The international financial reporting interpretations committee (IFRIC) has ruled that cryptocurrencies are neither financial assets nor legal tender.
The Korea Times reported the development on Sep 23, citing the Korea Accounting institute’s briefing in regard to an IFRIC meeting held in London June. The report showed that IFRIC had ruled that cryptocurrencies are not cash; neither are they equity instruments of another entity according to the report. The report referred to them as “intangible assets” and defined them as “”identifiable non-monetary assets without physical substance.”
In the IFRIC’s definition, an asset is only identifiable if it is separable from contractual or other legal rights. Separable here refers to an asset that 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.”
The IFRIC is a nonprofit international organization that comes up with a set of accounting standards that are mandatory in over 140 jurisdictions. These standards are also accepted in many other jurisdictions around the world. The IFRIC’s definition and position with regard to cryptocurrencies will enable governments to establish legal basis for taxation, and will also help businesses to come up with frameworks for corporate accounting. The Korea Times report argues that the position taken by IFRIC represents a setback for cryptocurrencies’ prospective recognition or status as currencies.
The definition by IFRIC throws a spanner in the works with countries increasingly taking to crypto taxation as well as crypto remuneration. Countries such as New Zealand have made great strides in setting up frameworks for crypto taxation as well as crypto remuneration. They have made it clear that cryptos that can be used for remuneration are only those that can be easily liquidated. Other countries such as France and Germany though, are totally against the whole idea of cryptocurrencies, because they don’t want “Parallel currencies” in their respective jurisdictions.
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