FSS Prepares Support Measures for Cryptocurrency Accounting...Mandatory Establishment of Note Disclosure

[Asia Economy Reporter Lee Jung-yoon] The Financial Supervisory Service (FSS) announced on the 15th that it has prepared support measures for the accounting treatment of virtual currencies through discussions at an expert meeting composed of related organizations such as the Korean Accounting Standards Board and the Korean Institute of Certified Public Accountants, as well as private sector experts.

As a result of the expert meeting discussions, accounting practice support measures were established to strengthen footnote disclosures and present application guidelines in order to assist information users' decision-making and reduce difficulties for companies and auditors.

First, it will be mandatory to newly disclose footnotes regarding the issuance, sale, holding of virtual currencies, and information related to virtual currency operators. Additionally, a disclosure requirement paragraph will be added to the accounting standards, and the FSS plans to distribute exemplary footnote disclosure cases containing specific preparation examples to help prepare thorough footnotes.

Furthermore, the Korean Accounting Standards Board will support companies' accounting treatment by providing guidance on virtual currency accounting issues and considerations when applying accounting standards through seminars and other means. The Korean Institute of Certified Public Accountants plans to prepare virtual asset audit guidelines to help understand virtual currency audit risks and secure appropriate audit quality.

Currently, although there are various accounting issues related to virtual currencies due to intermediary transactions and new business utilization, sector-specific laws and accounting and audit guidelines have not been established. Therefore, difficulties arise in applying accounting standards and conducting audits depending on the stakeholders such as companies, and the provision of related information is insufficient. Moreover, the need for transparent provision of related information is increasing due to domestic controversies over virtual currency sales, the Terra-Luna incident, and the recent bankruptcy filing of the global virtual currency exchange FTX.

An FSS official stated, "Through consultations with the Financial Services Commission and external opinion hearings such as joint seminars, we plan to finalize the strengthening of disclosures related to virtual assets and the audit guidelines." He added, "We will promote the distribution of virtual asset audit guidelines so that they can be utilized during year-end audits." He continued, "After going through procedures such as public consultation on the draft amendment of the standards, we plan to distribute exemplary footnote disclosures for virtual assets immediately upon finalizing the amendment."