Digital assets are increasingly important for businesses of all sizes, but many organizations don’t have a clear understanding of how to properly account for them. Digital assets such as cryptocurrency can be extremely volatile, and accounting for these assets requires special attention. Several key factors must be taken into consideration when it comes to accounting for digital assets.
The first step in accounting for digital assets is to identify what types of digital assets the organization is dealing with. This may include cryptocurrency, tokens, non-fungible tokens (NFTs), and other forms of digitally-stored value. Once these digital assets have been identified, organizations should create a framework for how they will be accounted for. This includes setting up specific accounts and accounting processes to track the value of these assets over time.
Organizations should also consider how they will report digital asset transactions on their financial statements. Generally, these types of transactions should be reported on the balance sheet as either a current or non-current asset, depending on their expected holding period. It is important to note that the value of digital assets can fluctuate rapidly, so it may be necessary to update these values regularly to accurately reflect their current market value.
Finally, organizations should ensure that they have proper internal controls in place for accounting for digital assets. This includes setting up procedures for identifying and mitigating risks associated with digital asset transactions, as well as creating systems for tracking and reconciling digital asset balances. By following these guidelines and taking the time to properly set up procedures for accounting for digital assets, organizations can ensure that their financials are accurate and up to date.