By Quantinvestor in cryptoaccounting — 13 Jul 2025

Cryptocurrency Accounting and Financial Reporting Standards: IFRS vs GAAP Treatment, Impairment Testing, and Audit Readiness

Introduction: Why Crypto Accounting Matters

Digital assets have moved from experimental tokens to material line items on corporate balance sheets. As Bitcoin, Ethereum, and stablecoins become treasury and payment instruments, finance teams must apply robust accounting policies. International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) both treat cryptocurrencies as intangible assets, yet the nuances around initial recognition, measurement, impairment testing, and disclosure differ. Understanding these differences is critical for CFOs, controllers, and auditors who want compliant, investor-friendly financial statements.

IFRS vs GAAP: Classification and Initial Recognition

Neither IFRS nor GAAP currently view cryptocurrencies as cash equivalents or financial instruments because they are not legal tender and lack a contractual claim on cash flows. Instead, both frameworks classify most crypto holdings as indefinite-lived intangible assets. The similarity ends there; each standard offers distinct guidance on when and how to recognize the asset, how to determine its cost basis, and what evidence companies must collect.

IFRS Treatment (IAS 38, IAS 2, and IAS 8)

Under IAS 38 Intangible Assets, cryptocurrencies held for investment purposes are measured initially at cost, including transaction fees. Subsequent measurement may follow either the cost model or the revaluation model if an active market exists and fair value can be measured reliably. Entities that actively trade crypto—such as exchanges or broker-dealers—may account for them as inventories under IAS 2 at fair value less costs to sell. When IFRS lacks explicit guidance, IAS 8 requires management to apply judgment and consider the economic substance of transactions.

GAAP Treatment (ASC 350 and SAB 121)

U.S. GAAP anchors cryptocurrency accounting in ASC 350 Intangibles—Goodwill and Other. Companies record crypto at historical cost upon acquisition. Because GAAP does not permit upward revaluation, entities use the cost model exclusively. The Securities and Exchange Commission’s Staff Accounting Bulletin 121 (SAB 121) adds that custodians safeguarding digital assets for others should present a liability and corresponding safeguarding asset measured at fair value.

Impairment Testing: Divergent Paths

Impairment testing is the area where IFRS and GAAP diverge most sharply, affecting reported earnings and key ratios. Both frameworks require impairment when the carrying amount exceeds recoverable amount, but the frequency, measurement basis, and subsequent reversals differ.

Impairment Under GAAP

GAAP treats cryptocurrencies like other indefinite-lived intangibles. Entities must test for impairment at least annually and more often if events or changes in circumstances indicate the asset is impaired—for example, a sustained drop in quoted prices. The impairment loss equals the difference between carrying amount and fair value, which becomes the new cost basis. Crucially, GAAP prohibits subsequent reversal of impairment losses, even if crypto prices recover. This conservative stance can create earnings volatility and undervalued balance sheets during bull markets.

Impairment Under IFRS

For IFRS reporters using the cost model, impairment testing follows IAS 36, which employs a recoverable amount based on higher of fair value less costs to sell and value in use. Testing occurs whenever indicators of impairment arise, not on a fixed schedule. IFRS allows entities to reverse prior impairment losses when fair value rebounds, limited to what the carrying amount would have been if no impairment had occurred. Companies opting for the revaluation model bypass impairment: assets are remeasured at fair value at each reporting date, and gains flow through other comprehensive income (OCI).

Disclosure Requirements

Transparent disclosure is vital for investors assessing risk and performance. IFRS requires entities to disclose measurement models, fair-value determination methodologies, and sensitivity analyses. GAAP mandates disclosures of cost basis, carrying amount, and impairment charges recognized during the period. Both regimes emphasize concentration risk, restrictions on use, and any security or legal encumbrances related to private keys.

Audit Readiness: Building a Crypto-Native Control Environment

Cryptocurrency’s decentralization complicates audit evidence. Blockchain transactions are immutable, but they also lack traditional third-party confirmations. To achieve a clean audit opinion, companies should design a crypto-native control environment that matches the rigor of legacy financial systems.

Private-key Governance: Establish multi-signature wallets and segregation of duties to prevent unilateral transfers.
On-chain Verification: Reconcile wallet balances to externally hosted nodes or blockchain explorers, capturing block heights and timestamps as evidence.
Pricing Methodology: Document fair-value hierarchies, exchange selection criteria, and time-stamping rules to support impairment testing and IFRS revaluations.
Custodial Agreements: Review SOC 1 and SOC 2 reports for third-party custodians and integrate findings into internal risk assessments.
IT General Controls: Apply access management, change management, and incident response procedures to wallet software and smart-contract interactions.

Best Practices for Finance Teams

Beyond compliance, forward-looking finance leaders use cryptocurrency adoption to modernize workflows.

Implement continuous monitoring dashboards that pull on-chain data into ERP systems, reducing month-end close times.
Align treasury policy with risk appetite, setting stop-loss thresholds that automatically trigger impairment assessments.
Engage auditors early to validate valuation models and sampling strategies for transaction testing.
Stay informed about pending standard-setting projects by the FASB and IASB, as fair-value accounting could soon replace cost models.

Conclusion

Cryptocurrency accounting is still evolving, but companies cannot wait for perfect clarity. By mastering today’s IFRS and GAAP rules on classification, impairment, and disclosure, finance teams can present reliable, decision-useful statements without stifling innovation. Robust controls, detailed documentation, and proactive auditor engagement will ensure audit readiness and build investor confidence, no matter how volatile the crypto market becomes.