Legal Foundations of Crypto Business Accounting
The Georgian law on accounting and financial reporting applies to every subject, and a virtual asset service provider (VASP) is, for these purposes, an ordinary enterprise: its bookkeeping and financial reporting must conform to the law, to other normative acts of Georgia and to international accounting and financial reporting standards. Crypto specifics — market volatility, the segregation of proprietary assets from client assets, high transaction volumes — do not displace the general rules; they demand that the rules be applied with the correct category in mind.
The law’s third article builds the ladder of standards: public interest entities (PIEs) and first-category enterprises report under full International Financial Reporting Standards (IFRS); second and third categories under the standard for small and medium-sized entities (IFRS for SMEs), with a voluntary option to apply full IFRS; fourth-category enterprises and non-commercial legal entities apply standards issued by the Service, and may voluntarily opt for IFRS for SMEs or full IFRS. Application of the international standards is mandatory, and the Service brings an updated standard into effect within 6 months of its issuance.
Size Categories — Where a VASP Fits
Category is determined by three criteria: total assets, revenue and the average number of employees in the reporting period. The fourth category requires at least two of three conditions: assets not exceeding 1 million GEL, revenue not exceeding 2 million GEL, and average headcount not exceeding 10. The third category caps are 10 million GEL, 20 million GEL and 50 employees; the second category’s are 50 million GEL, 100 million GEL and 250 employees. The first category begins where these indicators are exceeded. For crypto companies the sensitive point is the correct determination of revenue: the law defines it as the total inflow from sales of goods and/or rendering of services in the course of principal economic activity, excluding trade discounts, indirect taxes and amounts received on behalf of a third party.
Category changes follow a transparent timing rule: if a subject ceases to satisfy at least two of the three criteria at the end of two consecutive reporting periods, its category changes; where it has grown by two or more categories, this deferral does not apply. Where the category is unchanged, a switch to a different standard is possible only to a standard set for a higher category. For groups, category is determined from the parent’s consolidated data. PIE status deserves separate attention: a subject supervised by a supervisory authority receives PIE status from that authority, and remains a PIE for at least 3 reporting periods from the date the status is granted.
Filing and Publication of Reports
The law’s ninth article sets the full package of duties: a subject (other than a non-commercial legal entity) files with the Service its financial statements (including consolidated), the management report, the report on payments made to the state and, where required by law, the audit conclusion — immediately, but no later than 1 October of the year following the reporting period. The Service publishes submitted statements (other than those of fourth-category enterprises) within 1 month of filing; fourth-category reports are made available upon request, except for audit firms that are themselves fourth-category enterprises.
Where the reporting period does not coincide with the calendar year, the report is filed no later than 9 months after the period ends. A PIE must also publish its statements on its own website or in a print publication. Where defined by a regulatory or supervisory authority, interim financial statements are filed as well. The Service conducts risk-based selective verification of compliance and may demand remediation of identified deficiencies.
Audit and the Audit Conclusion
The law defines audit activity as work performed by an auditor or audit firm under international standards, aimed at expressing an opinion on whether the financial statements are prepared, in all material respects, on an appropriate basis of presentation. An auditor is a certified accountant who is a member of a professional organisation and registered in the state registry of auditors and audit firms. Attached to the statements comes the audit conclusion — the document in which the auditor expresses an opinion or declines to express one. For a crypto business the audit is particularly sensitive: valuation of virtual assets, segregation of client assets and the traceability of transactions require an experienced engagement partner. Where an audit is required by law, the conclusion is filed together with the statements, within the same deadline.
Frequently Asked Questions
Which standard must a VASP apply?
It depends on the size category: PIEs and the first category — full IFRS; second and third — IFRS for SMEs, with full IFRS permitted; the fourth category and non-commercial entities — the Service’s standards, with a voluntary option of IFRS for SMEs or IFRS.
What is the filing deadline for annual reports?
For a calendar year — no later than 1 October of the following year; for a period not coinciding with the calendar year — no later than 9 months after the period ends.
How does the category change when indicators move?
It changes if two of the three criteria fail at the end of two consecutive reporting periods; growth by two or more categories takes effect immediately. With an unchanged category, only a switch to a higher standard is allowed.
Must a VASP publish its reports?
The Service publishes filed statements within 1 month (except the fourth category). An entity with PIE status must also publish on its own website or in print.
How We Help on Legal.ge
On Legal.ge we help crypto companies put their accounting in order: we determine the size category and select the standard, draft accounting policies for virtual assets, prepare financial and management reports, coordinate with auditors and monitor filing deadlines. Contact us to map out your VASP’s reporting calendar and the full list of requirements.