Page 22 - CMA Journal (Jan-Feb 2026)

Focus Section

The International Accounting Standards Board (IASB) and Professional accounting organizations like ICMA Pakistan
the IFRS Interpretation Committee (IFRIC) have made it clear play a crucial role in this context. When advising clients and
that the accounting treatment of cryptocurrency assets is preparing financial statements, accountants must use
mostly determined by the entity’s business model and the heightened professional judgement, ensure proper
purpose for which the asset is held. The fundamental documentation, and adhere to ethical principles in the
framework for accounting for cryptocurrency assets under absence of clear statutory norms. To address regulatory
IFRS is therefore provided by IAS 38, IAS 2, and IFRS 13 (IFRS gaps and enhance the quality of crypto-related financial
Foundation, 2022). reporting in emerging economies, recent regional studies
emphasize the importance of professional guidance,
Crypto assets that are identifiable, non-monetary, and
devoid of physical substance are categorized as intangible continuous professional development (CPD), and locally
assets under IAS 38. When held for investment or long-term relevant technical notes (Georgiou et al., 2024; Özcan, 2025).
value appreciation, most cryptocurrencies meet these Key Accounting Challenges
criteria. At cost, including directly attributable purchase
costs, initial recognition takes place. If an active market For experienced accountants, the accounting treatment of
exists, either the cost model or the revaluation model may cryptocurrency assets poses a number of intricate
be used for subsequent measurement. However, because of challenges, especially in countries like Pakistan where clear
measurement uncertainty and market volatility, the local guidance is lacking. Classification under IFRS is a
revaluation approach is rarely used in practice, making primary issue. Since crypto assets are not specifically
impairment testing a crucial consideration for companies defined by IFRS, accountants must exercise discretion to
holding cryptocurrency assets (Daruwala, 2024). determine whether they qualify as cash and cash
equivalents, financial instruments, inventory, or intangible
When cryptocurrency assets are held for sale in the ordinary
course of business, especially by brokers or cryptocurrency assets. Because there is typically no contractual right to
exchanges, IAS 2 is applicable. When the broker exception receive cash, cryptocurrency assets are not considered cash
applies, cryptocurrency assets are measured at fair value less or financial instruments under IAS 32. Instead, they are
selling expenses or at the lower of cost and net realizable treated as intangible assets under IAS 38 or as inventory
value. Because these holdings are trading oriented, this under IAS 2 for brokers and traders. This judgement-based
classification allows changes in fair value to be recognized in classification compromises the comparability of financial
profit or loss. Recent research indicates that this approach accounts and increases the likelihood of inconsistent
provides more timely information but may also increase practices across organizations.
earnings volatility (Akanbi, 2024; Özcan, 2025). Measurement and estimation present a second significant
In both IAS 38 and IAS 2, the application of IFRS 13 is challenge. Extreme price volatility, small markets for specific
essential for fair value measurement. Determining fair value tokens, and fragmented trading platforms are
requires careful consideration of active markets, valuation characteristics of cryptocurrency assets. If an active market
techniques, and the hierarchy of observable inputs due to exists, organizations must choose between the cost model
the high price fluctuations and fragmented trading and the revaluation model when accounting for intangible
platforms associated with cryptocurrency assets. High assets under IAS 38. For many cryptocurrency assets,
transparency and professional judgment are critical, as particularly in emerging markets, determining whether an
inconsistent valuation techniques can compromise active market exists, as defined by IFRS, is itself a matter of
comparability and reliability (Georgiou et al., 2024). debate. This often results in substantial differences between
book values and market values, reducing the relevance of
Regulatory and Professional Landscape financial information.
of Crypto Assets in Pakistan Impairment assessment represents another critical
Professional accountants, auditors, and reporting challenge. Under IAS 36, crypto assets measured at cost
organizations face a great deal of ambiguity due to must be tested for impairment whenever indicators exist.
Pakistan’s still evolving and fragmented legislative Given the frequent and abrupt declines in crypto prices,
framework controlling cryptocurrency holdings. Pakistan impairment indicators often arise, requiring timely
has not yet created a single legal accounting framework for recognition of losses. However, subsequent recoveries in
cryptocurrencies, in contrast to a number of other countries value cannot be reversed for intangible assets with
that have implemented extensive legislation pertaining to indefinite useful lives, leading to asymmetric accounting
digital assets. In the past, the State Bank of Pakistan (SBP) outcomes that may not faithfully represent underlying
has voiced concerns about the usage of virtual currencies, performance. This creates a tension between prudence and
mainly pointing out dangers associated with money faithful representation, particularly for entities with
laundering, financing terrorism, consumer protection, and significant digital asset holdings.
financial stability. Although SBP circulars have discouraged Lastly, there is a systematic issue with professional
regulated financial institutions from facilitating capabilities and expertise. Accounting requirements must
cryptocurrency transactions, they do not provide guidance be combined with knowledge of digital wallets, blockchain
on accounting or financial reporting treatment, nor do they technology, private keys, and cybersecurity risks.
constitute a complete prohibition (SBP, 2023).

20 ICMA’s Chartered Management Accountant, Jan-Feb 2026