New FASB Crypto Rules Will Affect Crypto Companies By 2025

Key Points:

• FASB introduces rules requiring crypto companies to record Bitcoin and Ethereum holdings at a fair value for dynamic valuation.
• The new FASB crypto rules allow companies to record both highs and lows of their cryptocurrency holdings.

According to Bloomberg, the Financial Accounting Standards Board (FASB) has unveiled groundbreaking accounting rules for crypto companies, mandating the recording of Bitcoin and Ethereum holdings at fair value.

New FASB Crypto Rules Revolutionize Crypto Accounting

This measurement technique aims to reflect the real-time value of these digital assets, ensuring a more accurate representation of their worth.

The new FASB crypto rules mark a departure from the existing practice, which only allows companies to record the lows, disadvantaging businesses that invest in cryptocurrencies.

Under the new FASB crypto rules, companies such as MicroStrategy, Tesla, and Block, known for their significant cryptocurrency holdings, will now be able to capture both the highs and lows of their investments.

The previous one-sided accounting treatment, which led to a reduction in the value of holdings and subsequently earnings, will no longer apply. Changes in fair value will be directly recorded in the net income, providing a more dynamic reflection of the crypto market’s volatility.

These groundbreaking rules are set to take effect for both public and private companies, with fiscal years beginning after December 15, 2024, translating to 2025 for calendar year-end companies. Companies are also given the option to adopt the new FASB crypto rules before the deadline.

Until now, there has been no specific US accounting rule addressing the recognition and measurement of digital currencies. The crypto industry has long called for such regulations, with FASB resisting until this groundbreaking announcement.

In the absence of rules, businesses defaulted on an American Institute of Certified Public Accountants practice guide, treating cryptocurrencies as intangible assets.

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