# Crypto Currency / Virtual Currency - Disclosure Requirements
Where a Company has traded or invested in Crypto Currency or Virtual Currency during the financial year, certain mandatory disclosures must be made in the financial statements. The auditor must verify these disclosures pursuant to Schedule III amendments.
## A. Mandatory Disclosures
Where a Company has traded or invested in Crypto currency or Virtual Currency during the FY, the following shall be disclosed:
1. Profit or Loss on Transactions involving Crypto Currency or Virtual Currency during the year
2. Amount of Currency Held as at the reporting date (closing balance)
3. Deposits or Advances received from any person for the purpose of trading or investing in Crypto Currency / Virtual Currency
## B. Auditor's Verification Approach
### 1. Existence of Transactions
First determine whether the entity has dealt in crypto/virtual currency during the year through:
- Bank statement scrutiny (transfers to known crypto exchanges)
- Board minutes (any investment approval)
- Management representation
### 2. Valuation
- Verify the basis on which closing balances of crypto currency are valued (cost, fair value)
- Examine the source of fair value (crypto exchange quotes as on reporting date)
### 3. Profit/Loss Computation
- Verify transaction-wise computation
- Reconcile with broker/exchange statements
- Verify treatment of gains as capital or business income
### 4. Deposits and Advances
- Examine if entity has received any amounts from third parties for crypto trading
- Verify nature of relationship (related party implications)
- Verify if such activity is in line with the company's Memorandum of Association
### 5. Reporting Considerations
- Verify disclosure compliance with Schedule III (amended)
- Consider implications of any prohibitions/restrictions by RBI or government circulars
- Consider tax implications (taxation of Virtual Digital Assets @ 30% under Income Tax Act post-Finance Act 2022)
## C. Risk Considerations
- High inherent risk due to volatile valuations
- Pseudonymity makes counterparty verification difficult
- Regulatory uncertainty creates risk of subsequent events
- Custody risk (private key safekeeping)