In previous posts of this series, we examined why cryptocurrencies cannot be classified as cash equivalents or financial instruments under IFRS. Additionally, we explored when the inventory model applies to broker-traders and miners. This brings us to the default classification for cryptocurrency accounting: intangible assets under IAS 38.

The IFRS Interpretations Committee directed this approach in June 2019. However, the IASB’s February 2025 consultation revealed critical feedback. Stakeholders nearly unanimously agreed that IAS 38 is “outdated” for digital assets like cryptocurrencies.

Consequently, for exploration and mining companies holding Bitcoin as treasury reserves or accepting crypto payments, understanding both the current requirements and their limitations is essential.

Cryptocurrencies as Intangible Assets Under IAS 38: The Default Classification

Why Cryptocurrency Accounting Defaults to IAS 38 Intangible Assets

The IFRS Interpretations Committee concluded in June 2019 that most cryptocurrencies meet the definition of intangible assets under IAS 38. Specifically, digital assets satisfy three critical criteria. First, they are identifiable, meaning entities can separate them and sell or transfer them. Second, they are non-monetary, as they are not held in units of currency. Finally, they lack physical substance.

Consequently, entities must account for cryptocurrencies as intangible assets when broker-traders or miners do not hold them as inventory.

This classification applies regardless of the entity’s purpose. It covers investment appreciation, medium of exchange, or operational purposes. Furthermore, entities demonstrate control through possession of private keys. These keys function as digital signatures granting exclusive blockchain access.

However, developers created IAS 38 for traditional intangibles like patents and copyrights. In contrast, volatile, tradable digital currencies have fundamentally different economic characteristics.

Measurement Models and the Cost-Revaluation Dilemma in Cryptocurrency Accounting

Under IAS 38, entities initially measure cryptocurrencies at cost. This includes the purchase price plus directly attributable expenditures. For purchased cryptocurrencies, this means the transaction price plus exchange fees. Meanwhile, for mined cryptocurrencies, cost encompasses electricity, equipment depreciation, and allocated overhead.

Subsequently, entities must choose between the cost model or the revaluation model. The cost model carries the asset at original cost less impairment losses. In contrast, the revaluation model allows fair value reporting. Moreover, entities recognize increases in other comprehensive income (OCI).

However, the revaluation model requires an active market to exist. Major coins like Bitcoin and Ethereum meet this requirement. Nevertheless, many altcoins and utility tokens do not.

The cost model creates a fundamental mismatch between cryptocurrency accounting treatment and economic substance. For example, consider a company that purchased Bitcoin at $30,000 per coin. It continues reporting at that amount even if the market price rises to $60,000. Consequently, this effectively understates assets by 50%.

This limitation drew sharp criticism in the IASB’s February 2025 stakeholder consultation. Specifically, respondents argued the cost model fails to provide relevant information for investment-type digital assets.

Alternatively, the revaluation model offers more relevant information by reporting assets at fair value. However, accessing it requires demonstrating an “active market” as defined by IFRS 13. Additionally, entities must apply it consistently to all assets within the same class. Therefore, this potentially requires revaluation of all cryptocurrency holdings.

This treatment introduces volatility into equity balances. Nevertheless, it avoids the profit or loss impact that would occur under fair value through profit or loss models.

Indefinite Useful Life and the Impairment Testing Challenge

Most cryptocurrencies have an indefinite useful life under IAS 38. This stems from their digital nature. Specifically, there are no foreseeable limits on their capacity to generate future economic benefits. Therefore, entities do not subject these assets to systematic amortization.

Instead, entities must conduct annual impairment testing. Specifically, they assess whether the carrying amount exceeds the recoverable amount.

Moreover, impairment testing must occur whenever an indication exists that the asset may be impaired. This is a frequent occurrence given cryptocurrency price volatility. When entities identify impairment, they must recognize the loss immediately in profit or loss. Furthermore, entities cannot reverse this loss in subsequent periods. This applies even if the asset’s fair value recovers.

