Revamp in Crypto Asset Valuation on Balance Sheets
The U.S. Financial Accounting Services Board (FASB) has unanimously approved a significant change in the way crypto asset values are recorded on publicly traded companies’ balance sheets. This change is expected to increase the attractiveness of crypto assets for big investors by exposing them to the potential upside of their holdings.
Impact of FASB’s Change on Crypto
During a meeting held by the Board, comments on the proposed change were evaluated. Under the current rules, crypto assets are treated as intangible assets, with their values recorded at the historical prices paid for them. However, the new rule would require companies to mark their crypto assets at fair value in their accounting statements.
The current model is more suitable for assets like trademarks and copyrights, but less rational for cryptocurrencies like Bitcoin, which are highly liquid and regularly traded. The change aims to provide investors and other capital allocators with more decision-useful information.
MicroStrategy’s Perspective
This change is particularly significant for MicroStrategy, one of the largest corporate holders of Bitcoin. The company has suffered substantial impairment losses on its Bitcoin holdings under the current rules. The CEO of MicroStrategy believes that fair value crypto accounting eliminates a major barrier to corporate adoption of Bitcoin as a treasury reserve asset.
Exclusions from the Rule Change
It’s important to note that not all digital assets are covered by the new rules. Non-fungible tokens (NFTs), stablecoins (such as USDT and USDC), and other value-pegged cryptos will still be subject to intangible asset accounting.
Hot Take
FASB’s unanimous vote to change the valuation of crypto assets on balance sheets is a significant step towards providing more transparency and decision-useful information to investors. This change is expected to make crypto assets more appealing for big investors and encourage corporate adoption of cryptocurrencies like Bitcoin. However, it’s essential to consider the exclusions from the rule change, as some digital assets will still be subject to the current intangible asset accounting. Overall, this change marks a positive development for the crypto industry’s recognition and integration into traditional financial systems.
By
By
By
By
By