Classification of Cryptocurrency Holdings oftware Provider (the "Company") supports and sells computer software. The Company accepts ryptocurrencies (c.g., Bitcoin, Ether, Ripple) as payment for the sale of its computer software. he Company holds its cryptocurrencies partially for investment (e.g., expectation that they will ppreciate in value) and partially to use in the future to purchase goods or services. ryptocurrency is a new type of value and payment method that is different from fiat currency e.g., U.S. dollars and foreign currencies). With the exception of El Salvador which recently dopted Bitcoin as legal tender', cryptocurrencies have no government backing or recognition by central authority as legal tender. Their value is only supported by supply and demand. ryptocurrencies do not have a physical form but exist as immutable distributed ledgers electronic records) maintained on public blockchains. They are different than electronic astances of cash, such as an online bank account, in that they are not linked to a physical urrency. itcoin and other similar "coins" use cryptography (e.g., use of codes to secure communications) control the security and creation of these coins, which led to the term "cryptocurrencies." here are other crypto-assets that are not cryptocurrencies, such as tokens and stablecoins. While e Company in this case study does not accept or transact in tokens or stablecoins, it is mportant to distinguish the three. Cryptocurrency is a unit of value that is native to a blockchain. It is a means of exchange within the blockchain to incentivize the network of participants to use the blockchain. The purpose of a cryptocurrency is to function as a medium of exchange, and it has limited functionality beyond that. Cryptocurrencies are not issued by a jurisdictional authority, are not considered securities, and do not give rise to a contract between the holder and another party. A token is a piece of business logic (i.e., "smart contract") coded into an existing blockchain. A token can have a functionality beyond an exchange of value - it can represent any asset or functionality desired by the developer for use on a platform. Tokens may be an interest in an entity (e.g., security token), an interest in a specific asset (asset token), or a right to a future product or service (utility token). A stablecoin is a digital asset that is a means of exchange similar to a cryptocurrency but includes a mechanism designed to minimize price volatility by linking its value to the value of a more traditional asset such as a fiat currency or a commodity. This link is established through a contract that often allows the holder to redeem the stablecoin for the corresponding traditional asset (e.g., a stablecoin linked to $1.00 per stablecoin may be redeemed for $1.00 per stablecoin) ryptocurrencies are usually obtained by purchasing or receiving them on a peer-to-peer basis. hat is, they can be received directly from a counterparty in exchange for an asset or service or they can be purchased in exchange for a fiat currency, often from an exchange that specializes in cryptocurrencies. For a cryptocurrency to function as a means of peer-to-peer exchange, a ledger needs to be maintained for tracking ownership of the cryptocurrency. For cryptocurrencies, this electronic ledger is maintained using blockchain. There are many copies of this ledger and many ledger keepers. Distributing the processing allows many users to each play a small part in the maintenance of the ledger system; this means that the security of the system does not rely on a few individuals. The amount of coins for a particular cryptocurrency that are in circulation may be tightly controlled. For example, for Bitcoin there is a limit on the number of coins that can exist. New Bitcoins are only created as payment to processors (called "miners") for providing the service of validating and distributing an electronic ledger of these transactions to those involved in maintaining the blockchain. Required: 1. How should the Company's holdings of cryptocurrency be classified in the statement of financial position under U.S. GAAP and IFRS Standards? U. 2. How should the holdings of cryptocurrency be initially and subsequently measured under U.S. GAAP and IFRS Standards? 'As the guidance for the accounting treatment of Bitcoin in EI Salvador is currently being developed, please assume the Company is not located within El Salvador as this situation is outside of the scope of this case. Classification of Cryptocurrency Holdings oftware Provider (the "Company") supports and sells computer software. The Company accepts ryptocurrencies (c.g., Bitcoin, Ether, Ripple) as payment for the sale of its computer software. he Company holds its cryptocurrencies partially for investment (e.g., expectation that they will ppreciate in value) and partially to use in the future to purchase goods or services. ryptocurrency is a new type of value and payment method that is different from fiat currency e.g., U.S. dollars and foreign currencies). With the exception of El Salvador which recently dopted Bitcoin as legal tender', cryptocurrencies have no government backing or recognition by central authority as legal tender. Their value is only supported by supply and demand. ryptocurrencies do not have a physical form but exist as immutable distributed ledgers electronic records) maintained on public blockchains. They are different than electronic astances of cash, such as an online bank account, in that they are not linked to a physical urrency. itcoin and other similar "coins" use cryptography (e.g., use of codes to secure communications) control the security and creation of these coins, which led to the term "cryptocurrencies." here are other crypto-assets that are not cryptocurrencies, such as tokens and stablecoins. While e Company in this case study does not accept or transact in tokens or stablecoins, it is mportant to distinguish the three. Cryptocurrency is a unit of value that is native to a blockchain. It is a means of exchange within the blockchain to incentivize the network of participants to use the blockchain. The purpose of a cryptocurrency is to function as a medium of exchange, and it has limited functionality beyond that. Cryptocurrencies are not issued by a jurisdictional authority, are not considered securities, and do not give rise to a contract between the holder and another party. A token is a piece of business logic (i.e., "smart contract") coded into an existing blockchain. A token can have a functionality beyond an exchange of value - it can represent any asset or functionality desired by the developer for use on a platform. Tokens may be an interest in an entity (e.g., security token), an interest in a specific asset (asset token), or a right to a future product or service (utility token). A stablecoin is a digital asset that is a means of exchange similar to a cryptocurrency but includes a mechanism designed to minimize price volatility by linking its value to the value of a more traditional asset such as a fiat currency or a commodity. This link is established through a contract that often allows the holder to redeem the stablecoin for the corresponding traditional asset (e.g., a stablecoin linked to $1.00 per stablecoin may be redeemed for $1.00 per stablecoin) ryptocurrencies are usually obtained by purchasing or receiving them on a peer-to-peer basis. hat is, they can be received directly from a counterparty in exchange for an asset or service or they can be purchased in exchange for a fiat currency, often from an exchange that specializes in cryptocurrencies. For a cryptocurrency to function as a means of peer-to-peer exchange, a ledger needs to be maintained for tracking ownership of the cryptocurrency. For cryptocurrencies, this electronic ledger is maintained using blockchain. There are many copies of this ledger and many ledger keepers. Distributing the processing allows many users to each play a small part in the maintenance of the ledger system; this means that the security of the system does not rely on a few individuals. The amount of coins for a particular cryptocurrency that are in circulation may be tightly controlled. For example, for Bitcoin there is a limit on the number of coins that can exist. New Bitcoins are only created as payment to processors (called "miners") for providing the service of validating and distributing an electronic ledger of these transactions to those involved in maintaining the blockchain. Required: 1. How should the Company's holdings of cryptocurrency be classified in the statement of financial position under U.S. GAAP and IFRS Standards? U. 2. How should the holdings of cryptocurrency be initially and subsequently measured under U.S. GAAP and IFRS Standards? 'As the guidance for the accounting treatment of Bitcoin in EI Salvador is currently being developed, please assume the Company is not located within El Salvador as this situation is outside of the scope of this case