ACCT90012 Corporate Reporting
Group Assignment
2022 Semester 2
This assignment should be completed in groups of three to five students.

Assignment conditions:

Due Date Monday 3 October 2022 at 9:00 am (AEDT)
Word Limit 2,000 words (excluding executive summary, reference list, student names and tables)
Assessment value 20% of your overall grade.
Submission The assignment is to be submitted electronically as a single file using the submission
link in the Canvas system. Only one submission per group is required.
Please make sure that submit your final version of the assignment and that the file
name includes your group number (as a pdf document).
Format The assignment should be in either 1.5 or double-spacing, using a 12-point font size
(for Times Roman or equivalent).
All pages should be numbered.
Cover sheet A completed cover sheet (which is provided as a separate Word document on Canvas)
must be attached to your submitted assignment.
References The reference list should also be on a separate sheet(s). You are suggested to use the
Harvard system of referencing your sources (see the Giblin Eunson Library Subject
Guide and Helpsheets for a referencing resource).
Assignment
contribution
Submission confirms that all group members are submitting original work and have
equally contributed to the final paper.
Please contact the subject co-ordinator where you are having trouble contacting
members of your group.



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Group Assignment
Accounting for Crypto Assets

Introduction

According to PwC, “cryptographic assets (crypto assets) are transferable digital representations
that are designed in a way that prohibits their copying or duplication. The technology that
facilitates the transfer of crypto assets is referred to as blockchain or distributed ledger
technology. Blockchain is a digital, decentralized ledger that keeps a record of all transactions
that take place across a peer-to-peer network and enables the encryption of information.”
The IFRS Conceptual Framework defines an asset as “a present economic resource controlled
by the entity as a result of past events” and an economic resource as “a right that has the
potential to produce economic benefits.” According to PwC, crypto assets “will often meet the
definition of an intangible asset.” A common form of crypto asset is cryptocurrency, which are
expected to function as a medium of exchange or as a store of value.
Relatively few companies have invested in crypto assets. One early adopter is Tesla, which
early in 2021 invested a significant amount in Bitcoin, which was invented in 2008 and was
therefore the first cryptocurrency.
For a period in 2021, Tesla even allowed customers to purchase its vehicles using Bitcoin.
Tesla’s Bitcoin Payment Terms & Conditions included the following text:
All products are priced in U.S. Dollars. If you choose to make a payment using Bitcoin, you must
pay an amount of Bitcoin that is of equivalent value to the U.S. Dollar purchase price of the product
that you purchase. We will provide you with a U.S. Dollar price for the product or service that you
are purchasing, as well as a Bitcoin equivalent price (the “Bitcoin Price”). You must initiate the
transfer of the Bitcoin Price to us within the time period that we provide to you together with the
Bitcoin Price (the “Bitcoin Price Window”). If you do not initiate the transfer of the Bitcoin Price to
us within the Bitcoin Price Window, the Bitcoin Price will expire, and we will provide you with a
new Bitcoin Price and Bitcoin Price Window upon your request.
Even governments have shown interest in cryptocurrencies. The government of Venezuela
launched its own cryptocurrency in 2018. El Salvador adopted Bitcoin as legal tender and
cryptocurrencies like Bitcoin have become popular in Latin America in response to difficulties
with fiat currencies in several countries.

