FASB Announced Revolutionary Accounting on Digital Assets  

The Financial Accounting Standards Board (FASB), has recently published a significant change in how digital assets and crypto are accounted for. The direct influence of the change can be seen in the operational feasibility of buying digital assets for corporations.  

Uncovering The New Accounting Standards 

The new rule will make companies use fair value standards, which means digital assets will be valued at their fair market prices. These standards are suitable and would let entities hold digital assets on their balance sheet in a practical way.

Earlier the holdings by entities like BTC or Ether were only valued at a lower price from its purchase, which indicates an underestimated finances.

As per the report indications now digital assets are treated as intangible assets, which can be impaired, when the market price drops below the cost price, but are not adjusted upward when the price rises.

However, this technique is clearly unsuitable for an asset like Bitcoin, which is very unstable. The intangible asset category is usually for assets like goodwill, patents, licenses, and trademarks, things that do not have a definite market value but are adjusted when they are found to be impaired.

The implementation of this rule will take place in the fiscal year by December 15, 2024. However, the voting to approve these standards will take place earlier this year.

The publicly traded companies in the US hold a market value of 47 Trillion. The transformation will help these organizations uphold Bitcoin and altcoins in their balance sheets. Before the declaration, the net income figures were a bit confusing to investors as impairments showed operational losses.  

The new rules are expected to offer a glassy view of the financial system. Fluctuations in Bitcoin price can be recognized separately without mixing it with operational performance. 

How the Announcement is Going to Affect More Than the Spot ETF Approval? 

This declaration could arguably have a bigger effect than the approval of a spot ETF, as it directly touches the corporate sector, letting institutions get ahead of the retail crowd. While ETFs are available to retail brokerage accounts, this rule is mainly for corporations.

However, retail investors also benefit indirectly as they own the stocks of these corporations. Also, retail can buy bitcoin through crypto exchanges and keep the asset. It is worth noting, that the share of retail owning a significant amount of their net worth in digital assets is very low. It is likely to change once these large institutions widely accept it.

Michael Saylor, the founder and former CEO of MicroStrategy, has said that this change “removes a big obstacle to corporate adoption of Bitcoin as a treasury asset.” The board is urging companies to adopt the new standard early, showing a positive attitude toward digital assets and their incorporation into mainstream financial reporting.

Conclusion

The Financial Accounting Standards Board announcement is a huge development in the financial and crypto world. The switch to fair-value accounting will have a huge positive impact on the digital asset industry. The move will open doors for entities to enter the world of digital assets.

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.