New FASB guidelines on crypto accounting will revamp financial reporting in 2025.
The United States Financial Accounting Standards Board (FASB) has ratified new guidelines that will positively impact companies holding crypto.
On September 6th, the FASB voted unanimously to approve changes updating the accounting standards for cryptocurrency holdings.
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In March, the board collected public comments on the proposed changes. It is worth noting that the decision to alter rules builds on the FASB's tentative ruling in October 2022 regarding fair value accounting for digital assets.
Fair value is a critical accounting term that involves estimating an asset's worth by considering its current market value and other vital factors.
The forthcoming rules mark a departure from older practices, which compelled companies to maintain so-called impairment losses on their balance sheets, even if the value of the cryptocurrency had since recovered.
The implications of these changes are significant, as noted by FASB member Christine Botosan:
It’s not very often that we can both take cost out of the system and improve the decision usefulness of information, and it makes it a really easy vote to do both of those.
The shift in accounting rules will add a layer of volatility to the earnings reports of companies with substantial cryptocurrency holdings. On top of that, it will also enable them to record financial recoveries due to surges in crypto prices. Although the official start date is 2025, companies can adopt these new accounting methods immediately.
This change is not just relevant for crypto-specific companies like Coinbase. It will also have ripple effects on investment firms and corporations like MicroStrategy and Tesla that have sizeable crypto portfolios.
Michael Saylor, the chairman of MicroStrategy, discussed the new rules on X (formerly Twitter).
It is worth highlighting that cryptocurrency will be listed under "intangible assets" on companies’ financial statements.
The FASB’s approval of these new accounting rules represents a significant step forward for the corporate adoption of cryptocurrency. By changing how companies account for the fair value of their digital assets, the board is modernizing the financial reporting landscape.
