Non-fungible token valuation exposed: US Generally Accepted Accounting Principles Compliance and artificial intelligence’s disruptive role

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

The ascent of non-fungible tokens (NFTs) has recently garnered significant attention, prompting the need for effective methods to appraise these digital assets. An examination was conducted to ascertain the efficacy of the US Generally Accepted Accounting Principles (GAAP) in valuing NFTs, considering their unique attributes, notably their indivisibility and blockchain-based ownership. With a two-fold aim, this study conducts a comprehensive evaluation of GAAP’s suitability for NFT valuation while pinpointing the constraints inherent in the existing accounting framework. The proposed remedies encompass the development of industry-specific guidelines (ISG), refinement of NFT categorization and evaluation techniques, timely resolution of valuation complexities, and integration of artificial intelligence (AI) based solutions. Preliminary findings reveal that conventional GAAP procedures offer only partial alignment with the intricacies of NFT valuation, primarily because of the unprecedented nature of NFTs and swiftly evolving market dynamics. This investigation contributes significantly by delving into the subtleties of implementing established accounting principles within this nascent digital asset class. Furthermore, it underscores the importance of interdisciplinary collaboration between the accounting and technology sectors to adeptly navigate the ever-transforming domain of blockchain technology and digital assets. This research provides a resource for professionals, regulators, and scholars engaged in the dynamic realm of NFT valuation and accounting.

Keywords: NFT, Blockchain, Cryptocurrency, US GAAP

Authors’ individual contribution: Conceptualization — M.A. and H.U.U.; Methodology — M.A. and H.U.U.; Investigation — M.A. and H.U.U.; Writing — Original Draft — M.A. and H.U.U.; Writing — Review & Editing — M.A. and H.U.U.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M40, M41, M48, M49

Received: 16.10.2023
Accepted: 22.12.2023
Published online: 26.12.2023

How to cite this paper: Akpan, M., & Ukwu, H. U. (2023). Non-fungible token valuation exposed: US Generally Accepted Accounting Principles Compliance and artificial intelligence’s disruptive role. Risk Governance and Control: Financial Markets & Institutions, 13(4), 73–84. https://doi.org/10.22495/rgcv13i4p6