The first crypto accounting guidelines published by the Financial Accounting Standards Board have completely changed the way businesses disclose their bitcoin holdings.
Businesses that own Bitcoin (BTC) or Ethereum (ETH) are now required by these new regulations to value these assets using the fair value assessment method, which values them at their current market price.
Due to the volatility of cryptocurrencies, corporations were previously only allowed to report the depreciated value of their crypto assets, which frequently resulted in lower earnings reporting. Businesses that have made significant investments in digital currencies have taken issue with this biased strategy.
By enabling businesses to include both the highs and lows of their cryptocurrency holdings in their net income, the new regulations seek to give a more realistic and balanced picture of their financial health.
The regulations are expected to go into force for fiscal years starting after December 15, 2024, however, both public and private businesses are allowed to adopt them earlier. Grayscale Investments CFO Edward McGee praised the update as a kind Christmas present from accounting.
Before the Financial Accounting Standards Board’s (FASB) ruling, non-investment businesses treated bitcoins as intangible assets by adhering to an AICPA practice guide.
This meant that companies had to write down any declines in value permanently and could only declare gains upon selling the assets.
David Marcus and Michael Saylor Address Decision
A prominent proponent of Bitcoin and MicroStrategy founder, Michael Saylor tweeted his excitement with the FASB’s ruling. He emphasized the choice as a crucial advancement in accounting standards.
Saylor’s words were echoed by former PayPal President David Marcus, who emphasized the significance of this shift. Marcus retweeted Saylor’s post with a comment from Saylor, echoing her sentiments.
