How Digital Tokens like Bitcoin Will Affect the Accounting Profession
Being an accountant in the 21st century means that you will need to do your best to understand all the newest technologies. Since a new one is introduced practically every day, you can see just how complex following all these trends can be. It’s a constant cycle of learning and adapting to new conditions. The time when accounting meant dealing only with fiat currencies is now long gone, and every accountant in the world needs to prepare itself for the future, which already knocks on the door.
The first thing that immediately comes to our mind is the fact that the majority of accounting is done online. The reason is pretty simple, the majority of today’s finances are done this way. However, we can see that there’s a new concept on the rise. We are talking about cryptocurrencies. With the surge of their worth, many governments have decided to tax them. When we talk about this surge, we are not talking only about Bitcoin.
At the same time, all other altcoins have started to rise. In case you would like to learn about the reason for their rise, be sure to take a look at techbullion.com. So, the services of a cryptocurrency accountant will become a necessity sooner than we think. Plus, we can see that this concept will have a hand in a complete transformation of the world of accounting. The reason lies in the fact that cryptos use blockchain technology. Now, we would like to talk about what we can expect in the future.
How Will Bitcoin Impact Accountancy?
Cryptocurrency and Blockchain systems are not impacting accountancy as we speak. However, because of the demands on the finance industry and accounting, we can see that it will have a pretty big impact in the future. We can see that the highest percentage of governments in the world are looking for a way to impose taxes on BTC, ETH, and other digital currencies. So, we can see that will the impact on the accountancy pretty soon.
Therefore, we can see that they are looking for a way to create guidance for all the traders. Without any doubt, they will need some time before they create the best possible guidance for them, both in terms of accounting and the taxation procedure. At the moment, there is no perfect guidance. The reason is that there are no standards they can be based on. So, the accountants don’t have an idea about what they should do. However, when they hit the mainstream, it will be a whole other story.
What Would be the Standards?
We are sure that your first guess would be that cryptos should be accounted as cash. They represent some kind of digital money, after all. However, it needs to be said that they cannot be considered as something similar to cash, since they cannot be exchanged for any kind of service and product, right?
Even though more companies are accepting cryptos, mainly Bitcoin, as a method of payment, it needs to be said that their adoption is not as high as it should be. At the same time, these companies and entities can opt for accepting cryptos as a method of payment, but there’s no requirement for them to do that.
At the same time, one of the main characteristics of digital currencies is that their price can be pretty volatile in some cases. Therefore, they cannot be accounted as fiat currencies. Plus, these don’t meet the definition of a financial instrument since they cannot be used as cash. From all of these elements, you can understand that there’s no way for them to be accounted as some kind of financial asset.
However, crypto holdings can be traded on an exchange. So, expecting that the entity that receives them will have some kind of financial benefit is pretty realistic. But their nature is a non-monetary one. The reason being that they don’t have physical substance. The best way to describe them is by saying that they are some kind of intangible asset.
Basically, it means that they can be measured at revaluation or costs. By implementing this model, they are measured at the cost of initial recognition. After that, they have measured at cost less accumulated impairment losses and amortization. These assets can be carried at a revalued sum, in case there’s a market for them that can be considered active.
At the very least, cryptocurrencies can be treated as an inventory. In this case, they would be recognized as inventory at a lower cost and net realizable value. Since there are so many options about how accounting digital currencies can be handled, it needs to be said that we still don’t know the method it will be used in the end. Therefore, we will just need to wait and see.
Which Companies Adopted Cryptos?
We are living in the digital era, and cryptos have achieved significant adoption in the last couple of years. With them becoming more accepted and understood by people and firms, their popularity will surely grow. As of today, many reputable companies have decided to implement it. We are talking about companies like Expedia, Shopify, PayPal, and Overstock.
Without any doubt, many smaller companies will follow their example. One of the companies that have decided they will accept cryptos is Norwegian Air. As you can presume, they will be the first company of this kind that will do it. Surely, all these companies will need to think about hiring an accountant who can help them with taxing and accounting for their income.
The Bottom Line
The road to recognition was pretty rough for cryptos. In the beginning, institutions and companies were pretty skeptical about the whole concept. Over time, digital currencies have managed to establish themselves as a reputable method of payment.
So, it’s no wonder that so many companies decided to adopt them. At the same time, a lot of governments are interested in taxing them. Therefore, we can see that the concept of crypto accounting looks inevitable. Every trader should prepare for this moment. Surely, it will have a pretty large impact on the accounting profession.