EFRAG launches crypto-assets research to tighten accounting rules

The European Financial Reporting Advisory Group (EFRAG) is seeking input from crypto-assets experts, as part of a research project looking to address current gaps in accounting standards

The project is designed to identify and propose solutions for accounting challenges that are not addressed within existing International Financial Reporting Standards (IFRS) standards and other national accounting standard setter guidance.

To fully identify the accounting issues, EFRAG is seeking to engage with subject matter experts and practitioners across the wider crypto-assets community. It is looking for individuals with knowledge in a number of specific areas. These include issuance via initial coin offerings (ICOs) and similar offerings; holding/investing activities and payment services; custodial and storage services; and mining services.

For now, current accounting standards fail to provide specific guidance on treatment of cryptocurrency and there are concerns that growing use of the alternative ‘currency’ for payments and settlements, mean that it now needs to be regulated more tightly.

Both FRS 102 (UK GAAP) and IAS 7 Statement of Cash Flows define cash as ‘cash on hand and demand deposits’ and cash equivalents as ‘short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value’.

EFRAG says appropriate accounting guidance needs to consider the contractual and economic rights and obligations resulting from transactions. Hence, one objective of the outreach is to develop a comprehensive understanding of the obligations of issuers of tokens and the underlying rights, including customer protection, for both customers that acquire and store crypto-assets through trading platforms or other means, and token holders.

The goal is to define fact patterns within different jurisdictions within the EU and beyond that can help to identify the associated rights and obligations from a customer/holder perspective as well as a seller/issuer/custodial service provider perspective.

The outreach will be conducted from September to November 2019 through telephone interviews that should take between 45 minutes to one hour. Related questions will be shared before the interview.

EFRAG research project on crypto-assets

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