Introduction
In accordance with Financial Reporting Standard (FRS) 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, Sygem Limited classifies cryptocurrency as a fixed asset investment on its balance sheet. This note aims to provide an overview of the accounting treatment applied to cryptocurrency investments in line with FRS 102 Section 18 - Intangible Assets.
Classification and Measurement
Cryptocurrency investments held are classified as fixed asset investments, as they meet the definition of intangible assets under FRS 102. The revaluation model, as prescribed by FRS 102 Section 18, has been adopted for the measurement of these cryptocurrency investments.
Revaluation Model
Under the revaluation model, changes in the fair value of cryptocurrency investments are recognised and accounted for as follows:
1. Increase in Market Value: Any increase in the market value of cryptocurrency investments is recognised in other comprehensive income in other reserves within Capital and Reserves.
2. Profit and Loss Recognition: Increases in the value of the cryptocurrency investment that reverse a previously recognised revaluation decrease (which was accounted for in the Profit and Loss Account) are recognised in the Profit and Loss Account. However, recognition in the Profit and Loss Account is limited to the extent of the previously recognised revaluation decrease.
3. Decrease in Market Value: If there is a decrease in the value of the cryptocurrency investment, the decrease is recognised in other comprehensive income. This recognition is limited to the amount of any previously recognised increase in value for the same asset.
4. Excess Decrease: Any decrease in value beyond the previously recognised increase is recognised in the Profit and Loss Account.
Disposal of Cryptocurrency Investment
Profits or losses resulting from the actual disposal of cryptocurrency investments are recognised in the Profit and Loss Account as "Profit or Loss on Disposal of Intangible Fixed Assets."
This accounting treatment ensures that the financial statements reflect the appropriate valuation and recognition of its cryptocurrency investments in accordance with FRS 102.