and Falls in Value Accounting Rules for Bitcoin Capture Rising and Falling Values


Crypto companies and other businesses that hold significant digital currency assets finally have clear accounting rules to measure the value of their Bitcoin, Ethereum, and other cryptocurrencies. This was unanimously voted by the US Financial Accounting Standards Board (FASB) on Wednesday.

The new rules, expected to be published by the end of this year, will mandate companies to report their cryptocurrency holdings at fair value, in order to capture the most current asset values, including rebounds in value following price dips.

FASB member Christine Botosan expressed that this new standard will both simplify the system and enhance the usefulness of information. The rules will take effect in 2025, but companies will have the option to apply them sooner.

Under the American Institute of CPAs practice guide, companies record their cryptocurrency at the historical purchase price, assessing their holdings quarterly for impairments or value declines. Any temporary drop in Bitcoin’s price during a period is considered an impairment, and companies can’t adjust values upward if the market recovers.

MicroStrategy’s CFO Andrew Kang mentioned that fair-value crypto reporting would give investors a more relevant financial picture and a better understanding of their Bitcoin holdings.

The accounting rules will be mandatory for all public and private companies starting in the fiscal years after December 15, 2024. Companies must now separate their crypto assets on their balance sheets to provide transparency about their crypto investments. Additionally, they must disclose significant holdings and any restrictions on these holdings in their financial statement footnotes.

On an annual basis, companies must reconcile their crypto assets’ opening and closing balances, categorized by type. They will not need to include information about crypto assets received as payments and immediately converted to cash in the reconciliation activity. Companies must also follow the disclosures required in the applicable accounting rule, ASC 820, to ensure transparency in measurement methods.

FASB has committed to monitoring the crypto market and taking further action if needed. This accounting method is a significant step toward mainstream cryptocurrency adoption, and companies must adapt to these changes. FASB’s commitment to monitoring the crypto market ensures that future adjustments can be made as necessary.

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