Cryptocurrency Accounting Overhaul Approved by FASB
The Financial Accounting Standards Board (FASB) has unanimously approved changes in accounting and disclosure practices for cryptocurrency, including Bitcoin and digital assets.
These new regulations, effective from 2025, aim to enhance transparency for investors and financial statement users dealing with the volatility of these assets.
Established in 1973, the FASB is officially recognized by the U.S. Securities and Exchange Commission as the authority responsible for setting accounting standards for public companies.
The proposal, debated and voted on September 6, follows a “tentative” decision on fair value accounting for crypto assets made by the FASB in October 2022.
FASB Chairman Richard Jones expressed support for the decision, noting overwhelming feedback from investors who allocate capital based on financial statements.
The revised accounting approach will introduce greater earnings volatility for companies holding significant cryptocurrency assets while permitting them to report financial gains resulting from rising crypto values. Companies have the option to immediately implement fair-value accounting for their cryptocurrency holdings.
Under existing regulations, companies document their cryptocurrency holdings at their initial purchase cost and record value decreases as an “impairment charge” if the price falls below this cost. However, they cannot adjust the valuation upward if the cryptocurrency’s price increases, a practice criticized for neglecting potential gains.
Christine Botosan, an FASB member, stated that this change not only reduces costs in the system but also enhances the usefulness of information for decision-making.
MicroStrategy Chairman Michael Saylor noted the impact on corporate adoption of Bitcoin as a treasury asset, stating, “Fair value accounting is coming to #Bitcoin.”
To accommodate these modifications, cryptocurrencies will be categorized as “intangible assets” within financial statements.
This marks positive news on the US regulatory front, with the hope for similar developments in Australia.
