South Korea Mandates Disclosure of Crypto Holdings in Financial Statements Starting 2024

South Korea Mandates Disclosure of Crypto Holdings in Financial Statements Starting 2024

South Korea has recently unveiled draft regulations mandating companies that issue or own cryptocurrencies to disclose their holdings in financial statements, starting from the year 2024. The country’s financial regulator released the draft rules on Tuesday, outlining the requirements for companies to provide information regarding the quantity, characteristics, business models, and accounting policies concerning the sale of virtual currencies. Additionally, companies will be obligated to disclose their profits, volume, and market value related to their crypto assets.

The Financial Services Commission (FSC) emphasized that these measures are aimed at enhancing accounting transparency, following the enactment of the Virtual Asset User Protection Act on June 30. This move reflects the country’s commitment to establishing clearer guidelines for the reporting and management of digital assets.

Previously, companies and their auditors held differing views on the timing and criteria for determining whether the sale of virtual assets constituted profit. However, under the newly proposed rules, companies will recognize the sales of virtual assets as profit once they fulfill their obligations to the asset holders.

It is important to note that costs incurred in developing virtual assets and associated platforms will not be recognized as intangible assets, according to the announcement made by the regulatory authorities.

Over the past year, domestic accounting experts, alongside the Financial Services Commission, the Financial Supervisory Service, and the Accounting Standards Board, have engaged in ongoing discussions to address accounting uncertainties in this rapidly evolving field. The announcement also mentioned that guidelines for audit procedures are currently being prepared to ensure consistent and accurate reporting practices.

Overall, these regulatory changes signify South Korea’s commitment to bolstering transparency and accountability in the cryptocurrency market, as well as providing investors and stakeholders with a clearer understanding of the financial landscape within the digital asset industry.