Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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New U.S. Crypto Accounting Rules Come Into Effect in 2024
Regulation | Sep 7, 2023
Image: Unsplash/Kelly Sikkema
The U.S. Financial Accounting Standards Board (FASB) has unanimously voted to introduce new accounting rules for businesses with significant crypto holdings. These rules will provide guidelines on measuring the value of Bitcoin, Ethereum, and other cryptocurrencies in company assets.
Under the new rules, companies that invest in cryptocurrency will be required to report their holdings at fair value. This approach aims to capture the most current value of an asset, including any rebounds in value after price dips. This is a significant shift from the current practice where companies record their crypto at the historical price they paid.
Thescope of the FASB's focus remains narrow, covering assets based on blockchain technology and secured through cryptography. Notably, non-fungible tokens (NFTs), stablecoins, and wrapped tokens are not covered by these rules.
See: Digital Assets Research: Blockchain Accounting and Tax Solutions
The new accounting rules are expected to be published by the end of the year and will go into effect for fiscal years starting after December 15, 2024. However, companies will have the option to apply them early.
Major companies like Tesla and MicroStrategy, which have invested heavily in Bitcoin, will benefit from these new rules. The fair-value approach will provide a more accurate representation of a company's financial position, allowing investors to make more informed decisions.
Impact
Michael Saylor, the founder and former CEO of MicroStrategy:
"..highlighted that these new rules eliminate a significant barrier to corporate adoption of Bitcoin as a treasury asset."
The introduction of these new accounting rules marks a significant step forward in the integration of cryptocurrency into mainstream financial practices.
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