ERC-20 Token Scope: ASC 350-60, IAS 38 and Carrying Amount

Scope can change the carrying amount dramatically

For plain fungible tokens, the most consequential accounting question is decided before measurement starts. An ERC-20 token scope test comes first, and it settles which standard the holding is measured under. Get that wrong and every number after it is wrong too, however careful the price work. The question is simple to state:

Which standard applies?

Under IFRS, a plain token falls into IAS 38 unless it is inventory under IAS 2. Under current US GAAP, a fungible crypto intangible falls into ASC 350-60 if it satisfies every one of six scope criteria. Those two routes produce materially different carrying amounts from the same quantity of the same token.

The series research paper, ERC-20 Accounting: How to Account for a Plain Fungible Token, Allowances and Gas, demonstrates this with LINK, the token at contract 0x514910771AF9Ca656af840dff83E8264EcF986CA on Ethereum mainnet. On its worked facts the difference at one date, on one market price, is 78.6 per cent of the lower carrying amount.

IFRS: start with what the 2019 agenda decision actually covers

In June 2019, the IFRS Interpretations Committee considered holdings of a subset of cryptoassets it called "cryptocurrencies" for purposes of the agenda decision.

An agenda decision is the Committee's published explanation of why it did not add a standard-setting project to its work plan. It is not an IFRS Standard. The IFRS Foundation's Due Process Handbook says at paragraph 8.4 that agenda decisions "cannot add or change requirements in IFRS Standards", and at paragraph 8.5 that explanatory material "derives its authority from the Standards themselves". The support for a scope conclusion is therefore always the Standards, and the agenda decision is available only where the entity can conclude the token has all three characteristics.

The subset had three characteristics, in the Committee's own words:

1. a digital or virtual currency recorded on a distributed ledger that uses cryptography for security,
2. not issued by a jurisdictional authority or other party, and
3. does not give rise to a contract between the holder and another party.

The Committee observed, rather than concluded, that a holding meeting those characteristics meets the IAS 38 paragraph 8 definition of an intangible asset, on the grounds that it is capable of being separated from the holder and sold or transferred individually (IAS 38 paragraph 12) and does not give the holder a right to receive a fixed or determinable number of units of currency (IAS 21 paragraph 16). Those paragraphs apply to any asset an entity holds, so the reasoning is available whether or not the token is inside the defined subset.

It then concluded that IAS 2 applies when the cryptocurrency is held for sale in the ordinary course of business, and that IAS 38 applies otherwise.

Why the IFRIC fact pattern must not be overextended

The agenda decision does not say that all crypto is an IAS 38 intangible asset, and its own second paragraph explains why. The Committee considered a subset carrying all three of the characteristics above and gave that subset the defined name "cryptocurrency". Every conclusion in the decision is a conclusion about that defined term.

Its fact pattern excludes two kinds of token, not one. It excludes any token that gives rise to a contract between the holder and another party, and, because characteristic 2 reads "not issued by a jurisdictional authority or other party", it excludes any token that some party issued.

The contract limb is critical because many ERC-20 tokens create exactly such a contract. Examples include stablecoins with redemption rights, wrapped assets, tokenised deposits, lending receipt tokens, vault shares, tokenised securities and tokenised real-world assets. Those instruments require separate analysis under the standards applicable to their rights and obligations.

The issuance limb is the one most readers will not have met. This article's own reading is that a plain ERC-20 token is not inside the Committee's fact pattern at all, because it exists only because a deployer's constructor assigned the supply, and on the ordinary reading of "or other party" that is issuance by another party. The Committee's staff took the same view of the phrase. Asked to narrow it to a sovereign authority on the ground that all cryptocurrencies are issued by someone, the staff declined, recording that "other party" is "important in determining its scope" because "it excludes from the scope of the agenda decision some types of cryptoasset that have been issued by parties other than a jurisdictional authority" (Agenda Paper 12, paragraph 44).

No authoritative or interpretive source has settled how far the phrase reaches, so this is offered as this article's analysis and not as a rule anybody has published. The destination is very probably unchanged, IAS 38 or IAS 2. The route is different, and the route is what an auditor asks for: the entity works the definitions in the next section directly rather than borrowing the Committee's conclusion.

IFRS classification path for a plain token

Four questions, asked in order, each against a named paragraph.

Step 1: Is it cash?

Usually no. IAS 32 paragraph AG3 describes currency as a financial asset because it is the medium of exchange and therefore the basis on which all transactions are measured and recognised in financial statements. The Committee concluded that a holding of cryptocurrency is not cash because cryptocurrencies "do not currently have the characteristics of cash", noting that it was not aware of any cryptocurrency used as a medium of exchange and as the monetary unit in pricing goods or services to that extent. The word "currently" is the Committee's, and the test is one an entity re-performs rather than inherits.

