Classification and measurement of cryptocurrency holdings

No IFRS standard addresses cryptocurrency directly; cryptocurrencies held by a fintech are generally accounted for as intangible assets under IAS 38 (cost less impairment, unless an active market supports the revaluation model) unless they are held for sale in the ordinary course of a trading/broker-dealer business, in which case IAS 2 inventory treatment at fair value less costs to sell may apply, making the classification judgment highly consequential for the volatility recognized in profit or loss and for comparability across preparers.

Is the entity a broker-dealer/trading business holding crypto principally for near-term resale (supporting IAS 2 at fair value less costs to sell), or holding it for longer-term treasury/investment purposes (pointing to IAS 38)? Does an active market with readily and regularly available quoted prices exist to support the IAS 38 revaluation model rather than the default cost-less-impairment model? Is customer crypto held in custody clearly excluded from the entity's own balance sheet based on a genuine beneficial-ownership analysis?

1) Determine management's business model and intent for each crypto holding: near-term resale as part of ordinary trading/broker-dealer activity (points to IAS 2) versus longer-term treasury, investment, or strategic holding (points to IAS 38). 2) For IAS 38 treatment, recognize at cost on acquisition. 3) Assess whether an active market exists (quoted prices readily and regularly available) that would support the revaluation model as an accounting policy choice; absent that, apply the cost-less-impairment model. 4) For broker-trader IAS 2 treatment, measure inventory at fair value less costs to sell, with both gains and losses in profit or loss, as a scope exception to normal inventory measurement. 5) Clearly separate customer-owned crypto held in custody from the entity's own holdings; perform a genuine beneficial-ownership and control analysis before consolidating any custodial assets onto the entity's balance sheet. 6) Confirm SAMA regulatory permissibility of the underlying crypto activity before finalizing any accounting position, as this is a separate gating question from the accounting classification itself.

Under IAS 38 cost-less-impairment (the default absent an active market for revaluation), recognize impairment losses when fair value falls below carrying amount but do not recognize subsequent increases in value above cost until sale, this asymmetry is a key source of confusion; under the IAS 38 revaluation model (only available with an active market), recognize increases in OCI (revaluation surplus) and decreases first against that surplus then to profit or loss; under the IAS 2 broker-trader exception, measure at fair value less costs to sell with both gains and losses in profit or loss.

Disclose: the classification judgment applied (IAS 38 versus IAS 2) and its basis; the measurement basis (cost-less-impairment versus revaluation versus fair value less costs to sell); the nature of custody arrangements for customer-owned crypto and confirmation it is excluded from the entity's balance sheet; price volatility risk and a sensitivity analysis if holdings are material; and cumulative impairment losses recognized and not yet reversed under the cost model.

• Recording all crypto holdings at fair value through profit or loss without a technical basis for doing so (this is not a policy choice available under IAS 38'
• s default model)
• failing to reverse only impairment losses (not gains) under the IAS 38 cost model, understating value recovery disclosure
• consolidating customer custodial crypto assets onto the entity'
• s own balance sheet without a genuine beneficial-ownership analysis
• applying IAS 2 broker-trader treatment without a documented business model supporting near-term resale in the ordinary course of business
• failing to disclose the classification judgment at all, leaving readers unable to assess its sensitivity.