How To Account For Investment in Gold Under IFRS - CPDbox - Making IFRS Easy

4/20/22, 11:12 AM How to account for investment in gold under IFRS?
- CPDbox - Making IFRS Easy
How to account for investment in gold

under IFRS?
by Silvia

ACCOUNTING POLICIES AND ESTIMATES, CURRENT ASSETS, FINANCIAL INSTRUMENTS, IFRS
VIDEOS
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18
Many economists predict that the devastating economical effects of the pandemic
will show up sooner or later and gold will serve as a preservation of wealth, so many
people and institutions are now starting to invest in gold.
The logical question is how to account for similar investment. I am not making any
investment recommendations here, this is just about the accounting.
Please note: I have published this article with the podcast back in 2018, but today the
topic is so hot that I updated it and turned to video. I can reassure you that I am the

original author of all the content in this article and the video, except for the IFRS
https://www.cpdbox.com/040-investment-gold-ifrs/ 1/13
4/20/22, 11:12 AM How to account for investment in gold under IFRS? - CPDbox - Making IFRS Easy
standards created by the IFRS Foundation.
So, the interesting question about investing in gold and related accounting treatment
came from Uemit from Germany:
“Hi Silvia, how should we account for the gold under IFRS, especially if it was acquired
as a form of value storage?
Should we account for the gold under IFRS 9 and IAS 32 as a financial instrument, or
should we account for it under IAS 40 Investment property?”
Answer: What standards do NOT apply here
Currently, there is no specific standard in IFRS that would really deal specifically with
precious metals like gold, silver or platinum.
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Let me clearly say that no, you should not account for gold as for a financial
instrument under IFRS 9 and IAS 32, because gold does not meet the definition of a
financial instrument.
Financial instrument arises from a contractual arrangement and there is no

contractual arrangement when it comes to gold.
The same applies for the standard IAS 40 Investment property.
Gold does not meet the definition of the investment property, because under IAS 40,
investment property is either land or building or their parts. No gold or other precious
metals.
The truth is that the standard IAS 2 Inventories says something related to gold, in
article 3:
Commodity brokers and dealers should measure their inventories at fair value less
costs to sell and recognize the changes in fair value in profit or loss in the period of
the change.
However, it applies only to commodity brokers and dealers, but not to other
companies who might acquire gold just for the investment purposes, to store value.
What do to in this case?
Develop your own accounting policy
Well, as we have just found out, there is NO accounting policy prescribed by IFRS to
deal with the gold or precious metals as value storage.
Thus we should develop our own accounting policy in line with IAS 8.
And, IAS 8 says that you should refer to certain resources when making your own
policy.
What resources?
Primarily, you should search for IFRS arranging the similar and related issues.
Only then you can look to the general concepts and criteria in the Conceptual
Framework and then you can look to other publications of other standard-setting
bodies.
What if the sources contradict?
In this case, you must take other IFRS about the similar issues first into account. They
have priority.
Accounting policy for investment gold
What is the issue or transaction similar to the investment gold?
Let’s sum up the characteristics of the investment gold:
1. It has indefinite useful life;

2. Its fair value tends to increase over time (not always of course) 
3. The main purpose is to store value, get income from its capital appreciation
Summing this all up it seems to me that the fair value model applicable for
investment property under IAS 40 would be very appropriate for the investment gold,
too.
Moreover, if you look at financial assets like shares that you buy for capital
appreciation, you can chose to measure these assets at fair value through profit or
loss which is essentially the same as fair value model under IAS 40.
How should we apply fair value model to gold?
Initially, you would measure the acquisition of the investment gold at fair value.
It is true that this is not in line with IAS 40 which requires measuring investment
property initially at cost. However, we are developing our own accounting policy and
it does not need to copy IAS 40 precisely.
Also, due to the nature and purpose of investing in gold, fair value seems to be more
appropriate here.
Subsequently, at the end of each reporting period, you need to remeasure the gold at
fair value and account for any changes in profit or loss.
No depreciation, nothing at all.
When I did a little research on this topic on Internet I actually found a nice Accounting
guide for gold issued by World Gold Council.
It is very detailed and actually speaks about the accounting for monetary (investment)
gold held by monetary authorities (i.e. central banks).
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learning package with more than 40 hours of private video tutorials, more than 140
IFRS case studies solved in Excel, more than 180 pages of handouts and many
bonuses included. If you take action today and subscribe to the IFRS Kit, you’ll get it
at discount! Click here to check it out!
I would personally NOT take this guide into consideration when developing my own
accounting policy under IFRS, because it requires accounting for changes in other

