American Accounting Standards Board rules reflect the fair value of institutional cryptocurrency assets.
Cryptocurrency companies and institutions holding cryptocurrency assets got some good news about their accounting practices. They will be able to record the value of cryptocurrencies more realistically following rule changes in the United States.
The Financial Accounting Standards Board (FASB) finalized the new rules on December 13. FASB is the organization that sets accounting and reporting standards for U.S. Generally Accepted Accounting Principles (GAAP). GAAP-standard financial reports are required for companies trading on U.S. public markets.
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Current practice dictates that cryptocurrencies are considered intangible assets that last indefinitely and are therefore subject to impairment. This means that if the value of a cryptocurrency asset is lost during an accounting period, the value of the cryptocurrency recorded on the books will decrease, and even if the value of the asset held increases before then, the recorded value cannot increase until the asset is sold. .
FASB officially adopted fair value accounting. #Bitcoin For fiscal years beginning after December 15, 2024. This upgrade to accounting standards will facilitate the adoption of: $BTC It is used as a financial reserve asset by companies around the world. https://t.co/4GOuji6cr0
— Michael Saylor⚡️ (@saylor) December 13, 2023
This is a downside to the volatile cryptocurrency market because it can make a company’s assets appear to be worth less than their market value. In its accounting standards update, FASB said:
“Considering only a decline, rather than an increase, in the value of a cryptocurrency asset in financial statements until it is sold does not provide relevant information that reflects (1) the underlying economics of the asset and (2) the financial position of the company. .”
In accordance with updated accounting standards, the fair value (estimated market value) of cryptocurrency assets will be measured each accounting period and presented on the company’s books. The FASB update said the changes will provide more relevant information and reduce accounting costs and complexity.
The recent FASB ruling will be a very big deal. #Bitcoin.
But what is FASB and why should you care?
Time for Corporate Finance
— James Lavish (@jameslavish) November 14, 2022
FASB finalized the new rules after a consideration process that began last year. We asked for input in March and voted on the changes in September. The updated rules take effect for fiscal years beginning after December 15, 2024.
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