On December 13, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-08 to improve the accounting for and disclosure of certain crypto assets.
Under the current accounting standard, entities holding crypto assets measure these assets based on a cost-less-impairment model in which the assets are recorded at cost and then are tested for impairment annually and more frequently if events or circumstances indicate that it is more likely than not that the asset is impaired. If the carrying amount of the asset exceeds its fair value, the entity is required to recognize an impairment loss and reduce the carrying amount of the asset to its fair value. Subsequent increases in the carrying amount of the asset and reversal of an impairment loss are prohibited.
The new accounting standard provides that entities that hold crypto assets for which certain criteria are met must subsequently measure such assets at fair value, with changes recognized in net income each reporting period. The new standard is the result of stakeholder feedback indicating that the current cost-less-impairment model does not result in useful information that reflects the underlying economics of those assets and an entity’s financial position. Under the new standard, both upward and downward adjustments in value will be reflected in an entity’s financial statements — this is in contrast to the current standard, which only results in downward adjustments in value being reflected. The new standard also requires disclosure of significant crypto asset holdings, contractual sale restrictions and changes during the reporting period.
The new standard will become effective for all entities, including both public and private companies, with fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the new standard in an interim period, it must adopt it as of the beginning of the fiscal year that includes that interim period.