Whether a digital coin should be considered an intangible asset and how auditors should vet ownership and control of that token are among the many questions new guidance should help answer.
The American Institute of CPAs is finalizing guidance aimed at helping accountants and auditors apply existing U.S. standards to digital assets like bitcoin and ether, with the first batch of recommended practices to be released later this year.
Accounting and auditing standards are mum when it comes to digital asset, but as the volume of cryptocurrency trading grows, more companies and nonprofits find themselves having to account for such coins and tokens on their books.
The first set of accounting questions and answers from the AICPA will focus on how U.S. accounting standards for intangible assets and fair value measurement should be applied to the this new asset type, Matthew Schell, a partner with Crowe LLP who serves on the working group, said Oct. 16 during a SIFMA AICPA securities conference in New York.
Companies shouldn’t let the name of the asset determine their accounting. They have to think about how they are using the asset, Schell said.
Additional guidance will address requirements for broker-dealers, fair value measurement, and acceptable valuation techniques, Schell said.
Some basic issues, such as deciding whether to accept a client using digital currency, will be covered in the audit papers.
Firms should consider whether they have staff with the right skills to dive into the world of cryptography and blockchain, and whether their clients have adequate internal controls and security protocols in place, said Amy Steele, a Deloitte LLP audit partner, who leads the team drafting the audit guidance.
Risk assessment, valuation, and the nature of the transactions are among the other concepts the group is working through, Steele said.
“Our goal is to provide audit procedures that you could perform in order to respond to those particular challenges,” she said.
The IRS on Oct. 9 issued its first cryptocurrency tax guidance since 2014. The tax agency is increasingly focused on compliance from cryptocurrency investors.