This page explains the "Include year-end mark-to-market gains in annual P&L calculations" feature.
Table of Contents
1. What is "Year-end Mark-to-Market P&L"
Since the tax reform in April 2019, it is required for corporations to calculate unrealized gains and losses on holdings at the end of the fiscal year.
By selecting "Year-end Mark-to-Market P&L" in the corporate settings, the unrealized gains and losses on coins held at the end of the year will be added to the annual profit and loss. Generally, the "Reversal Method" is used for the end-of-year evaluation, but each method is explained below.
- Reversal Method: After recording the unrealized gains and losses at the end of the year, the average acquisition cost at the beginning of the next period is reverted to the average acquisition cost at the end of the previous year.
2. How to Set Up
STEP 1:
Click on "Ledger" under "Settings".
STEP 2:
In the Corporate settings, select either "Reversal Method" or "Cut-Off Method" from "Year-end Mark-to-Market P&L", then click "Update".
3. How to Check Year-end Mark-to-Market P&L
After calculation is complete, click on the "Summary" tab and then on the "Yearly" tab to check the Year-end Mark-to-Market P&L.
In the Case of Reversal Method
The COST/COIN at the beginning of the next fiscal year is reverted to the COST/COIN at the end of this year. The reversal of the year-end LATENT GAINS & LOSSES is automatically added to the TOTAL P&L.
In the Case of Cut-Off Method(As of December 2024, this option will no longer be available)
The end-of-year PRICE is adopted as the average acquisition cost (COST/COIN) at the beginning of the next period.
Additional Notes:
TOTAL REVENUE:
It represents the total transaction amount in the profit calculation at the time of each transaction, which is the sum of the "price x quantity" of coins at the time of transaction closure in Japanese yen. For sale transactions, it is the sale amount, and for transactions where currency is granted through staking, bonuses, lending, etc., it is the market equivalent amount at the time of grant.
TOTAL COST:
It is recorded as the purchase amount by deducting the realized profit and loss calculated in the profit and loss calculation from the total sales. (If there are no "sale" transactions in the relevant year, the total purchases will be 0 yen.)
*Total sales and total purchases are displayed as they are recognized as necessary information for financial statements for corporations and tax accountants.
4. Dealing with Coins without Price Data at End of Year
This feature cannot be applied to coins for which price data is not available at the end of the year. Please refer to the "Ledger Price" section of the Supported Coins to check whether price data is available. For coins without price data, please handle them separately using a custom file. Refer to the format of custom transactions here.
In the Case of Reversal Method
- Investigate the end-of-year price of the relevant coins, calculate the end-of-year LATENT GAINS & LOSSES yourself, and enter them with custom transaction using the CASH action.
- Enter the reversal of the end-of-year LATENT GAINS & LOSSES at the beginning of the next period using the CASH action.
*Refer to the example of " Expenses paid in a fiat currency" and "Income in the fiat currency"
in the custom file description for how to record CASH.
In the Case of Cut-Off Method(As of December 2024, this option will no longer be available)
- Upload a sales record with the end-of-year quantity and price at the end of the relevant year.
- Upload a purchase record with the end-of-year quantity and price at the beginning of the next period.
*The end-of-year latent gains and losses for the coins described above will be recognized as realized P&L.
*In the case of the Cut-Off Method, it is a condition that the Average Cost Method is applied. Please note that the coin balance at the end of the year will be zero.
5. When Using the Service for Exemption from Year-End Mark-to-Market Taxation
5-1. Who this section applies to
This section applies to corporate customers who use an exchange's "exemption from year-end mark-to-market taxation" service (a scheme under which crypto assets placed under a transfer restriction are excluded from year-end mark-to-market valuation).
5-2. How cryptact handles it
cryptact's "Year-end Mark-to-Market P&L" feature calculates unrealized gains and losses on all coins and all quantities held at the end of the fiscal year. There is no setting to exclude only the quantity covered by the exemption service from the valuation.
Therefore, if you use the exemption service, you need to enter an offsetting entry yourself for the exempted portion.
5-3. Figures you need
After completing the P&L calculation for the relevant fiscal year, open the "Yearly" tab on the "Summary" page and check the following:
- The year-end PRICE and COST/COIN of the relevant coin
- The LATENT GAINS & LOSSES of the relevant coin
The amount to offset is calculated as follows:
Amount to offset = (year-end PRICE − COST/COIN) × quantity covered by the exemption service
5-4. How to enter it (Reversal Method)
In a custom file, enter the following two rows using the CASH action.
| Date to enter | Purpose | Example to follow |
|---|---|---|
| End of the relevant fiscal year | Offset the unrealized gain on the exempted portion (subtract from P&L) | 2.15 Expenses paid in a fiat currency |
| Beginning of the next fiscal year | Reverse the offset made in the previous year (add to P&L) | 2.21 Income in the fiat currency |
* If the exempted portion has an unrealized loss, "Expenses" and "Income" above are swapped.
5-5. Example
In 2023, you bought 10 BTC at 1,000,000 JPY per BTC and applied the exemption service to 5 BTC. You carried all 10 BTC into the next fiscal year without selling. The BTC price at the end of FY2023 was 10,000,000 JPY. The Reversal Method is selected.
- cryptact adds an unrealized gain of 90,000,000 JPY (= (10,000,000 JPY − 1,000,000 JPY) × 10 BTC) on all 10 BTC to the FY2023 P&L.
- Of this, the exempted 5 BTC accounts for 45,000,000 JPY (= (10,000,000 JPY − 1,000,000 JPY) × 5 BTC). Enter 45,000,000 JPY as a CASH expense dated at the end of FY2023 to subtract it from the P&L.
- At the beginning of FY2024, cryptact automatically reverses the 90,000,000 JPY gain. Enter 45,000,000 JPY as CASH income dated at the beginning of FY2024 to add it back to the P&L.
5-6. Notes
- Amounts entered with CASH are recorded as realized P&L. The "LATENT GAINS & LOSSES" figure on the "Yearly" tab does not change; the adjustment appears in the realized P&L instead.
- Please consult your tax accountant regarding which quantities qualify for the exemption, the applicable requirements, and the tax filing treatment.
6. Notes
- This feature applies to fiscal years ending on or after April 1, 2019, following the tax reform.
- Please consult your tax accountant regarding the handling of positions held across the fiscal year in futures transactions. Our service does not perform end-of-year evaluations for non-spot transactions even if "Year-end Mark-to-Market P&L" function is applied in ledger settings.
- As of September 2024, there is no posting function available. Please consult your tax accountant for journal entries in accounting systems and corporate settlements.
- As of December 2024, the cut-off method will no longer be available for new users. Additionally, for users who have already selected the cut-off method, once they update their settings to "None" or "Reversal Method", they will not be able to reselect the cut-off method.