How the adoption of new accounting standards by FASB may affect businesses in terms of changes to cryptocurrency reporting
New accounting guidelines for the disclosure of cryptocurrency holdings have received unanimous approval from the Financial Accounting Guidelines Board (FASB) in the United States.
These regulations were introduced in March by the FASB, a non-governmental organization regulated by the U.S. Securities and Exchange Commission (SEC), breaking with the custom of valuing bitcoin assets purely based on unrealized losses.
In the event that a written vote is required for final approval, the implementation of these rules is anticipated to begin for fiscal years beginning after December 15, 2024.
An impediment to broader business adoption of cryptocurrencies was seen in this shift.
Companies will be expected to use a fair-value approach under the new regulations, evaluating specific digital assets based on their current market selling prices.
Changing Regulations Will Affect How Businesses Report Crypto Holdings
Gains and losses associated with cryptocurrencies will now be a required component of firms’ quarterly income reporting under the new FASB regulations, which will have an impact on how businesses report their financial performance.
The action has the backing of FASB Chairman Richard Jones, who said that it will give investors greater information for making decisions.
This development’s ability to ease barriers to businesses using cryptocurrencies as treasury assets is one noteworthy feature.
This feature, according to Michael Saylor, the founder and former CEO of MicroStrategy, removes a significant barrier to business adoption of Bitcoin.
FASB Encourages Businesses to Take Into Account Early Adoption
Companies that hold significant amounts of cryptocurrencies will see more earnings volatility as a result of the change in accounting approach, but they will also be able to report financial recoveries when cryptocurrency prices rise.
Companies like Coinbase, financial firms, and large enterprises like MicroStrategy and Tesla, which have sizable bitcoin portfolios, will be severely impacted by this law change.
To reflect their developing position in the financial world, cryptocurrencies will henceforth be classified in financial statements as “intangible assets” to account for these changes.
