Quick answer
An unrealised loss provision reduces the book value of crypto assets when their market price falls below cost — but does not automatically create a tax deduction.
Accounting
Germany
United Kingdom
United States
Unrealised Loss Provision
An accounting entry recording the decline in value of crypto assets held below their original cost, before any actual disposal.
GermanyUnited KingdomUnited StatesUnderstanding Unrealised Loss Provision on crypto
An unrealised loss provision (or impairment) is an accounting entry made when the carrying value of a crypto asset exceeds its recoverable amount — typically its current market value. Under most accounting standards, crypto held as an intangible asset must be tested for impairment, and any excess of carrying value over fair value is recognised as an impairment loss in the income statement. This is distinct from a tax loss — the accounting provision reduces reported earnings but does not create a capital loss for tax purposes until the asset is actually disposed of. Under old US GAAP, crypto impairments were only written down — not recovered — until the new ASU 2023-08 fair value model.
An unrealised loss provision (or impairment) is an accounting entry made when the carrying value of a crypto asset exceeds its recoverable amount — typically its current market value. Under most accounting standards, crypto held as an intangible asset must be tested for impairment, and any excess of carrying value over fair value is recognised as an impairment loss in the income statement. This is distinct from a tax loss — the accounting provision reduces reported earnings but does not create a capital loss for tax purposes until the asset is actually disposed of. Under old US GAAP, crypto impairments were only written down — not recovered — until the new ASU 2023-08 fair value model.
What this means for your crypto activity
Accounting vs tax
Accounting impairment of crypto reduces book profits but does not create a tax deduction until disposal.
Bear market reporting
Companies with large crypto holdings may show accounting losses in bear markets that don't match their tax position.
FASB ASU 2023-08
Under FASB ASU 2023-08 (effective 2025), eligible crypto must be measured at fair value with gains and losses through P&L.
Individual investors
For individual investors, 'unrealised loss provision' is an accounting concept — individuals simply have unrealised losses, not provisions.
Deferred tax assets
Deferred tax assets may arise from the timing difference between accounting impairment and tax loss realisation.
- Accounting impairment of crypto reduces book profits but does not create a tax deduction until disposal.
- Companies with large crypto holdings may show accounting losses in bear markets that don't match their tax position.
- Under FASB ASU 2023-08 (effective 2025), eligible crypto must be measured at fair value with gains and losses through P&L.
- For individual investors, 'unrealised loss provision' is an accounting concept — individuals simply have unrealised losses, not provisions.
- Deferred tax assets may arise from the timing difference between accounting impairment and tax loss realisation.
Seeing it in action
Example scenario
A UK company holds 10 BTC bought at £30,000 each (book value £300,000). BTC falls to £22,000. The company records an impairment provision of £80,000, reducing the book value to £220,000. This reduces reported profit by £80,000 but creates no tax deduction — the capital loss is only crystallised when the BTC is actually sold. The company has a deferred tax asset of £80,000 × 19% = £15,200.
How this works across jurisdictions
- Germany
HGB requires lower-of-cost-or-market; IFRS allows intangible asset revaluation model if a market exists.
- United Kingdom
FRS 102 requires impairment testing for intangible assets; tax deduction only arises on disposal.
- United States
Under new FASB ASU 2023-08, eligible crypto is measured at fair value with changes through income — effectively eliminating the asymmetric impairment-only model for public companies from 2025.
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