1. Introduction
In the News in April, 2017, we have mentioned laws related to virtual currencies and block chain as core technology. On the other hand, what accounting treatments are required for various transactions related to virtual currencies?
In this News, we will mention how IFRS, Japanese GAAP, and USGAAP deal with virtual currencies.

2. General comments
As a matter of fact, as of May, 2017, there is no clear accounting guidance on virtual currency transactions. Each country has lately begun to consider a framework of virtual currencies with the development of legal systems.
In the next chapter, we will introduce each country’s current accounting treatments of virtual currencies, focusing on IFRS, JGAAP, and USGAAP.

3. IFRS, JGAAP, and USGAAP
<IFRS>
IFRS are accounting standards applied in most countries except for the US and Japan. In 2015, The International Accounting Standards Board (IASB) just mentioned that virtual currencies should be one of the topics to be discussed from now on.

The Accounting Standards Advisory Forum (ASAF), serving as an advisory body of IFRS, discussed accounting treatments related to virtual currencies at the conference held in December 2016.

・The Australian Accounting Standards Board (AASB) made an agenda for the above conference and analyzed various aspects of virtual currencies as follows:
　①　Virtual currencies are not treated as cash, cash equivalents, or financial instruments.
  ②　Virtual currencies are treated as inventories or intangible assets.

The above treatments differ from the Japanese point of view. In Japanese regulations such as the Virtual Currencies Act or Consumption Tax Law, virtual currencies are treated as a method of payment.

The AASB provided an analysis as follows:

・Various discussions were exchanged, but the conference ended up in stating, “the ISAB continues to follow up the issues about virtual currencies.” Further discussions have not started since then.

<JGAAP>

In November, 2016, the Accounting Standards Board of Japan (ASBJ), a body of JGAAP, addressed the issues of virtual currencies at the Standard Advisory Council for the first time.

At the conference held on April 28, 2017, the ASBJ summed up various discussions and considered the scope of setting the accounting standards for virtual currencies. As a result, the ASBJ proposed that development of accounting standards for virtual currency users and operators should be minimized from the following reasons:

・Businesses related to virtual currencies are currently at an early stage of development.
・Consideration of virtual currencies has not been progressed internationally, and there is no accounting standard used as reference.
・There is no direct rule applied to virtual currencies in JGAAP.

The following are the minimum issues to be considered:

The United States have not started discussions about accounting treatments of virtual currencies yet, but the following movements have been seen lately.

In 2014, the Internal Revenue Service (IRS), which is equivalent to Japan’s National Tax Agency, revealed guidelines about the tax treatments of virtual currency transactions. The details are as follows:

・Virtual currencies should be treated as properties, not cash.
・Virtual currencies are evaluated at fair-market value in a reasonable manner.
・When virtual currencies are mined, gross income is realized upon the receipt at fair-market value.

In response to the above guidelines, the American Institute of CPAs (AICPA) released the letter in June 6, 2017, bringing up the following questions:

・What does a “reasonable manner” exactly mean in evaluating the fair market value　of virtual currencies?
・Values of virtual currencies are different in several published exchanges, so which exchange should be applied for evaluation?
・Should the costs of mining and acquiring virtual currencies be either capitalized like the acquisition costs of inventories or fixed assets, or expensed?
・In cases where convertible virtual currencies are treated as non-cash property, a barter transaction takes place and taxpayers should recognize gain or loss at the same time. Is it possible for taxpayers to recognize the fair market value of the currency on the transaction day even though several different values exist? Also, how do taxpayers know the basis of the currency related to each transaction?

Discussions have not advanced since then, but the AICPA will continuously consider and update the accounting treatments of virtual currencies through the AICPA letters.

4. Conclusion
In this News, we have mentioned “Virtual Currencies ② - IFRS, JGAAP, and USGAAP”. Each accounting standard is currently under consideration. We continue updating this issue in News.

Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.

(References)
The Australian Accounting Standards Board (AASB)
http://www.aasb.gov.au/admin/file/content102/c3/AASB_ASAF_DigitalCurrency.pdf

The Accounting Standards Board of Japan (ASBJ)
https://www.asb.or.jp/jp/project/proceedings/y2017/2017-0428.html

The American Institute of CPAs (AICPA)
https://www.aicpa.org/Advocacy/CPAAdvocate/2016/Pages/Virtual-Currency-Guidance-Needed.aspx