Latest News

Hot Issues
spacer
Access to more resources and tools than most websites.
spacer
Tax Return Mistakes
spacer
SMSF advice appetite strong, says ASIC
spacer
Taxpayers confused by Scott Morrison’s $1,080 tax refund
spacer
Common STP set-up mistakes - ATO
spacer
Proposal to hold directors liable for GST set to pierce corporate veil
spacer
September 2019 - vital statistics for Australia
spacer
Tax Commissioner wants to turn black economy to ‘lighter shade of grey’
spacer
Changes to the Private Health Insurance Statement
spacer
Up to 9 in 10 ‘other’ expenses adjusted as ATO reveals dodgy claims
spacer
Downsizer Super Contribution
spacer
Tax payers to receive beefed up tax returns.
spacer
10 top global corporations since 1998
spacer
Catch-up Contributions
spacer
Life Insurance
spacer
Community tip-offs trigger ATO visits
spacer
Australia at a glance
spacer
2019: Tax Time Checklists - Individuals; Company; Trust; Partnership; and Super Funds
spacer
Small business clients need to be ready for STP by 30 September
spacer
Big four firm outlines new financial year checklist for SMSFs
spacer
Alert - Online Share Accommodation
spacer
ATO flashes warning over $7.2bn car expenses claims
spacer
Vital statistics for our great nation.
spacer
3 out of 4 tax dob-ins are about business
spacer
Tax on compensation received for inappropriate advice
spacer
‘Extra care’ crucial in avoiding ATO spotlight this tax time
spacer
ATO clears up FAQs about Single Touch Payroll
spacer
GST reporting: common errors and how to correct them
spacer
LRBAs, guarantees in need of review after property market falls
spacer
Victorian Property Valuation Cycle
Article archive
spacer
Quarter 2 April - June 2019
spacer
Quarter 1 January - March 2019
spacer
Quarter 4 October - December 2018
spacer
Quarter 3 July - September 2018
spacer
Quarter 2 April - June 2018
spacer
Quarter 1 January - March 2018
spacer
Quarter 4 October - December 2017
spacer
Quarter 3 July - September 2017
spacer
Quarter 2 April - June 2017
spacer
Quarter 1 January - March 2017
spacer
Quarter 4 October - December 2016
spacer
Quarter 3 July - September 2016
spacer
Quarter 2 April - June 2016
spacer
Quarter 1 January - March 2016
spacer
Quarter 4 October - December 2015
spacer
Quarter 3 July - September 2015
spacer
Quarter 2 April - June 2015
spacer
Quarter 1 January - March 2015
spacer
Quarter 4 October - December 2014
Quarter 3 of, 2018 archive
spacer
In case you missed it – The company tax Bill that did pass Parliament.
spacer
GST spotlight headed to smaller end of town
spacer
Superannuation Amnesty – Maybe! Maybe Not!
spacer
ATO drills in car-sharing focus this tax time
spacer
What is Bankruptcy?
spacer
Update of Australia's vital statistics
spacer
ATO speaks on risk factors, surveillance triggers for FY19
spacer
ATO’s corporate residency guidance cops backlash
spacer
ATO dispels top tax time myths to clients as clampdown rolls out
spacer
Tools for budgeting, cash flow, Super and more ….
spacer
Guidance for SMSFs on transfer balance reporting
spacer
ATO issues alert on super, tax scams
spacer
Salary sacrifice integrity
spacer
Understanding the evolution of blockchain and cryptocurrencies
spacer
Update to Australia's vital statistics
spacer
Tax Time Checklists- Individual, Company, Trust, Partnership and Super Funds
spacer
SMSFs - Our 'hardest' jobs
spacer
Tax Office reveals adventurous, dubious claims ahead of tax time
spacer
ATO reveals top tax time mistakes, set to contact 1 million taxpayers
spacer
Watch out for charges with incoming GST laws.
spacer
Super savings gap for women stuck at 30%
spacer
‘Wipe the slate clean’: Clients, accountants urged to use new amnesty period
spacer
Statistics for all Australians
Understanding the evolution of blockchain and cryptocurrencies

While it’s unlikely that traditional accounting will be replaced by a blockchain method in the near future, accountants should keep a keen eye for any developments and be prepared to deal with new standards in accounting for cryptocurrencies.

