FASB to Consider Setting Rules on Companies’ Crypto Accounting, Disclosure


The Financial Accounting Standards Board voted to consider setting clear rules on the accounting and disclosure of certain digital assets such as Bitcoin and Ethereum, a move that could fill a gap for companies that hold these assets and provide more information to investors.

The U.S. accounting standard-setter said on Wednesday it would add the new project to the technical agenda that determines its rule-making priorities, paving the way for a potential new rule.

In December, the FASB began conducting research on whether to establish accounting and disclosure rules for cryptocurrencies and exchange-traded commodities. On Wednesday, the board said the new crypto effort wouldn’t include commodities such as natural gas or gold, though Chairman
Richard Jones
added that the board would continue to research commodities once its work on digital assets is complete.

Wednesday’s decision comes after years of foot-dragging on the crypto issue, with the FASB declining to take it up. Most recently, in October 2020, the standard-setter demurred again, saying investment in cryptocurrencies wasn’t widespread among companies.

At present, there are no specific accounting or disclosure rules on companies’ crypto holdings. In recent months, companies and investors have urged the FASB to provide such rules.

Several board members Wednesday said the matter had acquired more urgency as the market capitalization of Bitcoin and other crypto assets had shot up over time and more and more firms are investing in Bitcoin and Ethereum. Auto maker
Tesla Inc.,
payment firm
Block Inc.
and software provider
MicroStrategy Inc.
are among those holding big crypto assets on their balance sheets.

The FASB’s project should focus on digital assets that don’t carry ownership rights, such as “plain vanilla cryptocurrency,” Mr. Jones said, as opposed to those with copyrights, like nonfungible tokens.

The board is re-examining its priority projects after an “agenda consultation,” which netted more than 500 letters from companies, investors, academics and other stakeholders offering opinions on matters from accounting rules on crypto to rules on climate-related transactions.

Companies with crypto holdings currently account for them as indefinite-lived intangible assets, comparable to trademarks and website domains, based on nonbinding guidelines from the Association of International Certified Professional Accountants.

Under those guidelines, businesses have to review the value of these assets at least once a year. Companies have to write down the value if it drops below the purchase price, depending on the result of their impairment test. If the value rises, companies only can record a gain when they sell the assets, not while holding them.

Due to the volatility of crypto assets, companies have said this approach doesn’t reflect their financial condition or their operating results, and have pushed to apply fair-value accounting rules instead. Under fair-value accounting, companies recognize losses and gains in value immediately and treat digital assets as financial assets, not as intangibles.

The FASB said on Wednesday it would consider fair-value accounting, among other options.

“I can understand that the accounting under the intangible model doesn’t yield necessarily meaningful results,” Board Member
Marsha Hunt
said at the meeting. “The ability to measure an economic expectation is not served by the accounting that’s being followed today and I can agree that there’s opportunity for improvement.”

Write to Mark Maurer at [email protected]

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