US FASB To Introduce Fair Value Accounting for Cryptocurrencies

Updated: 07 September 2023

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New accounting guidelines passed by the Financial Accounting Standards Board (FASB) will require companies to use a “fair value” methodology that requires cryptocurrencies be valued according to market prices.

The new guidelines, the first accounting rule specifically for cryptocurrencies in the US, received a unanimous vote of approval from the FASB with the final draft expected later in the year. The standards are expected to take effect starting December 15, 2024, after final approval of the final draft goes to a written vote.

The regulations were introduced in March by the FASB, a non-governmental organization regulated by the U.S. Securities and Exchange Commission (SEC), as a move to break from the custom of valuing bitcoin and other digital assets based on unrealized losses.

The implementation of the new guidelines will see companies disclose their cryptocurrency holdings by making crypto gains and losses a part of their quarterly reports.

The disclosure will be made at fair value, which captures the most recent value of an asset. While the new standard will add volatility to the profitability of organizations that are significantly involved in cryptocurrencies, the ability to report recoveries is seen as an improvement over the existing practice.

Companies will be able them to instantly recognize losses and gains and treat digital assets like traditional financial assets rather than as indefinite-lived intangible assets.

The implementation and adherence to the accounting rules is expected to break the barrier that is believed to have slowed down the adoption of crypto, especially among corporate companies, says Microstrategy co-founder and former CEO Michael Saylor.

Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.https://t.co/MjVzUJRVjX

— Michael Saylor⚡️ (@saylor) September 6, 2023

FASB Says New Guidelines Provide Better Information For Investors

The new rules have received backing from FASB Chairman Richard Jones, who said that it will give investors more information for making better investment decisions.

“I think we heard overwhelmingly from investors that allocate capital based on the use of financial statements that this will provide them better information to make their decisions, and so I’m fully supportive of it,” Jones said.

Despite the implementation being slated for late next year, FASB agreed to and encouraged companies to seek an early adoption of the new standards.

According to Vice Chair Jim Kroeker, the benefits of the rules not only likely outweigh the expenses for businesses to comply, but they may also result in cost savings in some circumstances.

Companies have generally supported the proposed rule after after the FASB sought feedback on the proposal from the public.