Cryptocurrency Impairment — IAS 38 Cost Model
Recording an impairment loss when the fair value of held cryptocurrency falls below its carrying cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Impairment Loss — Cryptocurrency | Expense (+) | 120,000.00 | - |
| Cryptocurrency Asset (Carrying Value Reduced) | Asset (-) | - | 120,000.00 |
💡 Accountant's Note
Under the IAS 38 cost model, cryptocurrency is held at cost less any impairment. If the fair value (market price) falls below the carrying amount, an impairment loss must be recognised immediately. Unlike financial assets, impairments under IAS 38 cannot be reversed if the market price subsequently recovers — the write-down is permanent under cost model accounting.
Practitioner & Systems Framework
💻 ERP Architecture
Cryptocurrency impairment testing is performed at each reporting date by comparing the carrying cost to the market price on the reporting date (or the lowest intra-period price if the entity considers the lowest price to be the recoverable amount). The impairment loss is posted as a charge in the income statement. Under IAS 38 cost model, there is no subsequent reversal — even if Bitcoin's price recovers to above the original cost, the carrying value remains at the impaired amount until disposal. This creates a significant asymmetry: downside losses are recognised immediately; upside gains are only recognised on sale. US GAAP (ASC 350-60 effective 2025) moves to fair value measurement, eliminating this asymmetry.
⚠️ Audit Flags
Auditors confirm the cryptocurrency price used for impairment testing is sourced from a reputable exchange and represents the price at the exact reporting date (or close of business). Test that the impairment is calculated at the lot level (each lot purchased at different prices) rather than at a portfolio average. Confirm that no impairment reversal has been recorded — reversals are prohibited under IAS 38. For entities adopting the IAS 38 revaluation model (which requires an active market with sufficient depth and frequency), test that the revaluation reserve in equity is updated and any downward revaluation that exceeds the reserve is taken to P&L.
📄 Required Documentation
Cryptocurrency price at reporting date (exchange rate from a named source — CoinGecko, Bloomberg, CoinMarketCap), lot-level cost basis record, impairment calculation by lot, historical price chart confirming the reporting-date price, accounting policy (cost model vs. revaluation model), and prior period impairment schedule.
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