Cryptocurrency incorrectly categorised

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Cryptocurrency held as an investment by a client (and a material amount) ought to be reclassified as an intangible asset in the current year's accounts as it was miscategorised as a fixed asset investment in last year's account.  Can I simply reclassify it or should I do a Prior Year Adjustment?  This was an error, so in my view it is not really a reclassifcation of an asset in the current year.   FRS102(1a) accounts, so the accounts would have looked different last year had we done the right thing!  

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Stepurhan
By stepurhan
16th Feb 2024 12:20

Not had to deal with a client holding cryptocurrency, but why do you think it is an intangible asset? Is it not more akin to a bank account held in a foreign currency, albeit one with much more volatility in exchange rate?

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By paul.benny
16th Feb 2024 12:46

As yet, there is no authoratitive guidance on accounting for cryptocurrencies – FRED82 on proposed amendments to FRS102 explictly says the UK will await IASB (international) guidance.

The volatility of most Crypto means that it certainly doesn’t qualify as cash/cash equivalents per the definitions in FRS102.

I think it’s moot whether you should categorise as intangible or investments. Or even as a non-basic financial instrument (FRS102 s12). Given that the FRS102 definition of intangible assets refers to non-monetary assets, I lean away from categorising crypto holdings as intangibles. So I’d be interested to hear why you want to move from investments to intangibles.

Whatever heading is chosen, you need an accounting policy for annual revaluation – compare with para 18.18 and following and 16.7 for investment properties. Given the volatility, I think disclosure of the nature of the asset is essential.

If you do choose to reclassify, I would just report as a reclass in the current year, on the basis that the directors believe the new heading more accurately describes the asset.

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By Julie.T
05th Mar 2024 12:14

Great answer, many thanks

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