FASB Allows Firms To Account For Their Crypto Holdings
The decision by the United States Financial Accounting Standards Board (FASB) to allow firms to account for their Bitcoin holdings using “fair value” might be considered another step toward greater institutional use of cryptocurrencies.
The FASB board of directors decided on October 12 to compel firms to evaluate crypto assets at fair value.
At this point, the board’s decision is entative, and it might be amended at future board sessions as they examine their choices.
If approved, the decision will allow companies to regularly update their balance sheets with the fair value of crypto assets rather than referring to digital assets like Bitcoin (BTC) as intangible assets, where companies were required to measure assets at their lowest price during a reporting period.
The former approach of digital assets resulted in significant impairment losses on balance sheets even though their positions were currently in the black, with corporations unable to constantly update the value of their holdings if the value increased.
According to Anthony Tuths, principal of KPMG’s Alternative Investment Tax practice, the guideline might be positive for more mainstream crypto use, and it is expected to take effect in 2023:
“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.”
Tuths went on to say that not all digital assets will be eligible for the new accounting method. Nonfungible tokens (NFTs), asset-backed tokens, and similar tokens, on the other hand, are still subject to the prior standards.
Miles Brooks, director of the strategy at cryptocurrency tax business CoinLedger, stated that the recent FASB ruling is long overdue.
The United States standard-setter had refused to adopt new crypto accounting standards until May 11, when board members agreed to add the issue to its technical agenda following a rise in crypto asset market capitalization made the problem more urgent.
Brooks went on to suggest that the new FASB guidelines will allow corporations to reflect their present crypto holdings more correctly in their financial accounts.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join us to keep track of news: https://linktr.ee/coincu