The legal consideration of Bitcoin – Part 3: Disclosure in the financial statements

Bitcoin and co. have been occupying increasingly larger parts of the population for about a year and are also becoming economically more relevant. Therefore, Findea explains what needs to be considered according to the accounting regulations of the OR regarding Bitcoins. This article looks at how exactly Bitcoin must be reported in the balance sheet.

As was explained in the second article, Bitcoins are subject to a balance sheet obligation according to Art. 959 para. 2 OR. Consequently, the logical follow-up question is how Bitcoins should be shown in the balance sheet. It is important to note right at the beginning that the answer to this question depends on the respective purpose of use. Therefore, here follows an overview of the reporting under various balance sheet items.

‍Cash and cash equivalents

‍Under cash and cash equivalents count the holdings of various cash registers, postal and bank balances, and short-term fixed deposits. Thus, it can be noted that at least indirectly, classification as a legal tender or foreign currency is required. Bitcoin does not meet this requirement (see Part 1). Therefore, it is not appropriate to report Bitcoin as cash and cash equivalents.

‍Securities (Current and Fixed Assets)

‍It should be noted that the accounting term "securities" is not used congruently as the legal term "Wertpapiere" as per Art. 965 OR. Securities go much further, as gold and other precious metals are often reported under securities. Specifically, tradable values are meant, although they are neither legal tender nor a receivables. This also applies to Bitcoins. The broad definition of securities thus allows the inclusion of Bitcoin under this position.

Bitcoin as a separate position of securities in current assets makes sense when only a short-term holding intention exists, and trading with it does not count as ordinary business activities. Reporting in financial investments is then appropriate when a long-term holding intention exists.

‍Receivables

‍Bitcoin cannot be classified as a receivable. This is due to its nature as a completely independently regulated, autonomous system. Bitcoins can be exchanged into legal tender, but there is no entitlement to this. Therefore, classifying them as receivables is out of the question.‍

Inventories

‍Examples of inventories include raw materials, semi-finished and finished products, but also assets intended for sale as part of the operational business activity. If trading with Bitcoin belongs to a company's ordinary business operations (e.g., for brokers), it may be appropriate to classify these as inventories.

‍Intangible Assets

‍Classic examples of intangible assets held in fixed assets are non-monetary assets that do not possess physical substance like patents or trademarks. It can be said that if Bitcoins are held long-term, or this is the intention, this also applies to them. There are international accounting standards such as IFRS, which tend to classify Bitcoin as an intangible asset. This is fundamentally also reconcilable with the regulations of the OR. However, the classification as securities comes closer to reality. Further information can be found here.

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