New FASB Standard Makes It Easier for Companies To Hold Crypto

In 2023, the Financial Accounting Standards Board (FASB) published nine new accounting standard updates (ASUs). Included in this updated guidance came a change to crypto asset standards that made it easier for companies to hold crypto assets on their balance sheet. Read on to get our thoughts on this new standard that was published in December 2023.

Updates to Crypto Asset Standards

Prior to this new standard, crypto assets were required to be accounted for as intangible assets and reported on the balance sheet at historical cost. They were then required to be tested for impairment at least annually and written down if deemed to be impaired (price dropped below historical cost). However, if the price went back up, that impairment could not be recovered. Companies including Tesla, MicroStrategy Inc., Coinbase among others that invest in cryptocurrencies, such as Bitcoin and Ethereum, have complained that this treatment doesn’t accurately reflect the underlying economics of their crypto assets.

In response to these concerns, in December of 2023, the FASB issued ASU No. 2023-08, Intangibles — Goodwill and Other — Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. This landmark guidance is the first direct accounting standard on crypto assets and is expected to reduce the cost and complexity associated with applying the current accounting rules and generally make it easier for companies to hold crypto assets. It will require crypto assets that meet the following six conditions to be measured at fair value:

1. They’re fungible. This term refers to the ability of identical assets with the same value to be interchanged similar to how a $20 bill could be exchanged for another. This condition is specifically designed to exclude non-fungible tokens (NFTs) from the scope of the guidance.
2. They’re deemed to be intangible, which excludes securities and fiat currencies.
3. They don’t provide the asset holder with enforceable rights to, or claims on, underlying goods, services or other assets (such as with a contract).
4. They’re created or reside on a distributed ledger based on blockchain technology (thereby excluding software, media and data).
5. They’re secured through cryptography.
6. They aren’t created or issued by the reporting entity or its related parties.

Fair value represents the price that would be received if the company were to sell the crypto asset in an orderly transaction between market participants. Changes in value will be recognized in each reporting period as gains or losses in net income.

Companies must present crypto assets and changes from their remeasurement separately from that of other intangible assets as they have different measurement requirements. This will result in a prominent display of crypto assets and their activity, providing investors with clear and transparent information about the fair value of crypto assets within the financial statements. In addition, companies will need to provide detailed disclosures to help financial statement users understand their crypto asset holdings, contractual sale restrictions and changes during the reporting period. 

The updated guidance goes into effect for all entities for fiscal periods beginning after December 15, 2024, including interim periods within those years. Early application is permitted.

Get Your Reporting in Order

While this standard isn’t required to be adopted until fiscal periods beginning after December 15, 2024, many Companies are expected to early adopt this standard to take advantage of its benefits. Need help navigating this standard or want to learn about the other changes the FASB rolled out? Reach out to CSH.