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FASB Approves Crypto Asset Accounting and Disclosure Rule

S.J. Steinhardt
Published Date:
Sep 7, 2023

GettyImages-876844722 Bitcoin Cryptocurrency Blockchain

The Financial Accounting Standards Board (FASB) has voted to approve a new rule on cryptocurrency accounting and disclosure.

The rule would measure the changes in value of digital currencies held by companies. Companies holding these assets have argued that this new rule more accurately reflect their financial condition, according to The Wall Street Journal

Currently. there are no specific accounting or disclosure rules for crypto assets in the United States. In its exposure draft released in March, FASB noted that that "[s]takeholders stated that the current accounting—except as provided in generally accepted accounting principles (GAAP) for certain specialized industries—for holdings of crypto assets as indefinite-lived intangible assets, which is a cost-less-impairment accounting model, does not provide investors, lenders, creditors, and other allocators of capital (collectively, “investors”) with decision-useful information.”

Accordingly, the exposure draft stated, “In addition to better reflecting the economics of crypto assets, measuring those assets at fair value would potentially reduce cost and complexity associated with applying the current cost-less-impairment accounting mode.”

FASB expects to formally issue the standard by year-end, a spokeswoman told the Journal. It is set to go into effect for 2025 annual reports for calendar-year public and private companies, which can adopt the changes early. The rule will require public companies’ financial statements to disclose their crypto assets, separating them from other intangible assets such as patents and trademarks, on a quarterly and annual basis. Private companies will have to do the same in whichever financial reports they issue. Businesses will have to include gains and losses on their crypto assets in their net income.

The benefits of the rule not only likely outweigh the compliance costs for companies, but the rule could also spur cost savings in some cases, FASB Vice Chair Jim Kroeker told the Journal. 

Big Four accounting firms and major crypto companies had asked FASB to include wrapped tokens—digital tokens that allow crypto from one blockchain to be used on another—within the new standards, Bloomberg News reported, but the board members want more information about the market before including the tokens within the standard.

“I know there will be some that are disappointed that we haven’t expanded the scope to address wrapped tokens and NFTs and whatnot, but I think intentionally keeping this project narrow has really allowed us to get this into the hands of investors sooner,” FASB member Sue Cosper said, according to multiple news sources. 

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