Bitcoin: Its Economics for Financial Reporting
Australian Accounting Review, Vol. 27(2): 220-227, 2017
12 Pages Posted: 5 May 2015 Last revised: 20 Dec 2017
Date Written: May 4, 2015
There is yet any official guidance on the financial reporting of Bitcoin transaction from the standard setters as the crypto-currency become increasingly popular and tax accounting guidance begin to appear in 2014. Designed as a decentralized currency, Bitcoin will not become a reporting currency and will instead complement fiat money. We argue that the accounting principle of faithful representation requires interpreting the economic substance for financial reporting that varies with reporting entity: trading firms recognize Bitcoin like a foreign currency and measure the revenue, or expense, at the equivalent amount of the reporting currency; digital currency exchanges recognize Bitcoin as goods in line with tax accounting treatment. An Economica paper by Radford (1945) describing cigarette being used as commodity money in a POW camp has alluded to this economic basis. This paper applies accounting principle to a practical issue and contributes to the thinking process which may help standard setter issue an interpretation.
Keywords: Bitcoin, Reporting Entity, Faithful Representation, Financial Reporting
JEL Classification: M41, M48
Suggested Citation: Suggested Citation