Alyssa Choo
Alyssa Choo 2 minutes reading from Bitcoin

FASB: A MASSIVE Win for Crypto Equities

1/The Financial Accounting Standards Board announced that companies should use fair-value accounting when measuring crypto assets, like BTC and ETH

This is a MASSIVE win for crypto equities, entities reporting under US GAAP standards and the industry🧵

FASB Settles on Fair-Value Accounting for Measuring Crypto AssetsFASB Settles on Fair-Value Accounting for Measuring Crypto Assets

2/ What’s the big deal?

A. It allows these entities to account for and disclose the true value of their crypto assets in their financials according to market cap price

B. The announcement clarifies reporting and valuation standards for entities holding crypto assets

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C. It showcases FASB’s commitment to and priority in setting accounting standards and regulations for the industry

D. Big for corporate adoption: clearer accounting standards will alleviate reluctance to hold crypto assets

4/ Prior to this update, businesses reporting under US GAAP accounted for crypto assets as indefinite-lived tangible assets, like IP

5/ Under the indefinite-lived tangible asset accounting model, crypto assets were not amortized, it was written down (impaired) to fair value whenever the fair value fell below carrying amount

6/ So if the price of BTC fell, companies would report what would look like a loss

But if it rose, entities could not mark up the value unless it sold its crypto

7/ FASB’s Crypto Accounting Project:

FASB started its research in December and added its crypto project to its technical agenda that sets rule-making priorities in May

In August, FASB clarified its criteria for assets included in its crypto project

FASB Excludes NFTs, Some Stablecoins From Crypto Accounting Project FASB Excludes NFTs, Some Stablecoins From Crypto Accounting Project

8/ What’s next from FASB?

The board will consider what will have to be included in disclosures about the assets and how companies should inform investors

This post is based on this twitter thread.

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