Required
Answer all questions listed in each section below.
Cryptocurrency as intangible assets
According to its 10-K filing (annual report), Tesla’s “digital assets are considered indefinite-
lived intangible assets under applicable accounting rules. Accordingly, any decrease in their
fair values below our carrying values for such assets at any time subsequent to their acquisition
will require us to recognize impairment charges, whereas we may make no upward revisions
for any market price increases until a sale.”
Tesla’s 10-K also says “during the year ended December 31, 2021, we purchased and received
$1.500 billion of Bitcoin. During the year ended December 31, 2021, we recorded $101 million
of impairment losses on such digital assets. We also realized gains of $128 million in
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connection with selling a portion of our holdings in March 2021. Such gains are presented net
of impairment losses in Restructuring and other in the consolidated statement of operations.
As of December 31, 2021, the carrying value of our digital assets held was $1.260 billion,
which reflects cumulative impairments of $101 million. The fair market value of such digital
assets held as of December 31, 2021 was $1.990 billion.”
In addition, Tesla received $5 million in Bitcoin used as payment by customers purchasing
Tesla vehicles.
1. Provide journal entries for the events described above (purchase, impairment, sale, use
of Bitcoin in purchase, revaluation, etc.) using the (US GAAP) accounting treatment
described in the text above. We subsequently refer to these events as the “2021 Tesla
Bitcoin events”.
2. Provide journal entries for the 2021 Tesla Bitcoin events, but under IAS 38 using the
cost model.
3. Provide journal entries for the 2021 Tesla Bitcoin events, but under IAS 38 using the
revaluation model.
4. A patent confers upon its holder the sole right to make, use, and sell an invention for a
set period of time. The economic benefits of a patent might come from using the patent
in production of goods for sale or from licensing the patent to other parties in exchange
for cash. Provide two other examples of intangible assets and in each case identify the
potential economic benefits it provides.
5. What is the nature of the economic benefits offered by cryptocurrency? How do these
economic benefits differ from those of the other kinds of intangible assets you identify?
How are these similar?
Cryptocurrency versus currency
IFRS provides no explicit definition of the term cash. However, IAS 32 indicates that “currency
(cash) is a financial asset because it represents the medium of exchange and is therefore the
basis on which all transactions are measured and recognised in financial statements.” IAS 21
defines monetary items as “units of currency held and assets and liabilities to be received or
paid in a fixed or determinable number of units of currency.”
PwC argue that cryptocurrencies do not have some common properties of cash and currency.
Specifically, “cryptocurrencies are not legal tender and mostly are not issued or backed by any
government or state.” Additionally, “cryptocurrencies are currently not capable of setting
prices for goods and services directly.”
6. Suggest reasons why Tesla would give customers the option to purchase vehicles using
Bitcoin? What inferences can you draw from the Bitcoin Payment Terms & Conditions
about Tesla’s appetite for exposure to the risks and returns associate with Bitcoin?
(Note that the Bitcoin Price Window was as short as 30 minutes.)
7. Tesla, headquartered in the United States, allows consumers in many countries to
purchase Tesla vehicles using their respective local currencies. For example, Australian
customers can purchase using Australian dollars. Would you expect such purchases to
involve “Australian Dollar Payment Terms & Conditions” similar to the Bitcoin
Payment Terms & Conditions listed above? What differences in terms would you
expect to see with Australian dollar purchases compared with those for Bitcoin
purchases? Why?
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8. What implications would there be if Bitcoin were deemed a currency for financial
reporting purposes? Briefly discuss how this change would affect the various financial
statements of a firm like Tesla (income statement, balance sheet, and statement of cash
flows) relative to treating Bitcoin as an intangible asset. (For this question, assume that
financial reports are, apart from deeming Bitcoin as a currency, prepared in accordance
with IFRS.)
Cryptocurrency versus financial assets
9. It is widely agreed that cryptocurrencies such as Bitcoin are not considered financial
assets with the definition of IAS 32. Discuss why cryptocurrencies generally fail to
meet the definition of a financial asset.
10. Provide the journal entries for the 2021 Tesla Bitcoin events assuming that the Bitcoin
is treated as a financial asset. (For this question, assume that financial reports are, apart
from deeming Bitcoin as a financial asset, prepared in accordance with IFRS.)
11. Briefly discuss how the definition of “financial asset” in paragraph 11 in IAS 32 might
be expanded to include cryptocurrencies? Can you identify features of cryptocurrencies
that would help distinguish these from assets, such as intangible assets, that would be
important to exclude from the definition of “financial asset”?
Cryptocurrency as inventory
Another possible way of accounting for cryptocurrency would be as inventory. Under IAS 2,
inventory is accounted for as cost and inventory sold results in the recognition of the cost of
sales as an expense (being the cost of inventory transferred in the sale) and revenue from the
cash or other monetary assets received in exchange.
The business of Hut 8 Mining Corp is primarily in mining of digital assets “with an operational
focus on utilizing specialized equipment to solve complex computational problems to validate
transactions on different blockchains and receiving Bitcoin in return for successful services.
Additionally, the Company operates cloud and colocation date centre facilities in Canada
targeting enterprise customers seeking high performance computing services.”
12. While Hut 8 Mining Corp applies IFRS, it does not account for cryptocurrency (“digital
assets”) as inventory using IAS 2. From examination of the financial statements of Hut
8 Mining Corp for the year ended 31 December 2021, would it be appropriate for Hut
8 Mining Corp to account for its cryptocurrency as inventory under IAS 2?
13. Describe the accounting used by Hut 8 Mining Corp to account for cryptocurrency.
(Include in your discussion information on how Hut 8 Mining Corp recognizes revenue
from mined cryptocurrency, how it handles changes in fair values for cryptocurrency,
and how the costs of mined cryptocurrency are recognized as expenses.)
14. Briefly discuss how Hut 8 Mining Corp’s financial statement would be affected if Hut
8 Mining Corp accounted for its cryptocurrency as inventory under IAS 2 and
recognized revenue on mined cryptocurrency only when sold to outside parties.
Accounting for cryptocurrency
15. In light of your analysis and discussion above, what do you believe would be the best
way to account for cryptocurrency? In answering this question, you may focus on the
transactions and business models of Tesla and Hut 8 Mining Corp. If you recommend
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a common accounting treatment for both firms, or different accounting treatments for
these two firms, justify your recommendation. In answering this question, consider that
the objective of general-purpose financial reporting is “to provide financial information
about the reporting entity that is useful to existing and potential investors, lenders and
other creditors in making decisions relating to providing resources to the entity.”