Step 2: Is it a financial asset?

IAS 32 paragraph 11 defines a financial asset as any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity, a contractual right to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity, or one of the particular contracts that will or may be settled in the entity's own equity instruments.

For a plain token with no issuer redemption promise, there is no such contractual right. Where the answer is yes, the token is outside IAS 38 altogether, because IAS 38 paragraph 3(e) excludes financial assets as defined in IAS 32, and it is classified and measured under IFRS 9. That is the route for a tokenised debt claim or a token carrying a redemption right against an issuer, and it is a different article.

Step 3: Is it inventory?

If held for sale in the ordinary course of business, the token is inventory as IAS 2 paragraph 6 defines it, and IAS 2 applies. The ordinary inventory model is the lower of cost and net realisable value (IAS 2 paragraph 9).

IAS 2 paragraph 3(b) then takes out of the Standard's measurement requirements inventories held by commodity broker-traders who measure them at fair value less costs to sell, and requires changes in that amount to be recognised in profit or loss in the period of the change. Broker-traders are those who buy or sell commodities for others or on their own account, and the inventories the exclusion covers are principally acquired with the purpose of selling in the near future and generating a profit from fluctuations in price or the broker-trader's margin (IAS 2 paragraph 5). An entity holding tokens as a treasury investment, or trading occasionally for its own account without that purpose, does not reach paragraph 3(b) and measures at the lower of cost and net realisable value. The distinction depends on the business model and the reason the inventory is held, not on management's preference for fair value.

Step 4: If not, IAS 38

For the plain-token fact pattern, IAS 38 is the remaining route.

IAS 38 does not mean fair value through profit or loss

After initial recognition, IAS 38 paragraph 72 requires the entity to choose one of two policies. The cost model carries the asset at cost less accumulated amortisation and accumulated impairment losses (IAS 38 paragraph 74). The revaluation model carries it at fair value at the date of revaluation less subsequent accumulated amortisation and impairment, and for that purpose fair value must be measured by reference to an active market (IAS 38 paragraph 75).

An active market is one in which transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis (IFRS 13 Appendix A). IAS 38 does not define the term, it requires one, and it records that an active market for an intangible asset is uncommon. Even where a quoted token price exists, the preparer must test the token's market against that definition, and where the test fails the asset is carried at cost less accumulated amortisation and impairment losses (IAS 38 paragraph 81).

Under the revaluation model a revaluation increase is recognised in other comprehensive income and accumulated in equity as a revaluation surplus, except that it is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss (IAS 38 paragraph 85). A revaluation decrease is recognised in profit or loss except to the extent of any credit balance in the revaluation surplus for that asset (IAS 38 paragraph 86). For a token that falls and then recovers, the recovery therefore goes to profit or loss up to the amount of the earlier decrease, and only the excess reaches other comprehensive income.

So "the token has a market price" does not mean "IFRS fair value through profit or loss".

US GAAP: ASC 350-60 is a six-part scope test

ASU 2023-08 created ASC 350-60 for certain crypto assets. ASC 350-60-65-1(a) makes it effective for all entities for fiscal years beginning after 15 December 2024, including interim periods within those fiscal years, with early adoption permitted for financial statements not yet issued. For a calendar-year entity, 2025 is the first mandatory year, and the former cost-less-impairment model is no longer available for an in-scope token. ASC 350-60-65-1(b) and (c) take the cumulative effect of initial application to opening retained earnings, measured as the difference between the carrying amount at the end of the prior annual period and fair value at the beginning of the adoption year, so comparatives are not restated.

The Subtopic applies only when the asset meets all six criteria in ASC 350-60-15-1, which the standard letters (a) to (f):

• (a) meets the definition of intangible assets as defined in the Codification
• (b) does not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets
• (c) is created or resides on a distributed ledger based on blockchain or similar technology
• (d) is secured through cryptography
• (e) is fungible
• (f) is not created or issued by the reporting entity or its related parties

If one criterion fails, the asset is outside ASC 350-60.

Criterion (b) does most of the economic work

Criterion (b) excludes assets that give the asset holder enforceable rights to, or claims on, underlying goods, services, or other assets. Both limbs matter: a claim falling short of a formal right to delivery still takes the asset out of the Subtopic. ASU 2023-08 BC21 records that a crypto asset giving the holder rights to other crypto assets is outside the scope for that reason.

