Crypto Impairment under the IAS 38 Cost Model: How IAS 36 Bites

Not every entity fair-values crypto. Those on the IAS 38 cost model carry it at cost less impairment and must apply IAS 36 — and crypto's volatility makes impairment indicators easy to trigger while reversals are constrained. This guide is how impairment works for cost-model crypto, hedged, because the test and any reversal are an auditor judgement.

TL;DR

• IAS 38 cost model → crypto at cost less accumulated impairment, impairment assessed under IAS 36.
• Relevant where the IAS 38 revaluation model is not used, or (US GAAP) crypto is outside ASU 2023-08 scope.
• Crypto's volatility → a price decline is a typical impairment indicator; cost model captures downside, not unrealized upside.
• Reversal is constrained and framework-dependent — not a free mark-back to current price (historic US GAAP cost-less-impairment generally no reversal — a problem ASU 2023-08 addressed).
• Highly consequential vs fair-value models — settled with the auditor at classification.
• Not obsolete after ASU 2023-08 — applies wherever fair value doesn't. Test/reversal = auditor judgement. Not accounting advice.

When IAS 36 applies

When crypto is an intangible under the IAS 38 cost model, it is cost less accumulated impairment, and impairment is assessed under IAS 36. This is the path for entities not on the IAS 38 revaluation model, or (US GAAP) outside ASU 2023-08 scope (see impairment vs fair value). Whether the cost model applies and how impairment is assessed are auditor judgements.

Why crypto impairs easily

Crypto is volatile, and a significant price decline is a typical impairment indicator, so under the cost model a downward move can require an impairment loss, while subsequent upward moves do not symmetrically restore value. The cost model captures downside but not unrealized upside — a recurring criticism, and a key reason the fair-value models exist. The indicator assessment is an auditor judgement.

Reversal is constrained

Reversal is not a free mark-back to current price, and rules differ between IFRS and US GAAP. The historic US GAAP cost-less-impairment approach (pre-ASU 2023-08) generally did not reverse impairments — one of the problems ASU 2023-08 addressed by moving in-scope crypto to fair value. Whether/how reversal is permitted is framework-dependent and an auditor judgement — no blanket reversal rule stated here.

Versus the fair-value models

Highly consequential — the model choice is settled with the auditor as part of classification.

Still relevant after ASU 2023-08

ASU 2023-08 changed US GAAP measurement for in-scope crypto to fair value, but entities outside that scope, or on IFRS IAS 38 cost model, still apply an impairment-based approach. Cost-model impairment is not obsolete — it is the treatment wherever fair value does not apply. Which regime applies is an auditor judgement, not an assumption that everything is now fair value.

Practical guidance

1. Confirm the model — cost model + IAS 36 vs a fair-value model.
2. Expect volatility to trigger impairment indicators under the cost model.
3. Do not assume symmetric mark-back — reversal is constrained/framework-specific.
4. Recognize the asymmetry (downside captured, upside not) in policy decisions.
5. Don't assume ASU 2023-08 removed impairment — it applies outside FV scope.
6. Confirm indicators, recoverable amount, reversal with your auditor — fact-specific; not accounting advice.

How vendor tools handle impairment

Cryptio and Bitwave can track cost layers and surface price movements supporting an impairment assessment under the cost model. The tool supports the data; the impairment indicator, recoverable amount, and any reversal are auditor judgements under IAS 36 and the applicable framework.

How Wag3s helps

Wag3s Ledger tracks cost layers and price history per asset with an audit trail, so a cost-model impairment assessment (and the fair-value-model alternative) can be evidenced — while the impairment test and any reversal stay auditor-confirmed. See the Ledger product page.

Further reading

• Crypto Impairment vs Fair Value Accounting
• IAS 38 Crypto as an Intangible Asset
• FASB ASU 2023-08 Crypto Fair Value
• Crypto Asset Account Classification
• Crypto & IFRS 13 Fair Value Measurement
• Crypto Realized vs Unrealized Gain Accounts

Sources

• IAS 38 cost model carries crypto at cost less accumulated impairment with impairment assessed under IAS 36; relevant where the revaluation model is not used or (US GAAP) crypto is outside ASU 2023-08 scope — auditor judgement on policy/facts
• Crypto volatility makes a significant price decline a typical impairment indicator; the cost model captures downside but not unrealized upside (a recurring criticism, reason fair-value models exist)
• Reversal is constrained and framework-dependent (historic US GAAP cost-less-impairment generally no reversal — a problem ASU 2023-08 addressed); no blanket reversal rule — auditor judgement
• Cost-model impairment is not obsolete after ASU 2023-08 — it applies wherever fair value does not (outside ASU scope / IFRS cost model); which regime applies is an auditor judgement — not accounting advice