Bitcoin on the balance sheet? FASB OKs fair-value accounting for cryptocurrency assets

Until now, there haven’t been any specific accounting rules for cryptocurrency assets you may have. After all, crypto economics can be volatile. The price of bitcoin fell from $47,816 in January to $19,557 this month, according to YCharts.

After putting cryptocurrency accounting on its technical agenda earlier this year, the Financial Accounting Standards Board (FASB) reached a tentative decision to make fair-value accounting the primary accounting standard for reporting how much crypto holdings are worth.

The fair-value standard applies to cryptocurrency assets that:

• are held by private and public companies and nonprofits
• meet the GAAP definition of an intangible asset
• reside on a distributed ledger (e.g., blockchain)
• are fungible (meaning non-fungible tokens don’t count), and
• don’t provide the asset holder with enforceable rights to, or claims on, underlying goods, services or other assets.

When it comes to measurement of crypto assets:

• Alternative measurement, such as historical cost less impairment, for crypto assets not traded in an active market is not allowed
• They should be measured at fair value, with fair value changes recorded in current period comprehensive income, and
• Commissions, transaction fees and other charges incurred to acquire crypto assets should be expensed as incurred unless other industry-specific GAAP rule applies.

There are still discussions that need to take place about important details, like what has to be included in disclosures and how companies should inform investors. Then the board will have to vote on whether to issue a proposal, and that would have to be made available for public comment. But FASB’s general consensus is that fair-value accounting is the best approach.

What a cryptocurrency rule means for you

The current accounting approach many businesses have been taking with cryptocurrency assets is preparing annual financial statements that review the value of the assets and noting if it drops below the purchase price. But if the value rises, companies only record a gain when they sell the asset, not if they continue holding it.

A fair-value accounting rule would allow companies like yours to recognize crypto gains and losses on the balance sheet and treat digital assets the same as tangible financial assets. It could encourage more cryptocurrency investing because companies with crypto would have more incentive to hold onto their assets instead of selling them.