Crypto mining revenue

Is pool mining revenue under IFRS 15?

A miner in a pool provides hash rate, computing power, to the pool operator, which combines the hash rate of many miners to find blocks and shares the rewards, after a pool fee. The pool operator receives a service it uses in its own business, so it is the miner's customer, and the miner's promise is to provide hash computation. The consideration is crypto, so it is non-cash consideration measured at fair value. Pool contracts can usually be ended by either party at any time without penalty, so in effect a new contract starts each day, and miners measure revenue each day using a consistent price source and time. Under common pool payout methods, the miner's reward depends on its share of hash rate rather than on whether the pool finds a block. See non-cash consideration and fintech accounting.

What about solo mining?

A miner that mines alone and earns block rewards and transaction fees directly from the network has no customer: the network protocol is not an entity that contracts with the miner. That income is outside IFRS 15. Miners that mine solo develop an accounting policy by analogy, for example recognising the crypto earned as income at fair value when it is received, or treating mining as producing crypto that is then held as inventory or an intangible asset, and disclose the policy and the judgement.

Crypto mining revenue: a month for a pool miner

A miner contributes its hash rate to a pool for a month and earns 30 bitcoin after pool fees, at an average daily price of US$ 60,000, so revenue is 1,800 thousand. Electricity costs 900 thousand. Its fleet of mining rigs cost 19,200 thousand and is depreciated over 48 months, 400 thousand a month. It keeps the bitcoin it earns, under the IAS 38 cost model, and at the month end the price is 55,000.

The bitcoin earned is recognised at 1,800 thousand, its fair value when received, which becomes its cost. At the month end it is worth 1,650 thousand, so under the cost model the miner recognises an impairment loss of 150 thousand; under a fair value model, the same fall would be a fair value loss. Operating profit for the month is 350 thousand. A miner's profit therefore depends on the bitcoin price twice: once in revenue, and again in the measurement of the bitcoin it keeps.

How are mining rigs accounted for?

Mining machines are property, plant and equipment under IAS 16, depreciated over short useful lives, often two to five years, because newer, more efficient machines and rising network difficulty quickly reduce what older machines can earn. Falls in the crypto price, increases in network difficulty and the halving of block rewards, most recently in April 2024 when bitcoin's reward fell to 3.125 bitcoin per block, are indications of impairment. Machines are usually tested together as part of a mining site's cash-generating unit. Deposits paid to manufacturers for future machines are prepayments. See IAS 36 impairment.

How are power and hosting contracts treated?

Electricity is a miner's largest cost. Long-term power contracts at fixed prices may be derivatives if they can be settled net, unless they are held for the miner's own use. Payments received for reducing consumption when the grid is stretched, known as demand response, are other income or a reduction of power costs, according to the miner's policy. Miners that place machines in third-party data centres under hosting agreements assess whether the agreement contains a lease of specified space; most are service contracts. See identifying a lease.

How is the crypto a miner keeps accounted for?

Bitcoin a miner holds is a crypto asset: under IFRS, an intangible asset under IAS 38 at cost less impairment or, with an active market, at revalued amount, or inventory under IAS 2 if the miner sells it in the ordinary course of business. Miners that sell their bitcoin promptly to fund costs may treat it as inventory; those that hold it as a treasury reserve usually use IAS 38. See crypto assets: IAS 38 or IAS 2.

How is mining income taxed in the US?

The IRS treats crypto received from mining as income equal to its fair market value when the miner receives it, and that value becomes its tax basis. A later sale produces a capital gain or loss, or ordinary income for a miner trading as a business. Mining as a trade or business is also subject to self-employment tax for individuals. Book impairments or fair value changes on crypto held create temporary differences for deferred tax. See deferred tax.

How does US GAAP differ?

US miners in pools also recognise revenue under ASC 606 as the fair value of the crypto received, measured at contract inception, which is usually each day. Since ASU 2023-08, bitcoin held is measured at fair value through net income, so price rises are recognised as well as falls. Mining equipment follows ASC 360, with its undiscounted recoverability test for impairment. See IFRS and US GAAP impairment compared. See ASU 2023-08 explained.

This guide is general information. It is not tax or legal advice for your situation.