That pushes many token types outside ASC 350-60 even though they are blockchain-based, cryptographically secured and fungible: wrapped assets redeemable for another cryptoasset, lending receipts redeemable for deposited assets, tokenised commodities, tokenised securities, some stablecoins and vault shares. A plain fungible token with no redemption right is a much cleaner candidate.

The Board was asked to define the operative word and declined. ASU 2023-08 BC20 records that it agreed with respondents who observed that determining whether there are enforceable rights "may require judgment", and noted that "in many, but not necessarily all, cases it will be clear whether a crypto asset provides an asset holder with enforceable rights to underlying goods, services, or other assets". There is no bright line, and the standard setter said so.

The utility token is where criterion (b) runs out of guidance

The hardest case is a token whose market role is to pay for a network's services. The tempting argument runs: the token pays service providers, so it provides rights to services, so criterion (b) fails, so the token sits at cost less impairment. That argument does not survive the words of the criterion, which is about a right the holder has, not about what the holder can spend the token on. Being the accepted unit of payment in a market makes the holder the prospective payer, not the payee, and a plain fungible token holder has no counterparty under any obligation.

The phrase "utility token" appears zero times in ASU 2023-08 and zero times in the 159-page AICPA digital-assets practice aid, both searched in full for this article. The nearest concrete criterion (b) failure into goods or services anywhere in the practice aid is its Q&A 1B, where a non-fungible token "may fail the enforceable right to other goods and services criterion if it conveys to the holder a license to intellectual property". That is a legal right enforceable against a licensor, not a market role.

No specific guidance identified on whether being an accepted unit of payment in a network constitutes an enforceable right to services. Searched: ASU 2023-08 in full, and the practice aid in full, including its only three scope questions and answers, of which one concerns wrapped tokens and one non-fungible tokens. That is a documented absence of guidance, not a licence to choose, and the preparer's conclusion has to be reasoned and recorded.

Criterion (f) can exclude the reporting entity's own token

Criterion (f) takes the asset out of the Subtopic if it was created or issued by the reporting entity or its related parties, and it matters even when the entity later reacquires units in the market.

ASU 2023-08 BC17 draws the line for mining: an entity that mines or validates and receives newly created crypto assets "is not the creator of the crypto assets that it receives as consideration for performing services if mining or validating is the only involvement that an entity has in the creation of the asset". An entity that deployed the token contract is on the other side of that line, and its own token is outside ASC 350-60 in its hands. The scope analysis must therefore include token provenance and related-party relationships, not only current technical characteristics.

What ASC 350-60 actually changes

For in-scope assets, ASC 350-60-35-1 requires crypto assets to be measured at fair value in the statement of financial position, with gains and losses from remeasurement included in net income. Fair value is measured by applying Topic 820, which is the subject of the valuation article in this series.

The Subtopic also requires crypto assets to be presented separately from other intangible assets in the statement of financial position (ASC 350-60-45-1), and remeasurement gains and losses to be included in net income and presented separately from changes in the carrying amount of other intangible assets (ASC 350-60-45-2). At interim and annual dates the entity discloses the name, cost basis, fair value and number of units of each significant holding (ASC 350-60-50-1) and the fair value, nature and remaining duration of any contractually restricted holdings (ASC 350-60-50-6). At annual dates it discloses the cost basis method used (ASC 350-60-50-2), a reconciliation from opening to closing balances separating additions, dispositions, gains and losses (ASC 350-60-50-3), and the nature of those activities together with cumulative realised gains and losses on dispositions in the period (ASC 350-60-50-4).

Under IFRS the disclosure requirement is a block rather than a single paragraph, and the June 2019 agenda decision lists it: IAS 2 paragraphs 36 to 39 for cryptocurrencies held for sale in the ordinary course of business, IAS 38 paragraphs 118 to 128 for holdings to which IAS 38 is applied, IFRS 13 paragraphs 91 to 99 where the holding is measured at fair value, IAS 1 paragraph 122 for management's judgements, and IAS 10 paragraph 21 for material non-adjusting events, which for a token means a significant post-year-end price move. The IAS 1 reference moves when IFRS 18 replaces IAS 1, and IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.

ASC 350-60 does not provide the complete accounting model for every event. ASC 350-60-05-2 states that the Subtopic does not address the initial measurement, recognition and derecognition of crypto assets, which fall under other generally accepted accounting principles. For a disposal that means ASC 350-10-40-1 and, through it, ASC 610-20.

