A new accounting standard addressing the fair value of cryptocurrency assets formally marks a major change for businesses owning bitcoin (BTC) and other cryptocurrencies. The change lets companies document both gains and losses on their crypto holdings, therefore presenting a better picture of asset values and increasing the appeal of bitcoin treasuries to businesses.
Published by the Financial Accounting Standards Board (FASB), the impartial authority in charge of establishing accounting guidelines for businesses using Generally Accepted Accounting Principles (GAAP), the standard is Accounting Standards Update 2023-08 (ASU 2023-08).
what changed?
Companies used to have to disclose cryptocurrencies at their historical cost, changed merely for losses or damage. Often resulting in undervalued assets on company balance sheets, this antiquated method neglected price increases. Furthermore, because of crypto’s natural volatility, the approach enforced complicated impairment computations.
Companies can now register crypto assets at fair value under the new standard, therefore capturing both price rises and declines. Additionally recorded as nett income are gains, which could encourage more businesses to use bitcoin as a treasury reserve asset.
Michael Saylor, chairman of MicroStrategy, a company with the biggest corporate bitcoin reserve worldwide, said, “this upgrade to accounting standards will help businesses all around to adopt BTC as a treasury reserve asset.”
The New Standard’s Scope
As accounting firm Deloitte notes, the amendment specifically excludes non-fungible tokens (NFTs), tokens produced by the issuer, and wrapped tokens like WBTC even if it relates to crypto assets like bitcoin.
Adopting this standard marks a significant turning point in close proximity between corporate accounting methods and the developing crypto sector.
