Firms Adopt Fair-Value Accounting Style for Crypto Assets

• FASB has recommended fair-value accounting to determine crypto asset value.
• Firms must examine asset value yearly, noting price drops from the acquisition price.
• Previously, companies categorized crypto as intangible assets in financial statements.

According to Wall Street Journal, the Financial Accounting Standards Board (FASB) recommended that businesses use fair-value accounting to determine the value of bitcoin and other digital assets.

Previously, as there were no precise accounting regulations governing crypto assets, corporations categorized them as intangible assets with an indeterminate life span, similar to intellectual property and trademarks.

The report stated that companies must examine the value of their assets at least once a year, writing them down if the deal falls below the original acquisition price. Additionally, firms can only recognize profit after selling the asset at a higher price.

The fair-value accounting technique will be required rather than a choice for businesses, according to the FASB, which stated that it better depicts the economics of crypto assets. Gary Buesser, a board member, said:

We’ve heard from investors that they want transparency through disclosure, and the only way to get to that

Phong Le, Chief Executive Officer of MicroStrategy Inc. claims that the current approach firms use to generate financial statements for digital assets does not adequately reflect the outcomes of their operations or financial situation. Last year, CEO Le said in a comment letter to the FASB:

We expect the disconnect between the reported carrying value on our balance sheet and the fair market value of our bitcoin holdings to grow significantly over time

Furthermore, an assistant professor of accounting, Deniz Appelbaum, commented that “without these standards for the accounting and valuation of crypto assets, companies are reluctant to hold them.”