The gains are called long-term capital gains and are taxed at 20% with indexation benefit.

Upon purchase, I think gst or stt is applicable as I am not an expert at it. https://cleartax.in/s/bitcoin-tax-calculator

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