Cryptocurrencies Accounting and Tax Treatment

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In the news:
Bitcoin’s threat to the global financial system is probably at an end
Facebook’s Libra cryptocurrency can still take off and revolutionise money
JP Morgan creates first US bank-backed crypto-currency

White papers covering the accounting treatment of this assets:

Cryptographic assets and related transactions: accounting considerations under IFRS: PwC In depth INT2019-05
The 2019 updated version covering crypto assets. It covers all the different standards that can be involved when dealing with the transactions of these assets when accounting under IFRS.

How to treat cryptocurrencies in accounting 
This article is much less extensive than the one above but covers the topics under FRS 102.

IFRIC Update June 2019 Holdings of Cryptocurrencies
The interpretation/guidance issued by the IFRS Foundation. In the guidance issued by the foundation the state what are the main standards that apply to these transactions. A more detail analysis of not just the standards but other issues arising in these transactions under IFRS can be found in the PWC In depth INT2019-05 mention above.

The main standards affected under IFRS are:

• IAS 2 Inventory 
• IAS 38 Intangibles
• IFRS 13 Fair Value Measurement
• IFRS 9 Financial Instruments

Ideally the best way to proceed, considering the lack of guidance from the accounting point of view, would be to use the PWC Whitepaper/IFRS guidance that deals with IFRS and them "translate" to FRS 102 (the FRS standards allow for the fallback of referring to a different GAAP if no guidance can be found on it. In this case it is not a question of more guidance being found under IFRS but having an opinion that can be used under IFRS). 

Fortunately the most common transactions taking place nowadays are cryptocurrency exchanges (most of them would be classified as a commodity exchange and would fall under the exception of commodity brokers for Inventory which is very similar on both cases under IFRS and FRS 102) and the rest would very easily be classified as Intangibles (unfortunately here there are quite a few differences between both GAAPs and there is the issue of the valuation of the asset using Fair Value).

KPMG The Case for Crypto and Institutionalization
A white paper discussing the different types of assets that are right now using blockchain technology: from cryptocurrencies (such as Bitconin, Ethereum, Litecoin) to the emergence of tokenization and different types of cryptoassets. It is mainly writing from a US point of view but many of the issues are the same in the EU and Ireland. 
The paper deals with the most likely challenges cryptocurrencies will be dealing in the future such as compliance with regulatory obligations (with a big emphasis in the issues of Anti-Money Laundering that come with these assets and transactions), securing cryptoassets, accounting and tax reporting, management of forks, etc.


The standards relevant under US GAAP are mostly the same as the ones under IFRS, though the paper does not mention anything regarding exception of commodity brokers, it seems to just focus on using cryptocurrencies for payment in which case they are classified as Intangibles under US GAAP.

Taxation in US seems to be similar in a way to the taxation guide issued by Revenue below. As it is the case in Ireland, there was only one guide from the IRS Notice 2014-21 as of 2018 when the paper was written and it was updated in 2019 to provide more clarifications regarding many of the issues raised in the paper (tax treatment of Forks and Cost Basis of transactions) as per the following blog article from Coindesk The IRS Just Issued Its First Cryptocurrency Tax Guidance in 5 Years.

Taxation of Cryptocurrency Transactions
It covers the most current guidance issued by Revenue Commissioners regarding these transactions. It is a very short ebrief of only 3 pages including the cover page/index, but covers the majority of taxheads that would apply to the most common transactions taking place at the moment: IT, CGT, CT, VAT as well as events such as the payment of emoluments in cryptocurrency (examples of this type of transaction appear in the PWC whitepaper above). There is also a mention about valuation rules and the PWC paper above covers quite extensively this area under IFRS 13 Fair Value Measurement. Alternatively, the guidance provided by FRS 102 on Fair Value measurement can be used.

Revenue Briefs and other tax news week ending 05/01/2020

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Revenue has released several Tax brief after coming from the Christmas break:

Briefing covering deduction of fees and expenses incurred in the performance of the duties of an employment:

• eBrief No. 004/20: General Rule as to Deduction for Expenses in Employment. It covers in detail general rules that should be used to consider if the expense is allowable under law and the taxpayer can claim it free of tax or not, with all the consequences from the point of view of emoluments if it is not an allowable expense. It is quite thorough in the rules with different examples about what it is and is not allowed along with references to other ebriefs dealing with other items such as travel expenses and membership fees (this one updated as well and below in the list)
• eBrief No. 001/20: Deduction for statutory registration fees paid to the Health and Social Care Professionals Council (CORU). It covers the deduction of registration fees as this registration is a requirement by law for several profesions listed in the briefing. More specific than the rules in the previous ebrief. 
• eBrief No. 003/20: Deduction for Expenses in Respect of Annual Membership Fees Paid to a Professional Body. It covers flat rate expenses, profesional membership fees and expenses that are paid by employers to employees and whether they should be taxed or not. Again more specific than the first ebriefing in the list.

A couple of briefings have been retired as under the Safety, Health & Welfare at Work Act 2005 protective clothing and equipment must be provided by the employer.

• eBrief No. 002/20: Uniform and Clothing Allowances paid to Fire Officers. These allowances are no longer permitted as it is the employer the one providing these items to employees

Finally, there has been an update to the guidance in relation to the deductibility of provisions and accruals to align the guidance with recent updates to accounting standards. It is very thorough going through all the different standards applying to Ireland in the last 20 years approximately and I must said, as newly qualified that has barely had any contact with the old FRS standards, a little bit of a trip to the past. 

• eBrief No. 006/20: Provisions and Accruals

The last ebrief deals with clarifications relating to the payment of welfare benefit increases for a qualified adult and their tax treatment for payments for made for the tax year 2014 and onwards.

• eBrief No. 005/20: Certain benefits payable under Social Welfare Acts - increase for qualified adult

Intro to blog

This blog has been unattended for a long time and it's time to make it relevant to at least justify some of the visits (few) I get. Hopefully the first of new regular posts relevant to my actual student situation.

Some interesting links to read and video to watch. They came to my email through the Friday newsletter from the MOOC "Learning How to Learn" in Coursera. The course is free for anyone to enroll and extremely interesting to students, teachers or anyone interested in learning and continuing development.

Reading with Intention can Change your Life

The Ryan Holiday Reading Recommendation Email

Maria Popova BrainPickings.org

And the video is recommended in the newsletter to understand the focus and diffused learning modes.