comprehensive income and that is contradictory with IAS 40.
Remember, IAS 8 puts the IFRS standards dealing with similar issues first, and only
then you can look elsewhere, so you should really apply similar accounting policy as
fair value model under IAS 40.
Anyway, the Guidance by World Gold Council is still very interesting to read.
Here’s the video summing up the issue:
If you have a comment or an additional question to this topic, please leave a reply
below this article. Thank you!
Tags In
Financial Instruments
IAS 2
IAS 40
IFRS 9
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18 Comments
Amit Shrestha December 23, 2018 at 7:21 pm
Dear Silvia Ma’m,
Thank you so much guiding us and dealing with our confusions related to
IFRS.
I have really learnt so much from your videos. The way you present each
topic with examples are really outstanding and concise.
Have a good day.
With regards,
Amit Shrestha
CAP III Final
Institute of Chartered Accountants of Nepal (ICAN)

Reply
Silvia December 26, 2018 at 11:24 am 
Hi Amit, thank you very much, I appreciate these kind words!

S.

Reply
Victor January 7, 2019 at 6:53 am
Does this apply to accounting for cryptocurrencies

Reply
Ahsen Shahid August 4, 2019 at 1:22 pm
IAS 38 applies to that

Reply
Thomas Egan January 21, 2021 at 3:05 pm
There was an IFRIC Agenda decision on this last year. IAS 2 or

IAS 38 based on fact pattern.
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Reply
Umut March 10, 2019 at 9:24 am
Dear Silvia,
Your explanation and assessment are great. I have been dealing with
reporting a bank account linked with gold prices. I mean the company
buys virtual golds and store them at its bank account, on the other side
the company has the right to withdraw the golds as physical gold. Even in
this case, we should report that under the cash and cash equivalents. Is
that correct? Thank you very much.

Reply
Hamad May 4, 2019 at 9:14 pm
Hi Silivia
the link page is not found
accounting guide for gold issued by World Gold Council.

Reply
Silvia May 4, 2019 at 9:59 pm
Thanks for checking this – they update it time to time. Here’s

the new one:
https://www.gold.org/goldhub/research/guidance-
monetary-authorities-recommended-practice-accounting-
monetary-gold

Reply
Kenneth Sullivan August 15, 2019 at 7:29 pm
Silvia, I am the author of the World Gold Council guidance. Thank you for
your positive comments. The guidance is for central banks only who hold
gold for specific medium term strategic objectives that benefit from the
exclusion of unrealized revaluations from the measurement of annual
profit and loss. The accounting recommended in the paper avoids taking
unrealized price and FX gains through P&L but achieves transparency
through FVOCI. The conceptual basis for this approach can be found in
Working Towards a Common Accounting Framework for Gold at
https://www.gold.org/what-we-do/official-institutions/accounting-
monetary-gold

Reply
Silvia August 15, 2019 at 8:34 pm
Dear Kenneth, thank you for your comment, appreciated!

Sure, I understood very well that your guidance serves
different purposes than IFRSs have and it is good to mention
it here, so that people don’t take “what’s written” blindly and
apply that in their practice without further thinking of their
own situation. All best!

Reply 
Kshitij Sharma February 18, 2020 at 3:54 pm
Dear Kenneth,
I have read your paper on this matter. One thing that caught
my attention was related to accounting of non-monetary
gold. It has been mentioned in your paper is
“As their total is usually not material, the accounting issue is

not significant and the usual approach is to value them at
cost under IAS2 Inventories”
However, if non-monetary gold is measured at fair value,

then say the incremental value comes to around 1% of the
total assets side. This might be misleading information if
presented at cost, isn’t it?

Reply
Pema Yoezer November 20, 2019 at 1:23 pm
Thanks you…I love the quote…ofcourse no doubt on the subject matter

delivery…

Reply
Md.Liakot Ali March 14, 2020 at 12:17 pm
Dear Slivia
As Per IAS & IFRS, What Is Non -Inventory Items of the financial
Statement.
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Reply
Ishwari Bagale August 1, 2020 at 6:24 am
Hi Silvia.
How can we value for stock of gold and silver at the last date of for the
financial year ? Price of Gold tends to increase but rarely decreases so in
this case can we follow the rules of stock as cost price and market price 
whichever is lower ? or fair value presentation because every morning
federation of Gold traders announces new price for gold and silver. Can
we take new price announcement into consideration for the valuation of
stock gold at the end of financial year?. Please suggest

Reply
Silvia August 1, 2020 at 8:27 am
Ishwari, I don’t think that the price of gold always rises. That’s
n. 1 point. N.2 – you don’t have to apply lower of cost or NRV,
as I suggested above. Simply treat at fair value, if that’s your
accounting policy (or if you are a dealer/broker, then follow
exception in IAS 2 as described above).

