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In a decision made in June, the International Financial Reporting Interpretations Committee (IFRIC) said that cryptocurrencies, such as bitcoin, are neither legal tender nor financial products.
This was reported by the Korea Times referring to an announcement from the Korea Accounting Institute (KAI).
IFRIC assists the International Accounting Standards Board (IASB) by providing guidance on the application and interpretation of International Financial Reporting Standards (IFRS) – a not-for-profit organisation established to develop a single set of high-quality, enforceable and globally accepted accounting standards. IFRS Standards are currently required in more than 140 jurisdictions and permitted in many more.
IFRIC has ruled that cryptocurrencies are neither legal tender nor a financial product as they are "not cash nor an equity instrument of another entity," adding that they do not "give rise to a contractual right for the holder and it is not a contract that will or may be settled in the holder's own equity instruments."
According to the committee, the holding of cryptocurrency meets the definition of “intangible asset” as it is “capable of being separated from the holder and sold or transferred individually” and it “does not give the holder a right to receive a fixed or determinable number of units of currency."
IFRIC defines intangible assets as “identifiable non-monetary assets without physical substance." An asset is “identifiable” if it is separable or arises from contractual or other legal rights. An asset is separable if it "is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability."
With this ruling, businesses will now have to treat cryptocurrencies as intangible assets in accounting, Korea Times noted. It will also enable government bodies to establish a legal basis for taxation.
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