South Korea’s Financial Services Commission (FSC) announced on Tuesday the implementation of new rules, slated to take effect from January 2024.
Regulations will mandate firms that issue or own cryptocurrencies to provide detailed crypto disclosures in their financial statements.
The disclosures must include a range of information, including the amount and characteristics of their crypto tokens, their business models, and their internal accounting policies concerning the sale of cryptocurrencies and associated profits.
Moreover, companies holding cryptocurrencies for investment purposes will be required to disclose information about the token’s classification, book value, and the market value of their holdings.
The FSC indicated that the primary aim of these rules is to bolster accounting transparency at a time when the country’s legal authorities continue an investigation into the collapse of Terra last year, which wiped out roughly $40 billion in a matter of days.
Historically, there has been a divergence of views in Korea between companies and their auditors on the timing and criteria for determining when the sale of virtual assets to customers should be considered profit. However, the latest rules are expected to bring clarity to this issue.
They state that the sales of virtual assets will be recognized as profit only after the company has fulfilled its obligations to its holders. In addition, the costs associated with developing virtual assets and their platforms will not be recognized as intangible assets.
The announcement indicated that guidelines for audit procedures are currently under development.
These draft guidelines were endorsed by the Korea Accounting Standards Board on July 7, according to the FSC’s announcement.