       
 
While bitcoin is arguably the most famous cryptocurrency, it’s far from the only one. There are more than 1,500 cryptocurrencies around the world, and that number continues to grow. Bitcoin, along with many other cryptocurrencies, is based on the distributed ledger known as blockchain.
 
Originally, blockchain was exclusively used with cryptocurrencies, so the terms were commonly interchangeable. Now, blockchain has expanded to include various use cases that centre on validating identity and transactions.
 
This transformative technology has moved beyond buzzword status to become a realistic, viable business technology, so it’s important for accountants to understand how it works and how to account for it. Some even say the impact of distributed ledger technology could be as revolutionary as the internet itself.
 
To understand why, it’s important to define the blockchain. Essentially, it removes the need for intermediaries such as banks to verify transactions. Each ‘block’ in the chain contains a cryptographic hash of the previous block. Because each block depends on the one before it, the transactions can’t be changed retroactively without altering all the subsequent blocks. This makes it practically impossible to fraudulently alter the blockchain without the collusion of all other members.
 
While it’s unlikely that traditional accounting will be replaced by a blockchain method in the near future, the technology does have applications throughout business. Of more immediate interest and debate, however, is the volatility in the value of cryptocurrencies.
 
The value of a cryptocurrency has been proved to be highly susceptible to speculation. For example, one bitcoin is currently worth approximately AUSD$6,000, just six months ago it was valued as high as US$20,000. Having said that, some businesses continue accepting cryptocurrency payments and investing in digital currencies, despite their volatile value.
 
Another challenge regarding cryptocurrencies is in relation to the accounting, classification, and valuation of them for financial reporting purposes. The International Accounting Standards Board (IASB) has not yet issued a standard or clear guidance for accounting of cryptocurrencies. The best guidance available for Australian accountants is possibly the ASAF 2016 Meeting - Digital currency – A case for standard setting activity prepared by the Australian Accounting Standard Board (AASB). It presents a case for setting standards around digital currencies that concluded that digital currencies don’t meet the definition of most classes of assets in the accounting framework, including failing to represent cash, cash equivalents or financial assets.
 
Therefore, it seems likely that the only way to account for digital currencies is as intangible assets. They meet the identifiable criteria of an intangible asset, because they’re sold in units on an exchange. As mentioned above, because they don’t meet cash or cash equivalent definitions, they therefore meet the ‘non-monetary’ element of the criteria for intangible assets. They also have no physical substance, so they meet the criteria on that basis as well.
 
Despite this, the AASB concluded that entities trading with cryptocurrencies would be considered to hold those currencies for sale in the ordinary course of business. They would therefore be excluded from the scope of intangible assets and would have to account for them as inventory.
 
Businesses selling digital currency in the course of business may need to determine whether they’d be considered as a ‘commodity broker-trader’ under the standard. If so, they can’t account for digital currencies as inventory. Instead, they’d need to measure these assets at fair value less the cost to sell them, with changes in the fair value recognised as profit or loss.
 
This lack of clarity means entities will need to develop their own accounting policy to deal with how they recognise, classify, and value cryptocurrencies. That policy should provide guidance on how to account for the digital currencies, depending on the purpose of holding them.
 
For example, if an entity holds digital currencies for investment purposes, then they can be classified as an intangible asset measured at either the cost model or the fair value model (The fair value model could be the most useful way to communicate the value to a stakeholder).
 
Entities can also treat cryptocurrencies as intangible assets if they accept the cryptocurrency as payment for goods or services and will convert it to cash in the short term. However, if the entity holds digital currencies for trading, then they should be accounted for as inventory and measured at fair value less cost to sell, with changes in fair value recognised through profit or loss.
 
While this presents a logical interim approach for accounting for cryptocurrencies, future advancements in standards and definitions could provide a more concrete framework for businesses to adhere to. Accountants should, therefore, keep a watching brief on this area and be prepared to pivot to new standards.
 
 
 
By Rafael Morillo Maldonado
Principal, Audit and Assurance, RSM Australia
www.accountantsdaily.com.au

© O'Brien and Partners 2011 - All Rights Reserved | 91 Station Street, Malvern VIC 3144 | Tel: 03 9509 3911 | Fax: 03 9509 3922