The Financial Accounting Standards Board (FASB) has voted to set a new rule on cryptocurrency accounting and disclosure to more accurately reflect the financial condition of the changes companies holding these assets have argued are needed.

Up to now, there have been no accounting or disclosure standards in place pertaining to crypto assets in the US.

The FASB, which sets accounting standards for US public and private companies and nonprofits, voted unanimously. The new standard it adopted will require businesses to use fair-value accounting for bitcoin and certain other crypto assets. This means valuing these digital assets according to what they would trade for in the markets.

Accounting standard

At its meeting, the board evaluated comments on the change and gave its staff permission to draft a final version of the new accounting standard, effective for fiscal years starting after December 15, 2024, but businesses can start using the new standard earlier.

The final language is expected to be approved in a written vote before the end of the year.

Public companies’ financial statements will have to disclose their crypto assets, separating them from intangible assets like patents and trademarks, on a quarterly and annual basis, and private companies will have to do the same in whichever financial reports they compile. Businesses will have to include gains and losses on their crypto assets in their net income.

“I think we heard overwhelmingly from investors that allocate capital based on the use of financial statements that this will provide them better information to make their decisions, and so I’m fully supportive of it.”

Richard Jones, Chair, FASB

Assets that have contractual rights to cash flows or ownership of goods or services wouldn’t fall under the requirements. For example, the FASB has said the proposed requirements wouldn’t apply to wrapped tokens, which allow crypto assets from one blockchain to be represented and used on a different blockchain.

Nonfungible tokens

Nonfungible tokens, or NFTs, and certain stablecoins are also excluded. 

Acknowledging companies’ strong preference for these new accounting standards, Richard Jones, the FASB Chair, said: “I think we heard overwhelmingly from investors that allocate capital based on the use of financial statements that this will provide them better information to make their decisions, and so I’m fully supportive of it.”

Software provider MicroStrategy is a public company with crypto holdings on its balance sheets, like Tesla and payment company Block, and its founder and former CEO, Michael Saylor, tweeted that this development “eliminates a major impediment to corporate adoption of $BTC [bitcoin] as a treasury asset.”