Understanding the accounting divide: GAAP vs. IFRS
Jul 30, 2025・5 min read
You don’t need to dive deep into the tech to understand what cryptocurrencies are: digital assets that represent value on peer-to-peer (P2P) blockchain networks. Still, financial and regulatory bodies continue to debate how to account for them – and in some cases, their guidance directly conflicts.
Take, for example, the divide between GAAP versus IFRS, the world’s two dominant accounting standards. For businesses that hold crypto, understanding how they compare and contrast isn’t just a technical detail – it can significantly impact how they report assets and calculate tax liabilities.
In this guide, we’ll explain the differences between IFRS versus GAAP and how they affect the way crypto assets are classified, measured, and reported.
What are GAAP and IFRS?
GAAP, or Generally Accepted Accounting Principles, is the main accounting framework in the United States. The Financial Accounting Standards Board (FASB) sets its rules, which are closely tied to U.S. legal and regulatory systems.
Conversely, International Financial Reporting Standards (IFRS) are used more broadly around the world and tend to allow more flexibility in interpretation. The International Accounting Standards Board (IASB) maintains and updates the IFRS, focusing on making these standards applicable and accessible in over 140 nations and bringing consistency to global financial reporting.
While there have been efforts to align GAAP and IFRS more closely, key differences in law, economic priorities, and regulatory thinking have made full alignment difficult.
What’s the main difference between GAAP and IFRS?
There are many small differences between GAAP and IFRS, but the core distinction comes down to rules versus principles. GAAP offers more precise guidance on how to account for transactions, leaving less room for interpretation. By contrast, IFRS uses a more flexible, principles-based approach that allows for broader judgment and more discretion in recognizing, measuring, and disclosing financial information.
GAAP vs. IFRS reporting: How they differ
To better understand how GAAP and IFRS vary in practice, it helps to compare how the two frameworks handle basic accounting categories:
- GAAP versus IFRS revenue recognition: Under GAAP, businesses follow a five-step model outlined in ASC 606, which recognizes revenue when control transfers to the customer. IFRS 15, the corresponding revenue recognition standard under IFRS, also uses a five-step model but allows more flexibility – particularly around contract modifications and the timing of revenue recognition.
- Local versus global: Despite efforts to merge GAAP and IFRS, GAAP remains tailored to businesses operating in the U.S., while IFRS serves as the global standard for financial reporting. This geographic split makes it particularly difficult for multinational companies to reconcile financial reports across jurisdictions.
- Intangible assets: When accounting for intangible assets (e.g., patents, trademarks, or copyrights), GAAP generally only recognizes their value when the asset is acquired in a transaction. Internally generated intangible assets – like brand development or research – are typically not capitalized. With IFRS, there's greater leniency toward recognizing the value of some internally generated intangibles if they meet specific criteria related to development phase and future economic benefits.
- Inventory methods: GAAP gives businesses more flexibility in inventory accounting, including the use of the LIFO (Last-In, First-Out) method, which values inventory based on the most recent purchase prices. IFRS doesn't permit LIFO, instead allowing only FIFO (First-In, First-Out) or weighted average cost.
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The role of GAAP vs. IFRS in cryptocurrency accounting
Cryptocurrencies have introduced new challenges to traditional accounting frameworks, such as how to classify digital assets, measure fair value, and handle impairment or revenue recognition – and both GAAP and IFRS are still adapting to the blockchain era. While neither framework offers comprehensive guidance specific to crypto, each provides general approaches for handling digital assets under different circumstances.
Under IFRS, cryptocurrencies may be classified as either inventory (if held for sale) or intangible assets. Intangible assets are subject to impairment testing, but IFRS allows losses to be reversed if the asset later increases in value.
Historically, GAAP treated cryptocurrencies as indefinite-lived intangible assets measured at cost minus nonreversible impairment. In other words, if a business held a cryptocurrency that dropped in value, it had to record a loss – but it couldn't reverse it, even if the asset later recovered.
However, GAAP's ASU 2023-08 update introduced fair value accounting for certain crypto assets that meet specific "in-scope" criteria. These include being fungible, not granting enforceable rights to goods or services, and being created by a third party (i.e., not the reporting entity). The new rules primarily apply to widely traded cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) and exclude more speculative assets like non-fungible tokens (NFTs) and most stablecoins.
Choosing between GAAP and IFRS for business reporting
Depending on where a company operates or who its investors are, there may be no real choice between GAAP or IFRS – local laws or regulatory bodies often mandate one over the other. However, in some cases, business leaders can choose between the two frameworks to influence their company's valuation and tax liabilities. To determine whether GAAP or IFRS makes more sense for your business, consider the following:
Are you a U.S.-based or multinational company?
If your company is headquartered in the U.S. and operates primarily within the country, GAAP is the default choice. The U.S. Securities and Exchange Commission (SEC) requires companies to follow GAAP, as it aligns with U.S. regulatory and financial systems.
For non-U.S. or multinational businesses, IFRS is often the more practical and cost-effective option. Because over 140 countries use IFRS, adopting it can help streamline reporting across subsidiaries, partners, and stakeholders in multiple jurisdictions.
Are you preparing for an IPO or attracting investors?
If you're planning an initial public offering (IPO) in the U.S., GAAP is mandatory under SEC regulations. U.S. investors also prefer GAAP-compliant reports because they’re more familiar with the format when analyzing financial performance.
By contrast, companies listing on international exchanges – such as the London Stock Exchange or Euronext – typically follow IFRS. Investors outside the U.S. favor IFRS for its global comparability, and using it may also help attract funding from international venture capital firms or private equity investors.
What are your taxation and regulatory obligations?
U.S. tax filings rely heavily on GAAP-based financial statements, which makes GAAP the easier path for working with the IRS and state tax agencies. In other regions, tax authorities may expect IFRS-compliant reporting based on local standards and regulatory preferences.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.