The Financial Accounting Standards Board’s new regulations for specific crypto assets aim to enhance accounting and disclosure. Even though these rules will only come into effect in 2025, corporate entities could choose to adopt them earlier for potential immediate benefits.
These rules aspire to furnish investors and other capital allocators with more valuable information that accurately reflects the economics of certain crypto assets and the financial position of entities, as well as reduce the expenses and complexity that comes with applying current accounting. The regulations are expected to have repercussions on any entity—be it public or private—that possesses crypto assets.
The recent guidance, released December 13, 2023, calls for entities to gauge specific crypto assets at fair value, and to record changes in fair value in net income for each reporting cycle. Entities are also obligated to provide additional disclosures regarding the holding of certain crypto assets.
Before the advent of the new accounting guidance, entities— barring those within the bracket of specialized industry guidance— tabulated crypto assets as intangibles with an indefinite life in compliance with ASC 350. This demanded assets be gauged at historical cost subtracted by impairment.
Entities that plan to carry crypto on their balance sheets will likely need to adapt to these new standards and develop new reporting strategies. Finance, Treasury, Accounting, and Compliance teams should thoroughly understand the implications of the new rules and create new reporting and disclosure protocols for compliance.
The new accounting standards might not have all the answers regarding accounting for crypto assets, with further exploration needed for crypto assets that are not addressed. For instance, wrapped tokens did not receive explicit guidance from FASB in redeliberations on feedback from comment letters.
With crypto in your portfolio or if you’re contemplating it, the new accounting standards can assist you. They provide price and accounting transparency, better communication with investors, stakeholders, and the public, and can make the process more efficient, less costly, and less complicated.
Early adoption of the new rules is an option and brings its advantages. However, it is necessary to have the required price data and the required information for additional disclosures at hand.
The new accounting standard from FASB is not just a victory for companies but also for the public and investors. It reduces the complexity and cost, provides an accurate representation of the economic situation of the company, and offers additional information about the companies’ holdings in crypto assets.
Amy Park, a partner in the audit and assurance business of Deloitte & Touche LLP, suggests that entities should not wait until the deadline to implement these new processes and procedures. The timing is also beneficial as corporations with calendar year-ends can factor in the standard in their 2023 financial statements if they so choose.