BitCoinPosted: January 20, 2014
If you haven’t heard of Bitcoin, you need to do a little more reading about what is going on in the world. For those few who haven’t heard of it, Bitcoin is a virtual currency. It is not backed by a government. Instead it was created by an anonymous person or group. People can “mine” Bitcoins by solving ever increasingly complex problems. New Bitcoins are mined every 10 minutes, but there is a limited number so by sometime around 2040 all the Bitcoins available will have been mined. While Bitcoins maybe the next tulip mania, real companies (Zynga) are starting to accept them in payment and the value of a Bitcoin fluctuates and has been anywhere between $100 to $100 per Bitcoin in the last year.
As CPAs, Bitcoins, and other virtual currencies, are going to make us think hard about a lot of questions.
- Is Bitcoin a currency? Can a business produce financial statements in Bitcoins if they say that is the predominate currency in their markets?
- If Bitcoin is not a currency is it an investment, a derivative, or something else entirely? The answer has significant implications on the recording of Bitcoin value.
- Do I have to revalue them every period? If I do, does that revaluation go into OCI or net Income?
- Do I have to decide if they are held for sale or not?
- Are cash flows related to Bitcions operating cash flows or investing cash flows?
- What about taxes? Do changes in value qualify for capital gains treatment or not?
Maybe instead of messing with revenue and lease accounting which, while not perfect, is at least understood by most people, the FASB should be spending time thinking about things like this where we need real help in making sure the accounting is done consistently across all businesses.