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The question of how to account for digital assets has become a challenge for accountants as the use of these assets becomes more and more common.

Although accounting for digital assets and exchange-traded commodities was added to the FASB’s research agenda in December, authoritative guidance on this topic does not appear imminent.

To assist accountants and auditors in this difficult area, the AICPA and CIMA have created a Practice Aid that contains non-authoritative guidance developed by the Digital Assets Task Force. New questions and answers added to the practice aid this month deal with accounting for:

  • Contracts involving crypto-assets that may contain derivatives.
  • Borrowing and lending of crypto-assets.
  • Crypto-asset mining activities.

“Hopefully with these pressing and emerging issues, we provide timely and useful advice,” said Lan Ming, CPA, partner at EY and a member of the Digital Asset Task Force.

Contracts involving crypto-assets that may contain derivatives

Entities can enter into a contract involving a right to receive a fixed amount of cryptoassets through various transactions. For example, someone can commit to paying you 10 bitcoins in 30 days for a service you provide.

The practice aid explains that accounting for this right to receive crypto-assets would generally involve considering whether the accounting for derivatives under Subject 815 of the FASB Accounting Standards (ASC) Codification, Derivatives and hedgingwould apply.

In the example cited in Q&A 24 of the practice aid, an entity assesses whether derivative accounting is required and whether the right to receive the cryptoasset contains an embedded derivative that should be split and accounted for separately.

Borrow and lend

Entities often borrow and lend cryptoassets, and Ming said it was important to note the asymmetry in this accounting.

“There is no symmetry between the borrowing and lending side of accounting,” she said. “You have to follow separate accounting models for each.”

Entities that lend their crypto-assets should consider accounting according to FASB ASC Topic 606, Income from contracts with customersor FASB ASC 610-20 subtopic, Other income — Gains and losses resulting from the derecognition of non-financial assets, said Ming. A key element in accounting for the lending of crypto-assets is the issue of control over those assets.

“In these accounting frameworks, you not only have to think about when you are lending crypto to someone else legal title has transferred, but also have you ceded control of those assets to the other party. ?” Ming said. “Because the asset you are looking at is a non-financial asset.”

Following the example used in Q&A 25, Ming said, this shows that derecognition generally does not occur for the lender. Even if the title is legally transferred, the lender may still have to keep this asset on its balance sheet.

A crypto-asset borrower, according to Practical Help, includes the borrowed asset on their balance sheet but also recognizes an obligation to return the asset to the lender at the end of the borrowing period.

“Complexity now comes into play,” Ming said. “In this case, it’s that the asset that I put in my book, I’ll call it an intangible asset. But the obligation that I have to return is an instrument that contains a derivative that must be bifurcated or should usually be bifurcated.”

Recognition creates a time lag, as the intangible asset is held on the balance sheet at a cost subject to impairment, while the obligation is effectively marked to market.


The how-to help discusses accounting for two separate revenue streams related to crypto-asset mining activities on blockchain networks that use proof-of-work protocols.

When a crypto-asset mining entity successfully processes transactions on the blockchain, it may receive:

  • Payment by the parties who requested the transactions (transaction fees); and
  • A global reward from the blockchain network for completing the validation work.

The practice aid addresses accounting considerations when a miner is directly engaged in mining activities and when a miner operates by participating in a mining pool operated by a mining pool operator.

In either case, the key accounting issue to assess is whether the miner has a revenue contract under topic 606.

“That’s really what will determine when or how much revenue you’ve recognized,” Ming said.

— To comment on this article or suggest an idea for another article, contact Ken Tysiac at [email protected].