Starting today, companies can report the fair value of cryptocurrency assets they hold according to an update and amendment from the FASB.
New crypto fair value accounting rules from the Financial Accounting Standards Board (FASB) will go into effect today. These rules contain specifications that help companies keep up with profits and losses that are a fair representation of actual market prices for Bitcoin BTC $94 812 24h volatility: 0.1% Market cap: $1.88 T Vol. 24h: $23.37 B and several other fungible cryptocurrencies that match specific requirements.
New FASB Accounting Rules
Initially announced in December 2023, the rules were created to allow firms to report the current value of cryptocurrencies as part of each entity’s net income. Before now, entities had to consider impairment charges. This required reporting reductions when prices fall below the original purchase figure, but not for unrealized gains when prices rise. These profits could only be reported when realized – after sales. Now, companies may be able to report more gains since they no longer have to sell their assets to declare profits.
The FASB’s Subtopic 350-60 outlines 6 specific criteria the asset must meet for the new rule to apply. They include intangibility, existence on a distributed ledger, security via cryptography, and fungibility. In addition, the asset must not provide the holder with enforceable rights or claims on any goods, services, or other assets, and must not be created or issued by the reporting entity or its related parties. Consequently, non-fungible tokens (NFTs) and wrapped tokens are not enforceable under the FASB’s update.
According to reports, the unique nature of NFTs, in addition to the fact that they cannot be exchanged, makes pricing inconsistent and difficult to “fairly” report. In addition, these tokens sometimes do not have enough liquidity and are subjectively valued.
The new rules also contain other specifics. For instance, the FASB requires that entities present crypto assets reported at fair value and any other remeasurements done, separately from other intangible assets. Simplifying the new update, the FASB writes:
“Fair value measurement aligns the accounting required for holders of crypto assets with the accounting for entities that are subject to certain industry-specific guidance (such as investment companies) and eliminates the requirement to test those assets for impairment, thereby reducing the associated cost and complexity of applying the current guidance.”
Companies to Enjoy Higher Profits from Crypto Price Jumps
With the new rules, companies can benefit from spikes in crypto’s price. For instance, Bitcoin climbed to a new high above $106,000 following a few market updates. In addition to bullish technical analysis, Michael Saylor suggested in an X post that MicroStrategy had bought more BTC. The ensuing price jumps could be beneficial to these companies, contributing to potential profits.
In addition to Saylor’s indirect declaration, a few other factors are thought to have influenced the Bitcoin jump. Since President-elect Donald Trump won the November election, the Bitcoin market seems to have enjoyed a seemingly bullish run. Contributing to this is the likelihood of Trump establishing a federal Bitcoin reserve, which points to a potentially bullish 2025. According to independent analyst Ali Martinez, Bitcoin could hit $275,000 next year.
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