This is a MASSIVE win for crypto equities, entities reporting under US GAAP standards and the industry🧵
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
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
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 investorsThis post is based on this twitter thread.