Vol. 3 No. 1 (2023): Journal of AI-Assisted Scientific Discovery
Articles

Accounting for NFTs and Digital Collectibles: Establishing a Framework for Intangible Asset

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  • Piyushkumar Patel,
  • Hetal Patel,
  • Deepu Jose
Piyushkumar Patel
Accounting Consultant at Steelbro International Co., Inc, USA
Hetal Patel
Manager- finance department at Jamaica hospital, USA
Deepu Jose
Audit - Manager at Baker Tilly , USA
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Published 23-03-2023

Keywords

  • NFTs,
  • Digital Collectibles
Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

How to Cite

[1]
Piyushkumar Patel, Hetal Patel, and Deepu Jose, “Accounting for NFTs and Digital Collectibles: Establishing a Framework for Intangible Asset ”, Journal of AI-Assisted Scientific Discovery, vol. 3, no. 1, pp. 716–736, Mar. 2023, Accessed: Jan. 01, 2025. [Online]. Available: https://scienceacadpress.com/index.php/jaasd/article/view/261

Abstract

The rise of Non-Fungible Tokens (NFTs) and digital collectables has transformed the world of digital assets, offering new opportunities for creators, collectors, and investors. However, challenges must be addressed as this market grows, particularly in accounting. With their unique and indivisible nature, NFTs represent a departure from traditional assets, raising questions about how to classify, value, and report them in financial statements. These challenges become even more complex when considering the diverse forms that NFTs and digital collectables can take—ranging from artwork and music to virtual real estate & gaming assets. As digital assets, NFTs defy easy categorization in existing accounting standards, creating a need for a more transparent framework that addresses their intangible nature. The article examines current approaches to classifying these assets under accounting principles, highlighting both the ambiguities and progress in adapting traditional financial reporting systems to the digital age. It also delves into the implications for businesses, investors, and financial professionals, who need a consistent and transparent way to account for these assets. A significant point of discussion is the treatment of NFTs as intangible assets. This designation raises questions about valuation, depreciation, and impairment and how these assets should be disclosed in financial statements. The complexities of ownership, transfer, & royalties associated with NFTs further complicate the matter, requiring innovative solutions to ensure accurate reporting and compliance. In light of these challenges, the article suggests that developing a more robust framework for accounting for NFTs and digital collectables is essential, integrating these emerging assets into the broader financial reporting landscape while ensuring that clarity and consistency are maintained. By doing so, the goal is to provide a path forward for businesses & investors, helping to navigate the complexities of this evolving market and ensuring a reliable, transparent accounting approach for these intangible assets.

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