Reply
Masud Chowdhury August 19, 2020 at 12:16 pm
Hi Silvia,
Thanks for the nice explanation. Can you please tell me the recognition
criteria of Gold and Silver stored by any Central Bank?

Reply
Iswari Bagale October 2, 2020 at 5:46 pm
Hi Silvia
Thank you for your valuable information.
If we present value of gold at fair value presentation it’s stock value

increases as a result profit increases. On profit We need to pay tax
however gold is in stock not sold. Is it fair to pay tax stock.
Last year the gold price was 64500 Rs at the opening date of financial
year and 92800 was at the year end.
Please suggest journal entries

Reply
N.M.P.L. March 23, 2021 at 12:49 pm 
Hello Silvia. I am writing the essay in my college about starting options for
investments. Your article gave me a lot of useful information about the
investment in the gold. Thank you

Reply
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4/20/22, 11:12 AM How to account for investment in gold under IFRS?

- CPDbox - Making IFRS Easy

How to account for investment in gold

standards created by the IFRS Foundation.

Answer: What standards do NOT apply here

Special For You!

Financial instrument arises from a contractual arrangement and there is no

The same applies for the standard IAS 40 Investment property.

What do to in this case?

Develop your own accounting policy

What if the sources contradict?

Accounting policy for investment gold

What is the issue or transaction similar to the investment gold?

Let’s sum up the characteristics of the investment gold:

1. It has indefinite useful life;

How should we apply fair value model to gold?

No depreciation, nothing at all.

Special For You!

Here’s the video summing up the issue:

JOIN OUR FREE NEWSLETTER AND GET

report "Top 7 IFRS Mistakes" + free IFRS

Please check your inbox to confirm your subscription.

Amit Shrestha December 23, 2018 at 7:21 pm

Dear Silvia Ma’m,

Have a good day.

CAP III Final

Institute of Chartered Accountants of Nepal (ICAN)

Silvia December 26, 2018 at 11:24 am 

Hi Amit, thank you very much, I appreciate these kind words!

Victor January 7, 2019 at 6:53 am

Does this apply to accounting for cryptocurrencies

Ahsen Shahid August 4, 2019 at 1:22 pm

IAS 38 applies to that

Thomas Egan January 21, 2021 at 3:05 pm

There was an IFRIC Agenda decision on this last year. IAS 2 or

Umut March 10, 2019 at 9:24 am

Hamad May 4, 2019 at 9:14 pm

the link page is not found

accounting guide for gold issued by World Gold Council.

Silvia May 4, 2019 at 9:59 pm

Thanks for checking this – they update it time to time. Here’s

Kenneth Sullivan August 15, 2019 at 7:29 pm

Silvia August 15, 2019 at 8:34 pm

Dear Kenneth, thank you for your comment, appreciated!

Kshitij Sharma February 18, 2020 at 3:54 pm

“As their total is usually not material, the accounting issue is

However, if non-monetary gold is measured at fair value,

Pema Yoezer November 20, 2019 at 1:23 pm

Thanks you…I love the quote…ofcourse no doubt on the subject matter

Md.Liakot Ali March 14, 2020 at 12:17 pm

Ishwari Bagale August 1, 2020 at 6:24 am

Silvia August 1, 2020 at 8:27 am

Masud Chowdhury August 19, 2020 at 12:16 pm

Iswari Bagale October 2, 2020 at 5:46 pm

Thank you for your valuable information.

If we present value of gold at fair value presentation it’s stock value

Please suggest journal entries

N.M.P.L. March 23, 2021 at 12:49 pm 

Required fields are marked 

Mostafa Negm on IAS 37 Provisions, Contingent Liabilities and Contingent Assets

ACCOUNTING POLICIES AND ESTIMATES 11

CONSOLIDATION AND GROUPS 24

PROVISIONS AND OTHER LIABILITIES 41