Changes have been made to U.S. standard financial statements that require public and private companies to keep accounting records that measure the fair value of digital assets on the balance sheet from 2025.
The United States Financial Accounting Standards Board (FASB) unanimously approved the rules on accounting for the fair value of cryptocurrency assets of companies. This is reported by Bloomberg Law. The new rules have already been effectively adopted, their official publication should take place before the end of the year.
According to the new rules, companies that store a significant portion of their assets in BTC, ETH, or other cryptocurrencies will have to estimate their value based on the current exchange rate of digital assets, taking into account the recovery from price declines. This approach will introduce volatility to some companies’ revenues but will greatly improve accounting.
Currently, companies default to the American Institute of CPAs practice guideline, which treats most crypto as an intangible asset. This means that companies account for cryptocurrency assets on their balance sheet at their value at the time of purchase, reevaluating them every quarter for losses. For example, if BTC drops even briefly during the period, this is recorded as a loss. Companies can’t revise the values if the crypto market recovers.
According to Jeff Rundlet, Head of Accounting Strategy at Cryptio, the new rules will be a big step toward the adoption of digital assets by some large businesses and corporations that previously preferred to avoid crypto because of the technical complexities of tax reporting for holding them.
Under the new rules, companies will also be required to:
- make a separate record of their cryptocurrency assets so that investors and other users of financial statements can clearly see how much the company has invested in crypto;
- provide information each reporting period about the amount of cryptocurrency in the accounts and the restrictions on those assets;
- annually reconcile changes to the opening and closing balances of cryptocurrency assets;
- disclose the mandatory information required under the accounting rules of ASC 820.
The new rules will only apply to digital assets that are classified as intangible assets under U.S. accounting rules. Non-fungible tokens (NFT), stablecoins, and wrapped tokens won’t be included in the rules.
It took FASB members nearly six months to make a final decision on the accounting amendments. Public consultations regarding changes to the FASB’s accounting standards code began back in March, but board members formally discussed and voted on the amendments only on September 6.
The accounting rules will become mandatory for public and private companies for fiscal years beginning after December 15, 2024, including interim periods. However, companies can start using fair value accounting for their crypto-assets immediately if they wish.
U.S. tax regulations on cryptocurrencies remain a benchmark for other countries, despite the fact that the U.S. isn’t even among the top 10 countries with the lowest taxes on digital assets.
