Cryptocurrency held as an investment must be valued carefully while preparing the Balance Sheet. Let’s see how to value cryptocurrency and how any fall in its value is treated in the accounts
1. When is crypto an investment?
If you buy coins and keep them for a long time hoping the price will rise, and you do not trade them regularly, the holding is an investment. In the Balance Sheet it is shown under Non-current Assets as “Investment in Virtual Digital Assets”.
2. Valuation rule for investments
Crypto held as investment is carried at cost. Cost is not reduced just because the market price falls a little. But if there is a permanent (other than temporary) fall, the value must be written down. This write-down is called impairment loss.
Simple test
Carrying amount = Cost. If recoverable amount (market price today) is clearly and lastingly lower than cost, then Carrying amount = Recoverable amount, and the difference goes to Profit & Loss A/c as impairment.
Cost of acquisition includes
- Purchase price of the coins
- Brokerage and exchange charges
- Non-refundable taxes such as GST on brokerage (if credit is not available)
- Bank charges directly linked to the purchase
It does not include wallet subscription, internet bill, research charges or interest on loan. Those are period expenses.
4. Solved problems
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