Accounting meets metaverse: navigating the intersection between the real and virtual worlds

Abstract

Purpose

The “metaverse” is the new buzzword. With the phenomenal growth of the metaverse comes accounting, taxation and jurisdictional challenges, which business and governments have yet to fully address. This paper aims to highlight and rationalise the lack of regulatory framework and multiplicity of jurisdictions on metaverse transactions. This paper addresses some of the complications with respect to accounting and taxation in virtual environments.

Design/methodology/approach

This study relies on secondary data and emerging literature to understand the multiplicity of jurisdiction and complexity of the accounting transactions. The concept of the metaverse is rapidly evolving, and this study uses extant literature to provide the foundation for understanding the key challenges relating to accounting and taxation.

Findings

Concepts of revenue recognition and deferment are challenged by the transactions in the metaverse. There are novel applications, underpinned by emerging technologies and blockchain supporting new crypto assets, such as non-fungible tokens and other decentralised finance (DeFi) tools; however, the caveats of anonymity and jurisdictional issues persist. The paper suggests that the industry must adapt to the unique reporting requirements of these assets and develop new standards for evaluating their value for financial reporting purposes. The paper emphasises the need for a case-based approach in the absence of standardised regulations for the accounting industry in the metaverse.

Originality/value

This paper adds original contributions to extant literature of the metaverse and advances ongoing debates into the accounting and taxation issues pertinent to the metaverse and DeFi.

Citation

Pandey, D. and Gilmour, P. (2024), "Accounting meets metaverse: navigating the intersection between the real and virtual worlds", Journal of Financial Reporting and Accounting, Vol. 22 No. 2, pp. 211-226. https://doi.org/10.1108/JFRA-03-2023-0157