The future of currency can be an interesting challenge for a future accountant. In the past week alone, there have been several major developments in regards to the intersection between accounting a digital currency called “Bitcoin”. For those who are unfamiliar with Bitcoin, it is essentially online cash, or funds that can be used to make purchases either online or in the real world without compromising one’s identity as is necessary when paying with a credit card. Transactions are verified by a network of computers which tracks which bitcoins are attributed to which account.
For accountants, bitcoins present issues on several levels. Primarily, the debate centers around whether or not digital currencies can be classified as “cash” in the accounting process. Furthermore, since the value of online currency can fluctuate widely, many investors hold on to their currency as an investment rather than as money in a bank. This too can conflict with the classification of online currency as cash. Finally, especially as it relates to the International Accounting Standards Board, should online currency be grouped together with other intangible assets or should it be classified as a standalone product?
No matter the outcome of these debates, there is always going to be one group which is going to have the answers sooner than anyone else, and that’s the taxman. This past week, the IRS filed an inquiry with Coinbase asking for account data on their users in order to ascertain if the site is being used to evade taxes. Since taxes are always on the mind of a good accountant, it is important to follow news regarding this subject closely, and to always follow the latest guidance and legal advice of those familiar with these tools. Stay tuned for more updates about accounting and the future.