FASB Unveils Groundbreaking Rules For Crypto Accounting In 2025

Key Points:

• The Financial Accounting Standards Board (FASB) unanimously approved new accounting rules for cryptocurrency holdings.
• This shift in accounting practices may impact companies like MicroStrategy.
• The adoption of these rules marks the first U.S. accounting standard for cryptocurrency.

The Financial Accounting Standards Board (FASB) has unanimously approved groundbreaking rules for accounting for the fair value of companies’ cryptocurrency holdings, marking a significant milestone in the financial reporting of digital assets, according to Bloomberg Law.

These rules are set to take effect in 2025, providing companies with clearer guidance on how to handle their crypto assets. Under these new guidelines, companies holding or investing in cryptocurrency will be required to report their holdings at fair market value.

This shift in accounting practices is expected to impact the earnings of companies like MicroStrategy, one of the largest public holders of crypto, as it may lead to increased volatility in their financial reports.

The FASB, a leading U.S. regulatory body responsible for setting general accounting practices, plans to publish the detailed rules by the end of 2023, with implementation slated for 2025.

Notably, companies have the option to adopt these rules earlier if they choose to do so, except for wrapped tokens, which remain exempt.

Cody Carbone, Vice President of Policy at the blockchain trade association Chamber of Digital Commerce, hailed the decision as huge news. The previous accounting method required companies to retain impairment losses from crypto on their balance sheets even after the digital assets regained value.

This new approach, based on fair value accounting, acknowledges the market prices of cryptocurrencies, reflecting changes in their values and allowing companies to record financial recoveries from rising crypto prices.

The adoption of these rules represents the first dedicated U.S. accounting standard for cryptocurrency. It emphasizes a fair-value approach that values digital assets based on their market trading prices.

The FASB expects this new standard to come into effect for fiscal years starting after December 15, 2024, following staff drafting and a final approval vote.

This move is seen as a significant step toward providing investors with more transparent financial information regarding crypto holdings and their impact on companies’ earnings.

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