FASB Adopts New Rule on Fair-Value Accounting for Disclosure of Crypto Assets
Contributors: Graham Michitsch, Senior Manager
On September 6, 2023, the Financial Accounting Standards Board voted on cryptocurrency accounting and set in place a new rule that business must use fair-value accounting for certain crypto assets that meet the predefined criteria, such as bitcoin. This is a welcomed and long-awaited change that accountants, companies, and investors have rallied for as it treats digital assets the same as financial assets. The proposed change allows immediate recognition of gains and losses rather than the existing treatment of digital assets as intangibles, which follow the impairment model. Fair value reporting provides investors with a better view of an organizations financial position and digital asset exposures, allowing them to make more informed decisions regarding investments.
Compliance Date and Requirements
Companies will now have to disclose their various cryptocurrencies by type on their quarterly and yearly financial statements, but at valuations that better represent true book value. Both public and private that hold digital assets on their balance sheet, will now include crypto gains and losses via their net income instead of only taking an impairment expense when fair value drops below the established carrying amount. While the FASB expects to issue the standard by the end of 2023, the rule is not set to go into effect until 2025 for fiscal years beginning after December 15, 2024, however, companies can adopt the changes early. Additionally, companies will have to adhere and include the required reporting disclosures per accounting rule ASC 820, which explains how the company calculated their fair-value measurement.
Need accounting help with your digital assets strategy and crypto reporting? Cherry Bekaert’s Accounting Advisory professionals are at the forefront of this emerging landscape and can assist with a wide variety of adoption and readiness procedures to understand the accounting, tax, financial and operational considerations, including workflows and security measures needed to meet compliance. Reach out to your Cherry Bekaert advisor or a member of our Accounting Advisory practice.