The United States Financial Accounting Standards Board (FASB’s) decision to allow crypto-holding companies to use “fair values” could be considered another step towards institutional adoption of cryptocurrency.
The FASB board voted to require entities for crypto assets to be measured at “fair value” during a meeting held on October 12.
At this point, the board’s decision is “tentative”, but could change at future meetings as they weigh their options.
If approved, the decision will allow companies to update balance sheets with crypto assets’ fair value, rather than refer to digital assets like Bitcoin ( Bitcoin) in “intangible assets.” Companies were required to measure assets at the lowest price within a reporting period.
The prior treatment of digital assets led to large impairment losses in balance sheets, even though their positions were in the green. Firms were unable to update their holdings regularly if they were to rise in value.
Anthony Tuths principal in KPMG’s Alternative Investment Tax Practice said that the guidance could be positive for mainstream crypto adoption and added that it will likely go into effect by 2023.
“The FASB has cleared the way to new accounting guidance that will allow most cryptocurrency to be accounted at fair value. This guidance will be in effect most likely in 2023, and it will greatly facilitate mainstream adoption.
Tuths stated that not all digital assets will be eligible for the new accounting treatment. The previous guidelines still apply to nonfungible tokens, asset-backed and similar tokens.
Miles Brooks (Director of Strategy at Crypto Tax Firm CoinLedger) said that the new FASB decision was “long overdue”.
Until May, the United States standard-setter refused to consider crypto accounting rules. 11 when the board decided to add the project on its technical agenda following an increase in crypto assets’ market capitalization.
Brooks stated that the new FASB standards will enable companies to report current crypto holdings more accurately in their financial statements.
For years, investors and companies have sought clarity about crypto’s accounting standards. In fact, the California Society of Certified Public Accountants (CalCPA), for instance, urged the FASB to treat cryptocurrency more like foreign currency in 2019.