The United States Financial Accounting Standards Board (FASB) has approved new accounting rules that will require companies to record the fair value of their cryptocurrency holdings on their balance sheets starting in 2025.
The United States Financial Accounting Standards Board (FASB) has unanimously approved new accounting rules that will require companies to record the fair value of their cryptocurrency holdings on their balance sheets starting in 2025. This change is expected to have both benefits and drawbacks for companies holding cryptocurrency.
Previously, companies were required to keep impairment losses from cryptocurrency on their balance sheets even after the digital asset regained its value. However, the new accounting rules will allow companies to record financial recoveries from increasing cryptocurrency prices, potentially leading to increased earnings volatility.
While the change in accounting rules is expected to introduce more volatility in the earnings of companies with significant cryptocurrency holdings, it is also seen as a positive development for corporate adoption of cryptocurrency. Companies that hold large amounts of cryptocurrency, such as MicroStrategy and Tesla, will be affected by these new rules.
MicroStrategy Chairman Michael Saylor commented on the change, stating that fair value accounting for Bitcoin is coming and that it eliminates a major impediment to corporate adoption of BTC as a treasury asset. The change in accounting rules is expected to make it easier for companies to include cryptocurrency in their financial statements.
As part of the changes, cryptocurrency will become a line item under "intangible assets" in financial accounts. This adjustment reflects the increasing recognition of cryptocurrency as a valuable asset class that companies are holding as part of their corporate treasury strategies.
The FASB's decision to approve these new accounting rules for cryptocurrency was made after a call for comments on proposed changes earlier this year. The rules will officially go into effect in 2025, giving companies time to prepare for the accounting changes related to their cryptocurrency holdings.
Overall, the change in accounting rules is expected to provide more clarity and transparency regarding how companies report their cryptocurrency holdings and any fluctuations in their values. This could have a positive impact on investor confidence and the broader adoption of cryptocurrency in the corporate world.
(DEREK ANDERSEN, CoinTelegraph, 2023)