International Journal of Accounting Research

Accounting in the Age of Digital Assets: Reporting Challenges with Cryptocurrency and Blockchain

Marcus Linwood^* Department of Financial Reporting and Analysis, Eastbridge School of Business, Toronto, Canada
^*Correspondence: Marcus Linwood, Department of Financial Reporting and Analysis, Eastbridge School of Business, Toronto, Canada, Email:

Received: 27-Aug-2025, Manuscript No. IJAR-25-30108; Editor assigned: 29-Aug-2025, Pre QC No. IJAR-25-30108 (PQ); Reviewed: 12-Sep-2025, QC No. IJAR-25-30108; Revised: 19-Sep-2025, Manuscript No. IJAR-25-30108 (R); Published: 26-Sep-2025, DOI: 10.35248/2472-114X.25.13.427

Description

The expanding use of cryptocurrency and blockchain technology has introduced significant questions for those responsible for preparing and interpreting financial statements. These digital assets operate outside conventional monetary systems, and their accounting treatment continues to be a subject of uncertainty for many organizations. While technology has advanced quickly, standard-setting bodies have moved more cautiously, leading to ongoing challenges in ensuring consistency, comparability, and clarity in financial reporting.

Cryptocurrencies, by nature, do not fit neatly into existing financial categories. They are neither traditional cash equivalents nor financial instruments under most accounting frameworks. This classification issue becomes the first major hurdle. Under current International Financial Reporting Standards (IFRS), cryptocurrencies are typically accounted for as intangible assets. However, their market behavior often resembles commodities or investment assets, which makes the intangible classification seem mismatched for their economic function.

Using the intangible asset approach, companies must record these assets at cost, less any impairment. Revaluation is generally not permitted unless there is an active market and the entity adopts the revaluation model. This presents a mismatch between reported figures and market reality, especially for businesses that hold digital currencies as part of their trading or investment operations. The volatility commonly seen in crypto markets is not always visible on financial statements, leading to questions about whether current standards reflect the true financial position of such firms.

For entities that trade in cryptocurrencies or accept them as payment, revenue recognition and valuation become more complex. Fluctuating market prices mean that transactions can quickly lose or gain value in real terms. This affects how companies determine fair value at the point of sale or acquisition and complicates the measurement of gains or losses. Without clear guidance, different firms may apply inconsistent methods, reducing comparability between reports.

Blockchain, the underlying technology supporting cryptocurrencies, also introduces its own reporting issues. For example, in industries where blockchain is used to verify transactions or track asset ownership, the value derived from such applications is often difficult to quantify. Since blockchain is a decentralized system, its benefits do not always have a direct monetary equivalent that can be captured on the balance sheet. Companies may invest heavily in blockchain infrastructure, but accounting for these expenditures requires judgment calls that could vary widely across firms and jurisdictions.

Another challenge lies in auditing digital assets. Verifying ownership and existence requires new procedures, especially when private keys, digital wallets, and decentralized exchanges are involved. Auditors may find it difficult to confirm control over cryptocurrencies, and if access to digital assets is lost, recovery is often impossible. This raises concerns about asset security and the reliability of reported values. Traditional audit tools were not built to assess encrypted, decentralized systems, making assurance over crypto holdings more complicated.

Taxation also presents an area of concern. Since different countries apply different tax treatments to crypto transactions, companies operating across borders must comply with varying recognition rules, disclosure requirements, and valuation methods. These inconsistencies create added pressure on financial reporting teams, especially in multinational organizations that are subject to more than one jurisdiction's rules.

In response to these developments, standard-setting organizations have begun to consider revisions to existing guidelines. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have each initiated discussions on how best to address the accounting of digital assets. However, definitive rules have yet to be adopted, leaving preparers to rely on interpretations, professional judgment, and emerging industry practices.

Until formal standards are introduced, many companies have turned to voluntary disclosures to improve transparency. Some firms provide detailed breakdowns of their crypto holdings, valuation approaches, and risk exposures. Others include narrative explanations of their policies for managing digital assets. While these practices may improve user understanding, they are not a substitute for clear, consistent standards that apply across industries and borders.

In the absence of uniform guidance, financial professionals must carefully consider how their reporting choices affect the users of financial statements. The assumptions underlying valuations, impairment policies, and classifications should be clearly disclosed. This is particularly important for entities that rely on investor confidence, where any misunderstanding about the handling of digital assets could influence perception and decision-making.

The intersection of finance and technology continues to evolve, and accounting must respond accordingly. As cryptocurrencies become more embedded in business models, the need for precise, practical, and widely accepted reporting standards grows stronger. Accountants and auditors will need to remain alert to changes in both the technological landscape and regulatory environment to ensure their reporting continues to meet the needs of stakeholders. The complexity of these assets does not remove the obligation to report them clearly. Rather, it challenges the profession to adapt and provide the clarity that financial statement users expect in an increasingly digital economy.