The Financial Accounting Standards Board released its long-awaited
The
The amendments in the ASU require an entity to
"The new standard responds to feedback from stakeholders of all backgrounds who indicated that improving the accounting for and disclosure of cryptoassets should be a top priority for the Board," said FASB chair Richard R. Jones in a statement. "It will provide investors and other capital allocators with more relevant information that better reflects the underlying economics of certain crypto assets and an entity's financial position while reducing cost and complexity associated with applying current accounting."
The amendments in the update improve the accounting for certain cryptoassets by requiring an entity to measure those cryptoassets at fair value each reporting period with changes in fair value recognized in net income. The amendments also enhance the information provided to investors about an entity's cryptoasset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.
The amendments apply to all assets that meet all of the following criteria:
- Meet the definition of intangible asset as defined in the FASB Accounting Standards Codification;
- Don't provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets;
- Are created or reside on a distributed ledger based on blockchain or similar technology;
- Are secured through cryptography;
- Are fungible; and,
- Are not created or issued by the reporting entity or its related parties.
The amendments are effective for all entities for fiscal years beginning after Dec. 15, 2024, including interim periods within those fiscal years. Early adoption is allowed for both interim and annual financial statements that have not yet been issued (or made available for issuance). If amendments are adopted in an interim period, they must be adopted as of the beginning of the fiscal year that includes that interim period.
"The standard will mandatorily take effect in 2025 but allows for early adoption if the entity wants to early adopt the standard," said P.J. Theisen, a partner in the U.S. audit and assurance blockchain and digital assets practice at Deloitte. "In terms of benefits, first and foremost the new ASU is going to bring about increased transparency."
He noted that the previous accounting model did not reflect the underlying economics, the new standard and will allow for better communication with stakeholders about purchases, sales, and gains. "I think the new accounting model will provide a better ability for an entity to tell its story," said Theisen.
However, he acknowledged there may be some challenges in calculating the fair value of many types of cryptoassets, especially those that trade on different crypto exchanges and accountants will need to gather the necessary data carefully.
Deloitte has clients that will be able to benefit from the new standard. "We have a number of clients both within the tech industry and even outside the tech industry that hold cryptoassets that have been following the standard closely," said Theisen. "Some will be interested in early adopting the standard. We have a pretty large number of clients that will be applying this ASU."
KPMG also sees an impact from the new standard. "With the FASB's final rules published, U.S. accounting for crypto assets for non-investment companies has finally been rationalized," said Tony Tuths, a principal in alternative investments and digital asset tax practice leader at KPMG, in a statement. "Companies with crypto on their balance sheets can now hold the assets at fair value. Though not effective until 2025, companies can — and will — elect to use this reporting earlier. One more barrier to wider adoption has been removed."
Jones was asked during a congressional hearing Tuesday before the House Financial Services Capital Markets Subcommittee about whether the new standard would have applied to failed crypto exchanges like FTX.
"We issued a narrow subset of cryptocurrency rules that would require certain cryptocurrency to be reported at fair value," Jones responded. "That's because prior to that, we had two different standards, depending on what industry someone was in. For example, funds reported crypto and any other investment at fair value. For commercial type companies, they would report it at the lower of historical costs or fair value, effectively a mark to lowest value. So that's the standard setting that we did. It typically relates to commercial companies. As far as the exchanges, unless they qualify for some specialized accounting, that would have encompassed them."
Jones was then asked by Rep. Sean Kasten, D-Illinois, whether FYX would have been allowed under the new rules to issue its FTX tokens where it was both the issuer and effectively the valuer.
"I can't speak on that fact pattern because I don't know whether they applied GAAP and, if so, whether it was U.S. GAAP or international GAAP, and whether they applied it well," said Jones. "What I will tell you is that our standard excludes related-party issued tokens."
The ASU, including more information about transitioning to the new cryptoasset standard, is
