In a significant move impacting companies holding cryptocurrencies, the Financial Accounting Standards Board (FASB) has introduced new rules requiring them to measure their crypto assets at fair value.
This measurement technique, capturing the most up-to-date value of digital currencies like Bitcoin and Ethereum, aims to provide a more accurate reflection of their worth. The rules, effective from 2025, allow companies the option of earlier adoption.
FASB Change Is Significant For Major Crypto Players
According to a recent statement, the implementation of these rules is important for companies such as MicroStrategy. As they will now be able to accurately capture both the highs and lows of their crypto holdings.
It noted that previously, companies faced one-sided accounting treatment, only recording the lows and often resulting in reduced earnings due to the volatile nature of crypto values.
For companies with fiscal years beginning after December 15, 2024, the new rules become mandatory, with an option for early compliance.
It was emphasized the absence of specific US accounting rules for digital currencies led to confusion. Additionally, inconsistencies in the treatment of crypto holdings.
Changes To How Companies Report Crypto On Balance Sheets
The new FASB rules address this gap, providing clarity and standardization. Previously, companies followed practices treating cryptocurrencies as intangible assets, resulting in challenges, especially for those not qualifying as investment companies.
The scope of the rules deliberately remains narrow, excluding non-fungible tokens, stablecoins, and issuer-created tokens. Despite this, industry players are optimistic. They view the rules as a step toward standardization, which can boost investor confidence and legitimacy.
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According to the report, under the new rules, companies must create a separate entry for crypto assets on their balance sheets and disclose significant holdings and any restrictions in their footnotes.
Annual reconciliation of opening and closing balances, categorized by crypto assets, is also required.
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