The Financial Accounting Standards Board (FASB) has issued an Exposure Draft that contains guidance for improving the accounting and disclosure of crypto assets. The guidance applies to all entities holding crypto assets. The FASB has a detailed definition of what assets are considered “crypto assets” for purposes of this new guidance, but it generally would include most cryptocurrencies like Bitcoin and similar fungible digital assets.

Currently, generally accepted accounting principles (GAAP) does not have explicit guidance for crypto assets, and the accounting guidance for indefinite-lived intangible assets is typically utilized. Under that guidance, crypto assets are initially recorded at cost if purchased or at fair value if they are gifted or donated. The entity is required to write the crypto assets down to their lowest fair value at any point that the entity holds the assets and record a corresponding impairment loss. Gains are only recorded upon sale of the asset.

The Exposure Draft will now provide explicit accounting guidance for crypto assets. The primary change will be that crypto assets are recorded at fair value as of the date of each statement of financial position; any gains and losses from the changes in fair value are to be recorded in net income. Crypto assets will still be considered intangible assets, presented separately from other intangible assets. Further, the accounting change will align recognition of the change in value of crypto assets with the change in value of investments. Enhanced disclosures will be required to communicate to users the nature of the crypto assets and the activity of the crypto assets during the reporting period.

Comments on the Exposure Draft are due June 6, 2023. If you have questions regarding this FASB Exposure Draft, send us an email.

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