IFRS Treatment of Investment Gold: Fair Value, Cost, and Advisory Support
IFRS presents unique challenges for companies and institutions holding investment gold. As a consulting firm experienced in IFRS compliance and gold sector accounting, we help clients develop and implement accounting policies that meet international standards while reflecting the strategic nature of gold holdings. In this article, we explain the current IFRS landscape, common approaches, and how our team can assist in applying the right framework to your operations.
Why Gold is Not a Financial Instrument Under IFRS
Gold does not meet the definition of a financial instrument under IFRS 9. It is also not considered investment property under IAS 40. Without contractual rights or obligations, gold falls outside the scope of conventional IFRS classifications—requiring preparers to refer to alternative standards and construct accounting policies under IAS 8.
When IAS 2 Applies: Gold as Inventory
IAS 2 applies to entities that actively trade gold, such as bullion dealers or refiners. Under this standard, gold is measured at the lower of cost and net realisable value. However, for entities holding gold for investment or reserve purposes, IAS 2 is not appropriate. We help clients assess whether IAS 2 applies and guide them in distinguishing between inventory and strategic holdings.
IAS 8 and Custom Policy Development
Where no specific IFRS standard applies, IAS 8 permits the development of custom accounting policies by referencing:
- IFRS standards on similar issues
- The IFRS Conceptual Framework
- Internationally recognised practices from other standard-setters
For investment gold, many institutions refer to fair value models used in IAS 40 or IFRS 9, particularly the FVOCI (Fair Value Through Other Comprehensive Income) approach, as the most suitable reference.
Comparing Cost vs Fair Value Approaches
The two main approaches for accounting for gold are cost and fair value. Based on insights from the World Gold Council, most central banks and institutional holders prefer fair value due to the transparency it offers. Here’s a summary:
| Method | Description | IFRS Compliant? |
|---|---|---|
| Cost | Measured at historical price, no revaluation | ✅ Fully compliant (IAS 2) |
| FVTPL | Revalued through profit and loss | ❌ Not compliant |
| FVOCI | Revalued through OCI with reserve accounting | ❌ Not technically compliant but widely used |
| Fixed Asset Model | Gold treated like land (non-depreciable) | ❌ IAS 16 analogy only |
FVOCI: A Practical and Transparent Approach
We often recommend the Fair Value Through Other Comprehensive Income (FVOCI) model where permitted. This method allows gold to be valued at fair market prices without affecting the income statement unless the asset is sold. Benefits include:
- Fair value is reflected on the balance sheet
- Reduced volatility in profit and loss
- Creation of a gold revaluation reserve in equity
- Clear disclosure of realised and unrealised gains
How We Handle Exchange Rate Effects (IAS 21)
Since gold is priced in USD but may be reported in another currency, exchange rate effects must be handled carefully. If using FVOCI, the exchange movement is built into the revaluation, requiring no separate FX treatment. Our team ensures this is handled correctly to avoid compliance risks.
Disclosure and Reporting Support
Accurate and complete disclosures are critical in audit and regulatory reviews. We assist clients in:
- Documenting accounting policy and rationale
- Setting valuation frequency and sources
- Designing templates for gold revaluation reserves
- Reporting realised gains through P&L
Special Cases: Non-Monetary Gold
Gold jewellery, collector’s coins, and scrap are typically classified as non-monetary gold. These assets are recorded under IAS 2 or IAS 16 depending on use. We provide classification guidance and help clients manage inventory and museum or display assets separately from investment gold.
Conclusion
Accounting for investment gold under IFRS requires careful judgment, deep knowledge of the standards, and a strategic view of the institution’s goals. We understand the complexity of gold as a reserve, investment, or inventory asset—and we bring tailored solutions that align compliance, transparency, and audit-readiness. Whether you are developing new IFRS policies or need support refining your current framework, our team is ready to assist.
Need Help with IFRS Gold Accounting?
Our advisory team specialises in IFRS implementation for gold traders, refiners, central banks, and institutional holders. From policy design to reporting templates and audit prep, we provide end-to-end support.
Click here to get in touch with us and learn how we can help you build or upgrade your IFRS-compliant accounting for gold assets.
