NFT Accounting and Valuation: A Guide for Finance Professionals

NFT Accounting and Valuation: A Guide for Finance Professionals

Under IFRS, a non-fungible token held by an entity is usually accounted for as an intangible asset under IAS 38, or as inventory under IAS 2 if it is held for sale in the ordinary course of business – the same logic the IFRS Interpretations Committee applied to cryptocurrencies in its 2019 agenda decision. The harder problems are valuation and substance: NFT markets are thin and volatile, the token and the underlying rights are not the same thing, and impairment and revenue recognition judgements can be highly contentious. This guide sets out the framework finance professionals need when NFTs appear on a client's balance sheet.

What exactly is the asset?

A non-fungible token is a unique token recorded on a blockchain, typically pointing to a digital file (artwork, music, an in-game item) or representing rights connected to a physical or digital asset. The first and most important accounting step is to identify what the holder actually owns:

• In many cases, buying an NFT conveys ownership of the token itself plus a limited licence to display the linked content – not the copyright in the underlying work.
• Some NFTs embed genuine rights: revenue shares, membership entitlements, redemption rights over physical goods, or in-game utility.
• Others are essentially collectibles whose value rests entirely on market sentiment.

The accounting follows the rights, not the label. An NFT that entitles the holder to a share of royalties is economically different from a profile-picture collectible, and the recognition, measurement and disclosure should reflect that.

How are NFTs classified under IFRS?

Holders: IAS 38 or IAS 2

There is no NFT-specific IFRS standard. By analogy with the IFRS Interpretations Committee's 2019 decision on cryptocurrencies, an NFT held by an entity will generally be an intangible asset under IAS 38: it is identifiable, non-monetary and lacks physical substance. Where an entity holds NFTs for sale in the ordinary course of business – a trading platform's own stock, or a studio minting NFTs for sale – IAS 2 inventories applies instead, and a broker-trader may measure at fair value less costs to sell.

Under IAS 38, the default is the cost model: cost less amortisation and impairment. Most NFTs have indefinite useful lives (no foreseeable limit to the period of expected benefit), so they are not amortised but must be tested for impairment annually and whenever indicators exist. The revaluation model is only available where fair value can be determined by reference to an active market – and here NFTs differ fundamentally from bitcoin. Because each token is unique, identical items do not trade with sufficient frequency and volume, so an active market in the IFRS 13 sense will rarely, if ever, exist for a specific NFT. In practice, cost less impairment is the norm.

For context on how this fits the broader digital assets framework – including the contrast with US GAAP, where FASB's ASU 2023-08 requires fair value through net income for certain fungible crypto assets but excludes NFTs from its scope – see our guide to accounting for digital assets under IFRS.

Issuers: revenue and obligations

Entities minting and selling NFTs face a different analysis under IFRS 15. Key judgements include:

• Performance obligations: does the sale convey only the token, or also ongoing services (games, content drops, communities) that defer revenue?
• Principal versus agent: marketplaces must determine whether they control the NFT before transfer or merely facilitate.
• Royalties: creator royalties on secondary sales are typically recognised as the sales occur, but enforcement of royalty terms varies by marketplace and should inform recognition.
• Non-cash consideration: sales priced in crypto require measurement of the consideration received, adding a valuation layer on top of the revenue judgement.

Why is NFT valuation so difficult?

Valuation is where most NFT engagements get uncomfortable. The structural problems include:

• Uniqueness: no two tokens are identical, so 'comparable' sales are analogies, not observations – closer to art valuation than to listed securities.
• Thin and volatile markets: many NFTs trade rarely; collection 'floor prices' can move dramatically and may not be achievable for a specific token in any size.
• Wash trading: NFT markets have a documented history of self-dealing to inflate apparent prices, so headline transaction data cannot be taken at face value.
• Liquidity discounts: even a credible reference price may need adjusting for the realistic cost and time of selling.
• Platform and protocol risk: value can depend on the continued existence of a marketplace, game or hosting arrangement for the underlying file.

For impairment testing under IAS 36, recoverable amount is the higher of value in use and fair value less costs of disposal – and for most passively held NFTs, fair value less costs of disposal is the only realistic measure. Practitioners should document the valuation approach (last transaction price, collection floor price, comparable traits, independent appraisal), the date and source of the data, and the adjustments made. A defensible file matters more than false precision.

What should auditors focus on?

NFT balances raise audit risks across several assertions:

• Existence and rights: verifying control of the wallet holding the token (for example through a signed-message test), and reading the purchase terms to confirm what rights were actually acquired.
• Valuation: challenging management's fair value evidence, screening reference transactions for wash trading, and assessing impairment indicators at each reporting date.
• Completeness: confirming all wallets and custodial accounts are identified, including assets held on marketplaces.
• Fraud and AML: NFTs have been used for value transfer and layering; unusual purchase patterns or counterparties warrant scepticism, and firms' own AML obligations apply to NFT-related engagements.

What about tax?

Neither HMRC nor Irish Revenue has an NFT-specific code; normal principles apply. For UK individuals, buying and selling NFTs is generally within capital gains tax, with trading treatment possible for organised, frequent activity; note that NFTs are not pooled like fungible tokens – each is a separate asset for CGT. In Ireland, disposals by investors fall within CGT at 33%, with income treatment where activity amounts to trading. VAT on NFT sales is an evolving area in both jurisdictions and frequently turns on whether the supply is of an electronically supplied service – specialist advice is sensible for platform clients. From 2026, the EU's DAC8 and the OECD's Crypto-Asset Reporting Framework bring relevant crypto-asset transactions within automatic tax reporting, so marketplace activity will become increasingly visible to tax authorities.

Key takeaways for finance professionals

• Classify by rights and business model: IAS 38 for holders, IAS 2 for those selling in the ordinary course, IFRS 15 for issuers.
• Expect cost less impairment, not revaluation: an IFRS 13 active market rarely exists for a unique token.
• Treat market data sceptically and document valuation judgements thoroughly.
• For audits, prioritise wallet control, rights verification and impairment.
• Disclose clearly: nature of the assets, measurement basis, judgements and risks.

Frequently asked questions

Can an NFT ever be a financial asset?

Rarely as a starting point, because most NFTs do not give rise to a contractual right to receive cash or another financial asset. But the substance test cuts both ways: a token that contractually entitles the holder to cash flows may fall to be analysed under the financial instruments standards, and tokenised representations of real assets may point to the standard governing the underlying. The label 'NFT' tells you about the technology, not the accounting.

How should NFTs created internally be treated?

An entity minting NFTs from its own content faces the IAS 38 internal generation rules: research-phase costs are expensed, and most costs of creating digital artwork or collections will struggle to meet the capitalisation criteria, since internally generated brands and similar items cannot be recognised. In practice, NFT creation costs are usually expensed, with revenue recognised on sale under IFRS 15. Minting (gas) fees follow the same analysis – typically a cost of sale or operating expense rather than an asset.

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