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Digital form of assets which are transferable and securely maintained by technology called block chain technology is Cryptographic assets. The most popular one crypto now a days we heard are Bitcoin and Ether.Cryptocurrency are highly volatile. This causes issues in converting the value of the cryptocurrency to legal currency or cash. The Financial Services Regulatory Authority of Abu Dhabi Global Market (FSRA-ADGM) was the first authority who provide rules and regulations about purchase and sell of cryptocurrency. Sheikh Mohammad Bin Rashid Al Maktoum, The Prime Minister and Ruler of Dubai approves Dubai Virtual Asset Regulatory Authority (VARA).
It is legal to trade in Virtual assets in Dubai witht the permission of VARA’s Authorization.
Cryptocurrency Cannot be readily exchanged for any goods or services that’s why its not equivalent to cash as per IAS 7 and IAS 32. “Cash Comprises cash on hand and demand deposits.” As defined in IAS 7.6 Currency (including foreign currency) is generally accounted for as cash. But the Cryptocurrency is currency does not mean its necessarily cash for accounting purposes but can be used as a medium of exchange. Cryptocurrency does not meet the definition of a Cash equivalent in IAS 7.6 which is “short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.”
Cryptocurrency are classified as Intangible assets by the law. According to the IAS 38 the intangible assets can be measured at their cost and revaluation.On original recognition it measure at cost and then measure on impairment losses later on.
After Dubai granted Virtual assets License to Binance the worlds largest cryptocurrency exchange, and FTX Europe is now ready to set up a regional headquarters in the Dubai City.
Cryptocurrencies law is not clear, leaving trader without a legal framework to rely on. Due to this unclarity, banks and UAE have been refusing to work with individuals and corporate traders doing business with cryptocurrencies.
Some UAE bank closing bank account just after noticing that their customers were trading with cryptocurrencies and receiving money from notorious cryptocurrency exchanges, due to the banks are not ready to accept the risk.
If a person having credited his bank account with the cryptocurrencies abroad then he may be transferred his funds to a proper UAE licensed account of company to take benefit of the income tax in this country which 0%.
Under article 48 of Security Law any person without being licensed who advertise, promotes or encourages dealing in cryptocurrency that is not officially recognized in the UAE is subject to penalty of detention and or fine between Dh 20,000 and Dh 50,000.
When the taking close look on accounting for cryptocurrency Cryptocurrency are held to sale in the ordinary course of business then according to IFRS IC , IAS 2 applies.
IAS 2 defined Inventories either measured:-
IAS 2 does not require inventories in physical form but inventory should consist of assets that are held for sale in the ordinary course of action.
Entity would measure cryptocurrencies held for the sale in the ordinary course of business at the lower of cost and net realizable value applying paragraph 9 of IAS 2, subject to considering the commodity broker-trader exemption in paragraph 3(b) of IAS 2.
IAS 38 is apply to holdings of cryptocurrency and defined it as Intangible Assets.
IAS 32 Financial Instrument makes an connection between currency and cash.
IAS 1 (Presentation of Financial Statements) requires an entity to disclose judgement that its management has made regarding its accounting for holding crypto assets. If they are part of the judgement then that had the most significant effects on the amount recognized in the financial statements.
IAS 10 (Event after the Reporting Period) requires an entity to disclose details of the requirement in relation to material non-adjusting events.
IFRS 13 (Fair Value Measurement) applies when any entity holds cryptocurrencies at fair market value less costs to sell , Fair value measurement (IFRS 13) specify applicable disclosure requirement.
The IFRS IC define financial assets in accordance with IAS and concluded that a holding of cryptocurrency is not a financial asset. Cryptocurrency neither cash nor it is an equity instrument of another entity. IFRS IC concluded that just holding cryptocurrency is not considered as cash because cryptocurrency lacking the characteristic of cash.
IFRS 15 says identify the contract with customer identify the performance obligation in the contract determine and allocate the transaction price
recognize revenue when a performance obligation is satisfied.
* No Contract=IFRS 15 does not apply
IFRS 9 (Cryptocurrency should be accounted for as a financial assts at fair value through profit or loss) Cryptocurrency does not represent an ownership interest in an equity it means it is not a debt equity , or a contract establishing a right to deliver or receive cash or other financial instruments. It seems cryptocurrency to be consider as a financial assets.
Because of their inborn nature and structures, cryptographic resources require topic ability to reliably apply and keep up with the bookkeeping strategies. Alya Auditors has a devoted bookkeeping group with experts experienced in giving answers for complex bookkeeping issues across different areas in UAE. We can give you esteem adding bookkeeping and other consultancy administrations to record and deal with your Cryptographic resources or any connected business. We can impart to you the business best practices and suggestions to smooth out your bookkeeping practices in accordance with the administrative prerequisites as material and pertinent to your business.
Truly, let us know what service you are looking for and hence we can get back to you with more details.
Definitely, Alya Auditors is the one partner you need to ensure your business is built on accurate accounting books certainly, to spearhead greater growth and wider market reach.
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