- FASB updated guidelines for accounting of cryptocurrency holdings, allowing for value changes’ recognition.
- This benefits companies with crypto assets, requiring disclosure of fair value, cost, and asset types.
- Stakeholders’ feedback led to the unanimous adoption of new rules effective from December 15, 2024.
The U.S. Financial Accounting Standards Board (FASB), which provides guidelines for how businesses should show their assets on financial statements, released an update on Wednesday. This update allows companies to account for changes in the value of their cryptocurrency holdings.
This change will be beneficial for companies like MicroStrategy (MSTR) that have cryptocurrency on their balance sheets. Currently, according to the existing rules, businesses must report a loss if the value of the cryptocurrency they own drops below the purchase price, even if they haven’t sold the cryptocurrency. With the new rules, companies will need to disclose the fair value, the initial cost, and the types of assets they are holding.
Stakeholders providing feedback to FASB expressed concerns that the existing guidance didn’t offer valuable information for investors or other parties, according to the document.
The document stated that accounting for only decreases in the value of crypto assets in financial statements until they are sold fails to provide relevant information that reflects (1) the underlying economics of those assets and (2) an entity’s financial position.
The board unanimously adopted the new rules, which will take effect after December 15, 2024, as mentioned in the document.
In a section explaining how FASB arrived at the point of adopting new guidance, it noted receiving a significant amount of feedback supporting a new approach to digital assets.
“Stakeholders’ feedback, including respondents to the 2021 FASB Invitation to Comment (ITC), Agenda Consultation, indicated that improving the accounting for and disclosure of crypto assets should be a top priority for the Board. Nearly 500 respondents to the 2021 ITC requested that the Board add to its agenda a project related to crypto assets.”
U.S. Financial Accounting Standards Board (FASB)
FASB has been in the process of revising accounting regulations for cryptocurrency holdings over the past few months. In September, FASB had signaled its intention to implement the new guidance.
Michael Saylor, the founder and former CEO of MicroStrategy, had previously shared on Twitter that this change would simplify the process for companies to incorporate Bitcoin into their treasury assets. He reiterated this point on Wednesday morning following the release of the FASB guidance.
