Measurements and accounting for crypto assets just became easier with the adoption of fair value accounting by the FASB.
that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP).
The (FASB) stands for Financial Accounting Standards Board, a board responsible for establishing accounting and reporting standards for public, private, and non-profit companies, and on Wednesday, 12th October 2022, it gave clarity to how companies should account for crypto assets. There are currently no disclosure or accounting rules for crypto assets; consequently, companies classify them under the same category as intellectual property. The accounting classification is called ‘Indefinite lived assets” These assets are reviewed once a year to see if it falls below the previously recorded value or the purchase price. In the event of a rise in value, companies can only record a gain if they sell the asset, not if they keep holding it,
According to Gary Buesser, board member at FASB, companies, and investors are pushing the FASB to adopt fair-value accounting, which enables them to treat crypto assets as financial assets and record profits and losses immediately.
Buesser further said he had ‘heard from investors “ about their call for “transparency through disclosure,” and the only method to achieve it was through Fair-value accounting. He further emphasized The FASB‘s stance that Fair value accounting would be more of a requirement than an option for companies.
According to reports, companies and investors have been pushing for this move “for years; a rule in order to account for and disclose crypto assets. This led to the standard setters taking an interest in the topics as far back as December 2021, and by May 2022, they added the crypto project to its rule-setting agenda.
In August 2022, The FASB detailed its criteria for assets that would be included in the new regulation. It however left out NFTs and some stablecoins. Next, the board will detail what should be detailed in the disclosure about the assets and how companies can disclose them to their investors.
Speaking concerning the value and massive decline in prices of Bitcoin d Ethereum, the 2 most valued crypto assets on the globe, Buesser said, “The only way to get any kind of real information on the holding of bitcoin or Ethereum is through fair value,”
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