At Aeacus Lawyers, we are increasingly receiving inquiries from accountants and clients on how to properly record and value cryptocurrencies when they are received as a means of payment. With the growing popularity of cryptocurrencies like Bitcoin and their increasing use in the business world, it is essential for companies to understand the correct accounting treatment of these digital assets.
Definition of Virtual Currencies
Virtual currencies, such as Bitcoin, are defined as a digital representation of value that is not issued or guaranteed by a central bank or government, is not necessarily linked to a legally established currency, and does not have the legal status of currency or money. However, it is accepted by natural or legal persons as a means of exchange and can be electronically transferred, stored, and traded.
Accounting Treatment of Cryptocurrencies
The Belgian Accounting Standards Commission (CBN) has issued an opinion on the treatment of cryptocurrencies. This opinion specifically addresses the situation where a company receives payment in Bitcoin (or other cryptocurrencies) for an invoice originally issued in euros.
Traditional currencies are often recorded as cash equivalents. However, the CBN notes that cryptocurrencies do not fall under this category. This is because cryptocurrencies are not widely accepted as a means of payment and are not managed by credit institutions. This makes the classification as "cash equivalents" unsuitable according to the CBN.
Furthermore, the CBN excludes the classification of cryptocurrencies as "financial investments." According to the Royal Decree on the Code of Companies and Associations (KB WVV), financial investments include deposits with credit institutions or investment products such as securities or precious metals. Since cryptocurrencies do not fall under this definition and due to their high volatility, this classification is also deemed inappropriate.
Cryptocurrencies as Other Receivables
The CBN believes that cryptocurrencies should be recorded under the category "Other Receivables" on the assets side of the balance sheet. A cryptocurrency essentially represents a receivable from a future counterparty willing to provide goods or services in exchange for a certain amount of cryptocurrency. This aligns with the functioning of the cryptocurrency system. By recording cryptocurrencies in this way, it is emphasized that it is not a receivable from a credit institution, but rather from a limited number of parties willing to accept transactions in cryptocurrencies.
Since cryptocurrencies are not legally recognized as a means of payment, they represent only an alternative method to complete transactions between parties that agree to use them. Recording cryptocurrencies as "Other Receivables" also clarifies that a counterparty must always agree to payment in cryptocurrencies. This aspect is less apparent when classified as a "financial investment" and is not applicable at all for "cash equivalents."
Valuation of Cryptocurrencies
Another important aspect is the valuation of cryptocurrencies. Article 3:46 KB WVV stipulates that impairments must be applied to receivables if there is uncertainty about repayment. Cryptocurrencies are considered highly volatile, meaning that their value at the balance sheet date could be lower than their book value. In such cases, impairments should be applied according to the principle of prudence. Conversely, revaluation of cryptocurrencies is not allowed, even if their value has increased, as receivables are not eligible for revaluation gains.
Transparency in the Notes
Finally, the Commission recommends clearly stating in the notes to the financial statements the amount within the category "Other Receivables" that relates to cryptocurrencies. This ensures greater transparency and provides a clearer picture of the position of cryptocurrencies within the company.
Conclusion
Cryptocurrencies cannot be recorded as cash equivalents or financial investments, but should be classified under "Other Receivables." This approach offers a transparent and pragmatic way to manage the risks and uncertainties associated with cryptocurrencies. As regulations in this area are still evolving, it will be interesting to see how future legislative changes will address this issue.
Do you have any questions or comments regarding the above issue? Feel free to schedule a non-binding consultation.
Christophe Romero Senne Verholle
Comentarios