Consequently, this creates significant asymmetry in cryptocurrency accounting. Price declines trigger mandatory write-downs. However, the cost model does not recognize price increases.

For instance, consider Bitcoin that declined to $20,000. This triggers a $10,000 write-down. Subsequently, it recovers to $50,000. Nevertheless, the financial statements would still reflect the asset at $20,000. This “downward ratchet” effect systematically understates asset values. Moreover, it obscures the true financial position of entities holding cryptocurrencies.

Growing Regulatory Pressure: Why IAS 38 Is Failing Cryptocurrency Accounting

The limitations of applying IAS 38 to cryptocurrencies have reached a critical threshold. Notably, the IASB’s November 2025 Agenda Paper 8B confirms that cryptocurrency accounting has “received strong support” for addition to the Board’s work plan. This marks a significant shift after years of regulatory inertia.

Stakeholder feedback from the February 2025 consultation was nearly unanimous. Specifically, IAS 38’s requirements “do not work well” for cryptocurrencies. Furthermore, the standard is “outdated” for “new types of assets not envisaged when it was developed” (IASB Agenda Paper 17A, February 2025).

Moreover, the growing divergence between IFRS and US GAAP creates comparability challenges. FASB’s ASU 2023-08 mandates fair value accounting for certain crypto assets. This took effect for fiscal years beginning after December 15, 2024.

Consequently, Canadian publicly traded exploration companies reporting under IFRS must recognize a critical reality. Their financial statements may appear less transparent than US competitors using fair value measurement.

Meanwhile, 2025 saw a 58% increase in publicly listed companies holding Bitcoin. This intensifies pressure for standardized guidance.

The IASB is considering two approaches. They may pursue a broad project covering holders, custodians, and issuers. Alternatively, they may pursue a narrower project focused on measurement improvements. However, capacity constraints mean any new standard likely won’t arrive until 2026 or later.

Practical Implications for Exploration Companies

For mineral exploration and mining companies, the default cryptocurrency accounting treatment under IAS 38 creates several strategic considerations.

First, entities must document their classification rationale and measurement model selection. Additionally, they need to ensure consistency with stated financial reporting objectives.

Second, companies should establish robust impairment testing procedures. These procedures must respond to cryptocurrency volatility. However, they should not trigger unnecessary write-downs based on short-term price fluctuations.

Third, disclosure practices must compensate for IAS 38’s limitations. Specifically, companies should provide supplementary fair value information, risk exposures, and sensitivity analyses. This is particularly important for entities with material cryptocurrency holdings.

Furthermore, companies should monitor IASB developments closely. They should prepare for potential transition to fair value measurement when new standards emerge.

The current cryptocurrency accounting landscape demands specialized expertise. Specifically, it requires navigating the gap between inadequate existing standards and economic reality. Therefore, exploration companies should seek professional guidance from advisors with deep knowledge of both IFRS and digital asset markets. This ensures compliant, transparent financial reporting.

Conclusion

The classification of cryptocurrencies as intangible assets under IAS 38 represents the default cryptocurrency accounting treatment for most entities. However, this framework is increasingly recognized as inadequate.

Specifically, the cost model systematically understates asset values by ignoring fair value increases. Meanwhile, the revaluation model remains unavailable for many digital assets lacking active markets.

With regulatory momentum building at the IASB and stakeholder consensus that IAS 38 is “outdated” for cryptocurrencies, change appears inevitable. Nevertheless, it likely won’t arrive until 2027 or beyond.

In the next post, we’ll examine fair value measurement, transparency, and disclosure requirements under IFRS 13. Additionally, we’ll explore how entities can compensate for IAS 38’s limitations through enhanced voluntary disclosures.

If your exploration company is struggling to apply IAS 38 to cryptocurrency holdings, contact our IFRS and digital asset reporting specialists. Consequently, we can ensure your financial statements faithfully represent these complex exposures.