Digital assets are treated as intangible assets with an indefinite life by accounting standards. You need to impair intangible assets. With Cryptio’s Impairment module, you can run impairment for any given period or day and automatically report the results in one platform - without the time-consuming manual processes.

⚠️ Please note that the Impairment module is only available for those on Enterprise plans. If you are on an Enterprise plan, please reach out to the support team and we can switch it on for your workspace. If you are not an Enterprise customer but want access to the module, our support team is happy to discuss options.

What is impairment for crypto assets?

An impairment loss is defined by the ACCA as “the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.”

FASB treats digital assets as intangible assets (No. 142 - FASB). As a result, crypto assets “will not be amortized but rather will be tested at least annually for impairment”. Companies therefore must:

• Complete testing at least once a year.
  • ✔️Cryptio tip: Our customers tend to perform impairment tests more frequently, (i.e. quarterly, monthly, weekly, or even daily basis) to better reflect the fair value of the digital asset. Best practice recommendation is to perform an impairment test during your reconciliation process.
• Test at the lot level and asset by asset. Unit lots are comprised of newly acquired lots with the same acquisition date and the same acquisition price. Previous impairment test book value is used to complete the current impairment testing.
• Only upon the sale or disposal of that unit may you recognize a revenue gain or loss. Until then you will require to continue performing impairment calculations.

🚨If you are expecting an audit for the financial year, please always let your dedicated Customer Success Manager know ahead of time. This will allow us to give timely support on your accounts and even get our Accounting experts’ opinions if necessary. So when the time comes, you are well-prepared for the audit.

What can you do with Cryptio’s Impairment module?

1. Run an Impairment test on any given period, for any given day.
2. Decide to apply an impairment testing that has been executed, and carry the impaired cost basis in the Reports section.

Find Cryptio’s Impairment module by following these steps:

🚨 Before getting started with Impairment:

• Make sure your workspace data is complete and accurate with no pending issues.
• You need to lock your workspace. Familiarize yourself with our Data Lock feature and the requirements to switch it on. Learn how to lock your data in this article.
• Once you lock your workspace for the testing period, you are allowed to run any impairment test on the transaction data.

Step 1: Lock your data

Why do you need to lock transaction data before running an impairment test?

You need to lock the transaction data of the period on which you wish to run an impairment test. This prevents the user from changing the data once the impairment test is applied. Running impairment also affects the cost basis for every transaction until the end of your given period.

Step 2: Run an impairment test and update the valuation for the asset based on the new price

• Go to Accounting in the side navigation bar. On the dropdown menu, select the Impairment module.

• To run an impairment test, click on “+ Impairment”.

• Choose the Impairment date (the end date for the test period).

  • The End date is the reference date for the fair market value of the asset to be compared with their current carrying value (cost basis) by lot. From the Start date (the last impairment period, check FAQ for more information) to the End date, all lots that have been purchased and not sold, with a fair market value on the end date lower than the current carrying value are impaired.

• Fill out Notes.

  • The “Notes” section is for internal documentation purposes and is used to communicate to auditors the reasons why an impairment test was run.

• Once the test is run, you can access detailed reports from the Reports tab. These reports will show the represents the total impairment during the period.

  💡 Check out the report further down this article.

Step 3: Applying an impairment and update the cost basis across all the reports

• Once an impairment test is run, you have the option to “Apply” the new impaired cost basis to the Report section. To do this, click on “Apply” (see below). ⚠️ Note that only 1 impairment test can be applied at a time.

Generate Impairment reports

Once an impairment test is applied, the reports in the Reports section will display both fair value non-impaired and book value impaired cost basis data.

1. Go to the Reports page
2. Click on the + Report button, and a drawer will emerge
3. Find Accounting and Tax reports module
4. Select Impairment balance
5. Choose the Applied impairment from the dropdown
6. Choose relevant assets and wallets. The default option is including All.
7. Click Create
8. The report will appear on the page and click the download icon under the Actions column.

For complete impairment testing, we recommend generating the following report:

• The Impairment Balance
• The Asset Roll Forward Report - New impairment related datapoint will be available soon.
• The Transaction History Report - New impairment related datapoint will be available soon.
• The Historical Balances Report - New impairment related datapoint will be available soon.

💡 Tip: Our Accounting experts recommend “as customers go through their impairment testing and reconciliations, save down all the different reports.” for audit trail purposes.

💡 Trick: If you have two impairments one for the 2020 period (Jan-Dec 20) and one for the 2021 period (Jan-Dec 21). Then when you review reports, for the 2020 period you can see the 2020 impairment. But when you generate the 2021 period, you can see the comparison of 2020 and 2021. So our module can take single and multiple impairments. 

Impairment Balance report

Breakdown of impairment value per asset [on a lot level]

Every month, users would use this report to see what is the monthly booked amount that needs to go towards impairment. At the moment, this amount is not automatically calculated.

Read our FAQ to learn more about our Impairment module. For any further questions, feel free to reach out to the support team via the chatbot or raise a ticket.