Crypto Accounting for Estonian Companies

Section 2 — IAS 38 Cost Model: Measurement, Impairment, and Disposal

For companies holding crypto as long-term investments with conservative measurement

How the Cost Model Works

Under the IAS 38 cost model, crypto assets are held at their original acquisition cost minus any accumulated impairment losses. Market price movements above the carrying value are ignored — no upward revaluation is permitted under the cost model. Only when the market price falls below the carrying value does an accounting entry arise (impairment). This creates an asymmetric model: losses are recognised, gains are not.

The cost model is simpler to operate than the revaluation model — it requires no monthly price lookups for unrealised gains, no OCI reserve accounting, and no reversal mechanics. However, it means a company’s balance sheet can significantly understate the current value of its crypto holdings in a rising market, and it creates P&L volatility in bear markets when impairment charges are required.

Impairment Testing Under IAS 38 Cost Model

An impairment trigger is an indication that the carrying value may not be recoverable — for crypto, this is typically a sustained fall in market price below cost. When a trigger exists, you estimate the recoverable amount (the higher of fair value less costs to sell, and value in use). For liquid crypto assets, fair value less costs to sell is the relevant measure — essentially the current market price minus transaction fees.

Section 3 — IAS 38 Revaluation Model: Fair Value, OCI, and Month-End Entries

The preferred model for most Estonian crypto OÜs — reflecting current market value on the balance sheet

How the Revaluation Model Works

Under the revaluation model, crypto assets are remeasured to fair value at each reporting date (at minimum annually; in practice monthly or quarterly for crypto given price volatility). Changes in fair value since last revaluation are recognised in Other Comprehensive Income (OCI) — a section of the equity reserve — rather than in profit or loss. This means unrealised gains do not inflate operating profit, but they are visible on the balance sheet and in the statement of comprehensive income.

When a revalued asset is sold, any cumulative OCI gain (the revaluation reserve for that asset) is recycled to retained earnings — not through P&L. The P&L gain on disposal is calculated as: disposal proceeds minus the most recently revalued carrying amount.

Month-End Revaluation Schedule and Journal Entries

Each month-end, every crypto asset is revalued to its closing market price. The difference between the new carrying value and the prior carrying value is posted as an OCI entry (if a gain or a reversal within prior OCI) or as a P&L entry (if a loss exceeding prior OCI for that asset).

Section 4 — IAS 2 Inventory for Crypto Trading Operations

For exchanges, OTC desks, and companies that buy and sell crypto as their core business

When IAS 2 Applies

IAS 2 (Inventories) applies when crypto assets are held for sale in the ordinary course of business — i.e. when buying and selling crypto is the company’s primary revenue-generating activity rather than a treasury/investment function. A crypto exchange, OTC trading desk, or market-making operation holds crypto as inventory because it is constantly acquiring and selling assets as part of its trading book.

Under IAS 2, crypto inventory is measured at the lower of cost and net realisable value (NRV). Unlike IAS 38’s revaluation model, there is no upward revaluation — if market prices rise above cost, the carrying value stays at cost. If market prices fall below cost, the inventory is written down to NRV (the estimated selling price minus costs to sell).

Section 5 — Journal Entries for Every Crypto Transaction Type

The complete accounting entry for each event — buy, sell, swap, receive, mine, stake, pay fees

Buying Crypto With EUR

Purchase: 0.5 BTC @ €40,000/BTC = €20,000 (via exchange)

* Transaction fee (e.g. 0.2% = €40) increases cost of acquisition under IAS 38 — it is part of the cost of the asset. Fees can alternatively be capitalised into the asset cost (reduces subsequent taxable gain on disposal by the fee amount).

Selling Crypto for EUR (Revaluation Model — IAS 38)

Disposal: 0.5 BTC at €55,000/BTC = €27,500 (revalued carrying value was €24,000)

* Carrying value at disposal = €24,000 (after revaluations). Proceeds = €27,500. P&L gain = €27,500 − €24,000 = €3,500. Additionally: accumulated OCI reserve for this BTC (€4,000) is recycled — debit OCI Reserve / credit Retained Earnings (internal equity transfer).

Crypto-to-Crypto Swap (ETH to MATIC)

Swap: 1.0 ETH (carrying €2,000, FMV €2,100) for 3,000 MATIC (FMV €2,100)

* ETH disposed at FMV (€2,100). Cost base of ETH was €2,000. Gain = €100 recognised in P&L. MATIC acquired at €2,100 (FMV at swap) — this becomes MATIC’s new cost base. Gas fee for the swap is added to MATIC’s cost or expensed (policy choice).

Receiving Mining Rewards

Mining: 0.002 BTC received when price = €50,000/BTC → FMV = €100

* FMV at time of receipt = income. €100 is revenue in the period received. Also becomes the cost base for this 0.002 BTC — so a future sale at the same price creates no additional gain.

Receiving Staking Rewards

Staking: 50 tokens received when price = €0.80/token → FMV = €40

* Same treatment as mining. FMV at receipt = income AND new cost base. If tokens are later sold at €1.00, additional gain = (€1.00 − €0.80) × 50 = €10.

Paying Gas Fees in ETH

Gas Fee: 0.003 ETH gas for a DeFi transaction (ETH price €2,000 → fee = €6.00)

* Gas fees paid in ETH are a disposal of that ETH at current market value. The ETH cost base is reduced by the amount disposed. If the ETH disposed has a different cost base than the current market price, a small gain or loss arises on the ETH portion.

Transferring Between Own Wallets (Non-Taxable)

Transfer: 0.5 BTC from Coinbase exchange to own hardware wallet

* Transfer between own wallets: not a taxable disposal. Move the carrying value from one sub-account to another. Cost base follows the asset. The same BTC is still owned — only the custody location changed. Use sub-accounts within 1100 to track custody locations.

Section 6 — Fair Value Determination for Crypto Assets

How to establish defensible, consistent EUR prices for every transaction and month-end valuation

The Hierarchy: Which Price to Use

IFRS 13 (Fair Value Measurement) establishes a three-level hierarchy for fair value. For crypto assets, most major tokens (BTC, ETH, and large-cap tokens) are Level 1 — observable market prices in active markets. This means the price is objective and directly observable. For illiquid or thinly traded tokens, the hierarchy moves to Level 2 (observable inputs but not direct market price) or Level 3 (unobservable inputs — internal models). Most accounting and tax work deals with Level 1 assets.

Establishing a Price Data Policy

Your accounting policy must specify exactly how prices are determined, so that the approach is: consistent (same methodology every month), verifiable (source data can be looked up and confirmed), and documented (each price used can be traced to a specific source at a specific time). Price sources should be specified in the accounting policy document before the first transaction.

Section 7 — Monthly Close Process for Crypto Accounting

Day-by-day — from data download to filed returns and signed-off financial statements

The Crypto Monthly Close — What Makes It Different

The crypto monthly close shares the same objective as any standard close — accurate, complete financial statements — but the data sourcing and classification work is substantially more complex. The primary difference from a standard close is that the transaction data does not arrive in a single bank feed; it comes from blockchain explorers, exchange APIs, DeFi protocol subgraphs, and custody platform exports — each in different formats, with different timestamps, and requiring different classification logic.