The Financial Accounting Standards Board has decided to require companies to measure cryptocurrency assets at fair value.
FASB discussed during a meeting Wednesday how entities that hold crypto assets should measure those assets. The board decided to require an entity to measure crypto assets at fair value, using the guidance in Topic 820, “Fair Value Measurement,” according to a summary of tentative board decisions posted on FASB’s website. The board also decided to recognize increases and decreases in fair value in comprehensive income each reporting period, and to recognize certain costs incurred to acquire crypto assets, such as commissions, as an expense, unless the entity follows specialized industry measurement guidance that requires otherwise.
At the same FASB meeting, board members also considered different measurement alternatives for crypto assets with inactive markets, but they decided not to pursue those alternatives. They also considered whether to provide implementation guidance relative to the application of fair value measurement of crypto assets, but here too they decided not to provide additional measurement guidance as part of this project. In addition, they considered whether there should be a difference for private companies for the measurement of crypto assets and decided that the measurement and recognition requirements should be the same for all entities.
FASB plans to consider presentation, disclosure and transition matters for accounting for crypto assets at a future meeting.
“I think at the end of the day there’s a broad range of these assets with different levels of liquidity, but highly volatile, speculative, thinly traded assets,” said FASB Chair Richard Jones during a webcast of the meeting. “They have certain attributes to them and we’ll talk about disclosure later, but I think people hopefully go in with their eyes wide open and understand what they have.”
The upcoming standards may help clear up some of the confusion about how to account for crypto assets. “Crypto has been somewhat held back in the U.S. due to accounting rules requiring companies to take write-downs on digital assets but not being able to write up their values,” said Tony Tuths, digital asset practice leader and principal in alternative investments in the tax practice at Big Four firm KPMG, in a statement. “FASB has just cleared the way for new accounting guidance which will allow most cryptocurrencies to be accounted for at fair value. When this guidance goes into effect (likely in 2023) it will greatly help smooth the way for broader mainstream adoption. It should be noted that not all digital assets will qualify however. NFTs, asset-backed tokens, and similar tokens will remain with the old accounting treatment for now.”
For more details, see “Crypto at fair value: Inside FASB’s decision.”
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