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FASB Approves Much-Awaited Change in Crypto Accounting Rules
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The FASB has approved new accounting rules for companies holding crypto assets, which will require them to report their holdings at fair value.
The Financial Accounting Standards Board (FASB) voted unanimously on Wednesday to establish new rules on how companies account for and disclose their cryptocurrency holdings. The new rules, which will be effective from 2025 onwards, aim to help companies report their financials more accurately and provide investors more transparency on the digital assets held by companies.
FASB’s New Crypto Accounting Rules
In the absence of any specific accounting or disclosure rules for crypto assets in the U.S., businesses currently classify crypto assets as indefinite-lived intangible assets, just like intellectual property such as copyrights. In this case, companies are supposed to record an impairment charge if the price of the digital asset goes below the purchase price, even if they didn’t sell the digital asset. If the asset value goes up, companies cannot record any gain unless they sell the digital asset.
Now with the new fair accounting rules for Bitcoin (BTC-USD), Ethereum (ETH-USD), and certain other crypto assets, companies can report unrealized gains and losses on their holdings. This way, investors can have a more accurate picture of the financials of a company with crypto holdings.
While several companies have stayed away from crypto assets due to the lack of clear rules and regulations, others like electric vehicle (EV) maker Tesla (NASDAQ:TSLA), fintech giant Block (NYSE:SQ), and software company MicroStrategy (NASDAQ:MSTR) have crypto holdings on their balance sheets.
It is worth noting that the new rules are not applicable to Non-fungible tokens (NFTs), certain stablecoins, and wrapped tokens (cryptocurrencies pegged to the value of another original crypto or assets like gold and shares).
Reacting to the news, MicroStrategy chairman Michael Saylor wrote on X, “Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.”
Bitcoin, the largest cryptocurrency by market cap, has advanced over 55% year-to-date.
