Accounting Experts Lithuania

Crypto-accounting

Despite the similar reporting system and regulations, crypto-accounting has many nuances and pitfalls. Accounting and reporting rules, first of all, differ from the country's legislation and regulator's requirements. You need to be thoroughly familiar with each item of the rules to avoid being sanctioned or fined. In addition, you must take into account the specifics of your work, as in this case, different regulatory measures may apply. Gofaizen & Sherle has extensive experience in dealing with cryptocurrency companies, opening cryptocurrency licenses in various jurisdictions, fully supporting clients every step of the way and a course in accounting. Our team is an active supporter of modern accounting methods and is constantly looking for ways to streamline and innovate our business processes. We actively use automatic optical document recognition and are among the first accounting companies to implement robotic accounting processes.

Crypto-Classic Accounting

The proper functioning and further development of any enterprise depend to a large extent on the accounting department and the costs associated with its maintenance. Professional accounting services are a guarantee of security and success in business development. This is a complex task requiring considerable experience in drawing up accounting documents and passing various types of inspections.Moreover, without proper accounting support, you can get serious financial losses in the form of penalties from the state authorities.A huge number of companies prefer to outsource accounting support because of the high cost of maintaining full-time accounting personnel. The difficulties of maintaining your accounting department also include the constant search for employees and the cost of equipment. Good accounting practices and sound advice can help your company be successful and protected from unpleasant surprises. Whether you are an international company or a local, one-person firm, we would like to work with you. Every client is important to us, regardless of the size, turnover, or scope of the client's business.

Peculiarities in the accounting of cryptocurrency companies

At the moment, there is no single accounting color standard for cryptocurrencies. In practice, accountants who are involved in cryptocurrency reporting have no other options than to use existing accounting standards, adapting them to a specific situation. Even if there are no specific accounting standards for cryptocurrencies, you can rely on current IFRS (International Financial Reporting Standards). However, you should pay attention to the company's activities to choose the right approach: whether cryptocurrency is used as a means of payment or attracts investors, exchange, or issuance of cryptocurrencies. The regulation of reporting depends on the jurisdiction of the country of operation. But in most cases, the main purpose of monitoring: is to stop money laundering, and prevent terrorist financing or illegal transactions with virtual currency. Also, the monitoring system is used to collect certain taxes. For example, in Canada, entrepreneurs declare profits from cryptocurrency, and the tax authorities can check their e-wallet to detect the time and volume of a particular transaction.

What is cryptocurrency

Cryptocurrencies are intangible digital tokens (objects) that represent a certain value. They exist exclusively in electronic forms, recorded in an electronic distributed ledger system built on blockchain technology. Cryptocurrency records and transaction data in such a system are virtually impossible to change. Another advantage of this technology is the anonymity of the record owner. These tokens can provide a variety of uses. Originally, cryptocurrency was invented as a medium of exchange, but other digital tokens have emerged that can grant rights to use other assets or be a property right, like securities.

How cryptocurrency is classified in accounting

According to the current regulatory documentation, cryptocurrency does not have the status of money nor the status of electronic money. Banks do not exchange crypto as a foreign currency, all exchanges occur through intermediaries. At the same time, cryptocurrency can perform the same function as ordinary currency. It can be used to pay for services or goods upon the seller's consent, but it is considered a "barter transaction". More and more businesses are now accepting virtual currencies as their primary payment, but they are not legal tender. As an example, transactions with gold are "demonetized", that is, it is considered an asset, a commodity, but not money. It is only a trading unit on the commodities market, and the payment with gold is a barter transaction with money. Highly liquid assets, easily convertible into cash and short-term are classified as cash equivalents. But cryptocurrencies can't be such, since they are not issued by a sovereign state and contain the risk of fluctuating costs. For most companies, cryptocurrencies can be intangible assets, that is, non-financial assets with no physical substance. However, you need to pay attention to the nuances of your work and specific situation.

What accounting standards apply to crypto assets

In practice, when accounting for cryptocurrencies, there is an understanding that there is no single IFRS standard. Therefore, the only option is to use existing standards that are set for accounting. For example, strategic business reporting SBR. Cryptocurrency cannot be accounted for as a financial asset because it is not a debt or equity security (does not denote an ownership interest in a legal entity). That said, it can meet the definition of an “Intangible Asset“ under IAS 38 because it can separate from the holder and be sold/transferred separately. Because cryptocurrencies are traded every day and the existence of such a market can be demonstrated, the revaluation model of IFRS 13 Fair Value Measurement can be used. Depending on the business model, cryptocurrencies held for sale in the ordinary course of business may be classified as inventory under IAS 2 Inventories; otherwise they are generally accounted for as intangible assets under IAS 38 (IFRIC agenda decision, June 2019). For example, in a situation where a business holds cryptocurrencies for sale, this could be classified as inventory. We can conclude that there is no universal and unified classification at the moment. It is necessary to take into account the specifics of your business, the jurisdiction of the country where you work, and many other factors. If you find it difficult to determine the standards by which accounting should be done - our team is competent to help in this situation.