What happens outside ASC 350-60

A crypto intangible that fails the scope criteria may remain within ASC 350-30, depending on the facts and whether another Topic applies. For an indefinite-lived intangible under the legacy model:

• the asset is carried at cost, subject to impairment
• ASC 350-30-35-18 requires it to be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired
• ASC 350-30-35-19 measures the loss as the excess of carrying amount over fair value and makes the adjusted carrying amount the asset's new accounting basis
• ASC 350-30-35-20 prohibits the subsequent reversal of a previously recognised impairment loss, so a later recovery in the token's price never restores the carrying amount

The timing of the test is the part preparers get wrong, and it is what creates the divergence below. It is not a reporting-date test. The AICPA digital-assets practice aid treats a trade in an identical digital asset below carrying amount as the indicator, at Response 5: "This is the case regardless of when this occurs during the reporting period and whether the price recovers before the end of the reporting period." Response 6 adds that where fair value is below carrying value "an impairment loss is recorded at that time", and that the prohibition on reversal "applies even if the fair value of the asset recovers above the original carrying value within the same accounting period". Response 7 puts the unit of account at the individual unit or a divisible fraction of one, so each acquisition lot is tested against its own cost.

The result is asymmetry. Downside is recognised whenever it occurs, later upside is not recognised until derecognition, and the earlier impairment stays embedded in the carrying amount however far the market recovers.

Why the same token can produce radically different carrying amounts

Take a token acquired for $20 per unit, which falls to $10 inside the reporting period and recovers to $18 by the reporting date. An in-scope ASC 350-60 asset has no impairment concept: it is remeasured to $18 at the reporting date, and the fall and the recovery both run through net income. A legacy impairment-only intangible is tested when the price touches $10, not at the reporting date:

on the day the price touches $10  ->  carrying amount $10, impairment loss to P&L
at the reporting date, price $18  ->  carrying amount remains $10, no upward reversal

The economic asset is worth $18 in both cases. The carrying amount differs because the ERC-20 token scope conclusion differs, which is why a criterion as technical as "does the token provide enforceable rights to, or claims on, underlying assets?" has a major balance-sheet effect.

What the scope decision does to one real holding

The research paper uses one unchanged holding of 1,777.579813 LINK to show what the ERC-20 token scope decision can do. At 31 December 2025:

The first two US GAAP answers already differ by $2,798.18, and they differ only because the out-of-scope column is written down whenever an identical unit trades below carrying amount during the period, not merely at a reporting date. Lot A was written down at the 7 April 2025 price of $10.133 and Lot B at the 22 June 2025 price of $10.993, leaving $8,045.88 and $10,812.19 at the year end, and neither write-down reverses when the price recovers to $12.183 on 31 December.

Carry the same quantity to 8 September 2026, with no sale and one market price of $12.520 per LINK:

Only the first of those comes from $12.520, as 1,777.579813 units times $12.520. The second does not. LINK fell to a one-minute close of $7.009 on 6 June 2026, forcing a further write-down of $6,399.01 in the first half of 2026, and nothing closed lower between 1 July and 8 September. The out-of-scope column is therefore frozen at 1,777.579813 units times $7.009, and the 8 September price moves only the in-scope column.

The difference is $9,796.24, equal to 78.6 per cent of the lower carrying amount.

The reason is not a different quantity or a different market price. It is the accounting model. Under ASC 350-60 the asset is remeasured in both directions through net income every reporting period. Outside it, prior impairment establishes a new carrying basis and ASC 350-30-35-20 prohibits reversal.

IFRS and US GAAP do not converge on one crypto model

The table is a map, not a substitute for the underlying standards.

IFRS adds a third answer rather than splitting the difference

The IAS 38 cost-model bridge in the worked example produces $21,526.31 at 31 December 2025, just below the $21,656.25 ASC 350-60 fair value. Recoverable amount there is fair value less costs of disposal, so estimated disposal costs enter the impairment calculation, and the worked facts give the IFRS acquisition lot a different initial cost because the nonmonetary exchange analysis differs from the US GAAP ledger. IAS 38 paragraph 47 measures the asset acquired in an exchange at the fair value of the asset given up "unless the fair value of the asset received is more clearly evident". In the worked example the US GAAP route measures the token received at its own fair value instead, and the two initial costs part company on the first day. The complete worked example carries those entries.

More importantly, an entity must assess at the end of each reporting period whether an impairment loss recognised in a prior period for an asset other than goodwill may no longer exist or may have decreased (IAS 36 paragraph 110), and that loss shall be reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised (IAS 36 paragraph 114). Once that condition is met the reversal is mandatory, not an election, and it goes to profit or loss (IAS 36 paragraph 119). It is capped: the increased carrying amount may not exceed the carrying amount, net of amortisation or depreciation, that would have been determined had no impairment loss been recognised in prior years (IAS 36 paragraph 117), which for a token carried without amortisation is its original cost. An impairment loss recognised for goodwill is never reversed (IAS 36 paragraph 124).

