BUSINESS
Disclosures of virtual currency holdings could be similar to what was required in case of demonetised notes; ICAI working on rules
Companies might have to disclose their holdings of bitcoins the way they had to show their stocks of demonetised notes.
The issue of disclosure of virtual currencies as well as how they should be valued and accounted for by a company are some of the questions Institute of Chartered Accounts are trying to answer following a directive from the government.
"Disclosures of virtual currency holdings could be similar to what was required in case of SBN (Specified Bank Notes) post demonetization. No decision of disclosure has been decided as yet though work is on full swing as we have to complete the work by March-end," says Debashis Mitra, Council Member of Institute of Chartered Accountants of India (ICAI).
Amendments to the Schedule 3 of the Companies Act requires that every company has to disclose details of specified bank notes held and transacted during the period from the day of demonetization, November 8, 2016 to December 30, 2016 in a format given by Ministry of Corporate Affairs.
"Answers to questions like disclosure and valuation of virtual currencies by corporate are being handled under the Digital Accounting and Assurance Standard Board formed about six months bank by ICAI," he said on the sidelines of a seminar on corporate governance held by industry body CII.
"The Board was constituted for deliberating and initiating solutions for issues in accounting, including valuation and assurance including internal audit in the digital world," an internal communication of ICAI said.
Apart from setting the guidelines for valuation and disclosure, ICAI has also been engaging with chartered accounts to ascertain their views on the potential impact of all emerging and converging technologies like such as AI, IoT, machine learning and blockchain (that powers virtual currencies) on accounting, sources in ICAI said.
"Auditors are also needed to be given directive on how to qualify their reports if virtual currencies are there in the books," Mitra said.
"It's kind of a black-box. Nobody knows what's inside. It has no oversight by anybody in the world. How do you value something which doesn't have any underlying base? And how did so many virtual currency exchanges have come up? Are they governed by any regulator?" asked J N Gupta, managing director of Stakeholders Empowerment Services.
Trading in such a thing might have thrown up opportunities to transfer illegal money or even fund activities like terrorism, Gupta, who also serves as a member of SEBI Panel on Uday Kotak Committee on corporate governance, said.
The Income Tax department last month undertook surveys of bitcoin exchanges across the country in cities like Mumbai, Pune, Bengaluru, Delhi, Hyderabad and Gurugram to understand how they operate, parties involved including traders and bank accounts linked to them.
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