The legal consideration of Bitcoin - Part 4: Evaluation

In the second post, we noted that there is an obligation to account for Bitcoins. The question of how they are to be reported was answered in the third post. This fourth post now deals with the question of how Bitcoins are to be valued.

Securities (Current and Fixed Assets)

‍Anyone who has accounted for their Bitcoins as securities has two possible valuation approaches. One is valuation at acquisition cost or lower values. The other is at observable market prices. For example, the ESTV publishes an average value relevant for wealth tax of various Bitcoin providers. However, one is also free to make their own observations and calculate an average value based on the relevant trading platforms. Those who decide to value their Bitcoin according to the observable market price are obliged, according to Art. 960b Para. 1 OR, to classify all of their Bitcoins in this balance sheet position and in this manner.

‍Inventories

‍If Bitcoins are held as inventories because they are intended for sale in the course of operational business activities, there are two options for valuation. The first option is offered by Art. 960c Para. 1 OR. It states that inventories are to be valued according to acquisition costs or the lower market value. A common procedure can be used for setting the acquisition value (for example, first-in-first-out). The determination of the lower market value is analogous to the explanations in the "Securities" section. The second option is provided by Art. 960b Para. 1 OR, which was already explained in the previous section.

‍Intangible Assets

‍In valuing Bitcoins that are held as intangible assets, there are two options as well. According to Art. 960a OR, valuation at acquisition cost/lower values is possible. In this case, although there is no depreciation due to usage, other value losses are to be corrected by value adjustment as specified in Art. 960a Para. 3 OR. These are to be made when the market value (determination as in the "Securities" section) falls below the acquisition or previous book value. The second option again provides valuation at observable market prices according to Art. 960b Para. 1 OR (cf. "Securities" section).

No matter how the Bitcoins are reported on the balance sheet, if the valuation is based on observable market prices, there is the option, according to Art. 960b Para. 2 OR, to form a reserve for fluctuations.

More information can be found here.

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