Fintech accounting: the key issues

Why is fintech accounting different?

Fintech companies combine technology with financial services. Their revenue often depends on whether they act as principal or agent in a chain of banks, card schemes and merchants; their balance sheets can hold customers' money or crypto, loans to consumers and new kinds of digital asset; and their staff are often paid partly in shares. No IFRS standard is written for fintech, so the general standards apply, sometimes with significant judgement. See principal versus agent.

Which issues matter most in fintech accounting?

How are crypto holdings accounted for?

The IFRS Interpretations Committee concluded in 2019 that cryptocurrencies are not cash or financial assets. They are usually intangible assets under IAS 38, at cost less impairment or, if there is an active market, at revalued amounts, unless the holder sells them in the ordinary course of business, in which case they are inventory under IAS 2, measured at fair value less costs to sell by commodity broker-traders. US GAAP now requires most crypto assets to be measured at fair value through net income. See crypto assets: IAS 38 or IAS 2.

When is customers' crypto or money on the balance sheet?

Exchanges, wallets and custodians hold crypto and money for customers. Whether these appear on the company's balance sheet depends on whether it controls them: for example, whether it can use them for its own purposes, and what the legal terms and insolvency protections say. E-money issuers and payment institutions usually recognise the cash they hold for customers with a matching liability, and must keep it safeguarded. See safeguarding customers' crypto and e-money and safeguarded funds.

How do payment companies recognise revenue?

A payment processor charges merchants a fee per transaction, out of which it pays interchange to the card issuer and fees to the card scheme. If it controls the payment service it provides to the merchant, it is the principal and reports the full fee as revenue, with interchange and scheme fees as costs; if it only arranges for others to provide it, it reports net revenue. The answer differs between business models and has a large effect on reported revenue. Buy now pay later providers earn a discount from merchants for each purchase they finance, and late fees from consumers, and hold short-term loans subject to expected credit losses. See payment processor revenue, buy now pay later and expected credit losses.

What other issues arise?

Peer-to-peer lending platforms decide whether loans they arrange belong to them or to the investors, under the IFRS 9 derecognition rules. Software development costs for platforms are capitalised under IAS 38 when the criteria are met. Fintech companies often grant share options and restricted shares to staff, recognised under IFRS 2. The detailed guides cover stablecoins, peer-to-peer lending platforms, crypto mining revenue and share-based payment in fintech; see also digital wallet revenue and crypto at fair value under US GAAP. See derecognition and share-based payment in tech.

How does US GAAP differ?

US GAAP has specific guidance on crypto: since ASU 2023-08, effective for fiscal years beginning after 15 December 2024, crypto assets within its scope are measured at fair value with changes in net income and presented separately. Revenue, credit losses and share-based payment follow ASC 606, ASC 326 and ASC 718, which are broadly similar to IFRS, with differences in the credit loss model. See IFRS 9 ECL and CECL compared.

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