How Are Digital Assets Treated Under IFRS and UK GAAP?

Introduction

One of the most common questions among finance professionals and accounting students is: where do digital assets sit in the financial statements? The honest answer is that there is no dedicated standard — neither IFRS nor UK GAAP has a specific rule for crypto-assets. That creates both complexity and professional judgement calls that you need to navigate carefully.

This article provides a technical breakdown of the current treatment under both frameworks, the key judgements involved, and where the standards are heading.

The Absence of a Dedicated Standard

The IASB (International Accounting Standards Board) has not yet issued a dedicated IFRS standard for crypto-assets or digital assets. In the absence of a specific standard, IAS 8 requires entities to use judgement to develop an accounting policy that is relevant and reliable. The IASB issued an Agenda Decision in June 2019, updated in 2023, which provides non-authoritative guidance — and most standard setters and practitioners follow this.

The UK's Financial Reporting Council (FRC) has similarly not issued a dedicated standard under UK GAAP. HMRC's guidance addresses tax treatment, but the accounting treatment under FRS 102 requires professional judgement on the same basis.

Treatment Under IFRS

IAS 38 — Intangible Assets (Most Common Treatment)

For most entities holding cryptocurrencies, the IASB's 2019 Agenda Decision concluded that holdings of cryptocurrencies meet the definition of an intangible asset under IAS 38. This is because:

• They are identifiable (separable — can be transferred individually)
• They lack physical substance
• They are controlled by the entity (held in a wallet, private key)
• It is probable that future economic benefits will flow to the entity

Under IAS 38, the entity chooses either the cost model or the revaluation model:

• Cost model: Asset recorded at cost on acquisition. Tested for impairment under IAS 36 whenever indicators exist. Impairment losses recognised in P&L. Crucially, under the cost model, gains from price rises cannot be recognised — only losses from impairment.
• Revaluation model: Available only if an active market exists. The IASB Agenda Decision noted that certain cryptocurrencies do trade on active markets (as defined by IFRS 13). If elected, the asset is revalued to fair value at each reporting date. Increases go to Other Comprehensive Income (revaluation surplus); decreases first reduce any existing surplus and then go to P&L.

IAS 2 — Inventories (Broker-Traders)

If an entity holds crypto primarily for the purpose of selling in the near term and generating profit from price fluctuations — such as a crypto broker or dealer — IAS 2 may apply instead of IAS 38. Under IAS 2's broker-trader exemption, the assets can be measured at fair value less costs to sell, with changes recognised in P&L. This is a significant difference from the cost model under IAS 38.

IFRS 9 — Financial Instruments

Most cryptocurrencies do not meet the definition of a financial asset under IFRS 9 because they do not represent a contractual right to receive cash or another financial instrument. However, certain structured tokens or instruments with contractual cash flow characteristics may fall within IFRS 9's scope — this requires careful analysis on a case-by-case basis.

Treatment Under UK GAAP (FRS 102)

FRS 102 follows a similar logic to IFRS for digital assets. In the absence of a specific section, preparers look to the definitions and recognition criteria across the standard:

• Intangible assets (Section 18): The most commonly applied section for cryptocurrency holdings. Under the cost model (required under FRS 102 Section 18 unless a revaluation is permitted), assets are carried at cost less impairment. The revaluation model for intangibles is only available where an active market exists — which is contested for most digital assets.
• Inventories (Section 13): If held for sale in the ordinary course of business (e.g. by a crypto dealer), Section 13 may apply, with assets valued at the lower of cost and net realisable value.
• Financial instruments (Section 11/12): As under IFRS 9, most cryptocurrencies do not meet the financial instrument definition under FRS 102.

The FRS 102 triennial review (effective 1 January 2026) does not introduce a specific digital assets section, though the updated standard's closer alignment with IFRS 15/16 concepts may have indirect implications for how some token arrangements are accounted for.

Impairment Under Both Frameworks

Impairment is particularly relevant for digital assets given their price volatility. Key points:

• Under IAS 38 cost model: test for impairment whenever there is an indicator (e.g. market price falls below carrying value)
• Impairment loss = carrying amount minus recoverable amount (higher of fair value less costs to sell and value in use)
• For crypto assets, value in use is rarely determinable — so recoverable amount is typically market price less disposal costs
• Under FRS 102: similar approach — impairment review triggered by indicators, write down to recoverable amount
• Impairment reversals: Under IAS 38, reversals of impairment for intangibles are prohibited except in specific circumstances. Under FRS 102, reversals may be permitted where the impairment conditions no longer exist

IASB Agenda Decisions and What's Coming

The IASB has acknowledged that IAS 38 was not designed with digital assets in mind. In 2023, the Board confirmed it would not add a specific crypto project to its agenda at this time, but noted that the existing guidance under IAS 38 and the Agenda Decisions remain the authoritative reference.

The ISSB (International Sustainability Standards Board) is separately considering how digital asset-related emissions and climate disclosures interact with IFRS S1 and S2 — relevant for proof-of-work mining operations.

Deepen Your Technical Knowledge with Learnsignal

Technical accounting treatment for digital assets is one of the most rapidly evolving areas in the profession. If you want to build structured, authoritative knowledge on IFRS and UK GAAP application, Learnsignal's CPD courses cover financial reporting standards with practical, exam-quality content. View our CPD courses and stay ahead of the curve.

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