Bitcoin accounting for private companies

Bitcoin accounting for private companies follows the same core standards as for listed companies. Under US GAAP, the FASB standard on digital assets (ASU 2023-08) applies to public and private entities alike, with the same effective date and no simplified private company alternative. What differs for private companies is the framework they may be using, the readers of their accounts and the practical risks around ownership and controls.

This article focuses on those differences. The wider strategic case for private businesses is covered in Bitcoin treasury for private companies.

Which framework applies

Private companies report under a wider range of frameworks than listed ones. The framework drives the answer.

The first task is simply to confirm which framework the company's accounts are prepared under, and whether lenders or shareholders require a particular one.

Bitcoin accounting for private companies under US GAAP

ASU 2023-08 applies to all entities reporting under US GAAP for fiscal years beginning after 15 December 2024, with early adoption permitted. A private company applies:

• The same scope criteria, which Bitcoin meets.
• The same measurement: fair value at each reporting date, with changes in net income.
• The same presentation: a separate balance sheet line and separate presentation of remeasurement gains and losses.
• The same disclosures: significant holdings, cost basis, restrictions, an annual roll-forward and the cost basis method.
• The same transition: a cumulative-effect adjustment to opening retained earnings.

The fair value measurement follows ASC 820, as for any other company. See ASU 2023-08: fair value accounting for Bitcoin explained and Bitcoin disclosure requirements.

What a private company does not usually face is securities regulator review of its filings or quarterly reporting. Annual accounts may be audited, reviewed or compiled, depending on size, ownership and lender requirements. Even where an audit is not required, the records should be kept to an audit standard, because lenders, buyers and tax authorities may ask for them.

IFRS and IFRS for SMEs

A private company using full IFRS follows the same analysis as a listed IFRS reporter. Bitcoin is generally an intangible asset under IAS 38, unless held for sale in the ordinary course of business.

IFRS for SMEs is less settled. It contains no specific guidance on Bitcoin, and its intangible asset section differs from IAS 38. In particular, it has no revaluation model and treats intangible assets as having a finite useful life, which would imply amortisation. Some preparers consider whether another section, or the framework's hierarchy for selecting policies where no section applies directly, gives a more relevant result. This is a judgement to settle with the auditor before the first purchase, not at the first year-end.

National frameworks vary in the same way. Some local standard-setters have issued guidance; many have not.

CFO tip: email your auditor before the first purchase with three questions: which framework and section applies, which measurement model they would accept, and what evidence of ownership and valuation they will need. A written answer avoids a year-end disagreement.

Proving the company owns the Bitcoin

In owner-managed businesses, the line between company assets and personal assets can blur. With Bitcoin, that line must be sharp.

Common problems include:

• Bitcoin bought by the company but held in a wallet set up by a founder personally.
• Keys or recovery phrases known only to one owner.
• Exchange or custody accounts opened in an individual's name rather than the company's.
• No board minute recording the decision to buy.

Each of these creates doubt about whether the company controls the asset. Auditors may be unable to confirm existence and ownership, and in a dispute, sale or insolvency, ownership could be contested. The fix is simple but must be done from the start: company-named custody accounts, board-approved signers and documented key management. See corporate Bitcoin custody: the options explained.

Related parties, lenders and shareholders

Private company accounts are read by a smaller but closely interested group.

• Related parties. Bitcoin bought from, sold to or held for owners, directors or their companies is a related party transaction and must be disclosed under the applicable framework.
• Lenders. Bank facilities often contain covenants based on net worth or profit, and restrictions on investments. Check whether a Bitcoin purchase needs consent and how fair value movements affect covenant tests.
• Shareholders. Shareholder agreements may require consent for investments outside the ordinary course. Minority shareholders will want to understand the accounting effect.
• Buyers and investors. In a future sale or funding round, due diligence will examine the Bitcoin records, controls and accounting closely.

Controls in a small finance team

A private company often has a small finance function, which makes segregation of duties harder. Compensating controls help: board review of monthly reconciliations, multi-person signing that includes a director outside finance, and a third-party custodian with its own controls. See internal controls over Bitcoin for finance teams.

Companies should take their own accounting, tax and legal advice, including on the framework that applies to them.

How The Bitcoin World helps

We help private companies set up Bitcoin holdings in the company's name, with custody, records and board materials that stand up to audit, lender and buyer scrutiny. Execution and custody are carried out by licensed third-party institutions. See our custody architecture and corporate treasury services.