That is the opposite of the ASC 350-30 prohibition, and different again from ASC 350-60, which does not use an impairment model for in-scope crypto assets. One token can therefore sit under three genuinely different subsequent-measurement mechanisms:

ASC 350-60            -> fair value moves both directions through net income
ASC 350-30            -> impairment down, no reversal, ever
IAS 38 cost + IAS 36  -> impairment down, reversal required if the estimates change, capped at cost

An ERC-20 token scope memo should precede valuation

For every material token, the close file should contain a written scope memo recording:

• Asset identity. Chain ID, contract address, token type, proxy or upgrade status.
• Economic rights. Redemption rights, rights to goods or services, rights to another asset, issuer obligations, governance or utility features, legal agreements.
• IFRS conclusion. The cash test under IAS 32 paragraph AG3, the financial-asset test under IAS 32 paragraph 11, the inventory tests under IAS 2 paragraphs 6, 3(b) and 5, the IAS 38 conclusion, and an active-market assessment if revaluation is considered.
• US GAAP conclusion. Each ASC 350-60-15-1 criterion individually, lettered (a) to (f), the related-party and issuer analysis, and the alternative Topic if any criterion fails.
• Consequences. Measurement basis, income-statement treatment, presentation, disclosure, the impairment model and the timing of its test, and deferred-tax consequences.

The 78.6 per cent lesson

The headline is not that one framework is more conservative or more accurate. The lesson is that classification drives measurement. On one unchanged holding of 1,777.579813 LINK, at one date, at one market price, the ERC-20 token scope conclusion is worth $9,796.24, which is 78.6 per cent of the lower of the two carrying amounts it produces.

A token that looks identical in a wallet can sit under a fair-value-through-net-income model, an impairment model, an inventory model, or another standard depending on its rights and the reporting framework. For a material holding the scope memo is not paperwork after the fact. It is the document that determines what numbers are allowed to appear in the financial statements.

How Tokenbooks helps with ERC-20 scope and measurement

Once the scope conclusion is written, it still has to be configured somewhere. In Tokenbooks the reporting framework is a per-portfolio setting, and US GAAP under ASC 350-60 is one of the frameworks that setting offers.

For a portfolio on that framework, fair-value remeasurement runs at period close. It posts to an adjunct asset account against unrealised gain or loss and leaves the cost-basis lots untouched, so the fair-value carrying amount and the cost history stay apart instead of one overwriting the other.

Those postings are ordinary double-entry entries against the portfolio's own editable chart of accounts. The reports built on the same postings include the balance sheet, profit and loss, income and expenses, capital gains and losses, and trial balance, exported to Excel or JSON.

See the Ethereum integration page.

More in this series

Accounting Token Anatomy: ERC-20 Tokens. This article stands alone, but the series builds in order.

Previous (02.1.3): Why a Token Balance Is Not an Accounting Record

Next (02.1.5): ERC-20 Token Valuation for Accounting: Which Price to Use

Sources and further reading

• IFRS Interpretations Committee, Holdings of Cryptocurrencies, June 2019. ifrs.org
• IFRS Interpretations Committee, June 2019, Agenda Paper 12, paragraphs 41, 44 and 45 on "or other party". ifrs.org
• IFRS Foundation, Due Process Handbook, August 2020, paragraphs 8.4 and 8.5. ifrs.org
• IAS 38 Intangible Assets, IFRS Foundation 2025 annotated text. ifrs.org
• IAS 2 Inventories. ifrs.org
• IAS 32 Financial Instruments: Presentation. ifrs.org
• IAS 36 Impairment of Assets. ifrs.org
• IAS 21 The Effects of Changes in Foreign Exchange Rates. ifrs.org
• IFRS 13 Fair Value Measurement, for the Appendix A definition of an active market. ifrs.org
• IFRS 18 Presentation and Disclosure in Financial Statements, for its effective date. ifrs.org
• FASB ASU 2023-08, for ASC 350-60-05-2, 15-1, 35-1, 45-1, 45-2, 50-1 to 50-6 and 65-1, and BC17, BC20 and BC21. storage.fasb.org
• FASB ASU 2012-02, for ASC 350-30-35-18, 35-19 and 35-20. storage.fasb.org
• AICPA, Accounting for and Auditing of Digital Assets, practice aid as of 30 September 2025, Accounting chapter 1 Responses 5 to 7 on impairment of indefinite-lived out-of-scope crypto intangible assets. assets.ctfassets.net This article is educational material. A real scope conclusion requires the current standards, the complete contractual terms, token code, custody structure, and entity-specific facts.