As of today, the Financial Accounting Standards Board will put its fair value accounting rules on BTC and other eligible crypto assets into effect.
Under the new rules, companies will measure crypto assets at fair value and update them at each reporting period in their financial statements. This will help companies realize both profits and losses based on Bitcoin’s (BTC) market prices, helping them keep pace with the often fluctuating traded status of the currency. FASB ASC Subtopic 350-60 outlines a new accounting standard that is suitable for fungible crypto assets that meet certain requirements. However, NFTs, wrapped tokens, and internally generated digital assets are exempt from the scope.
HISTORY: FASB FAIR VALUE ACCOUNTING RULES FOR #BITCOIN OFFICIALLY TAKE EFFECT TODAY
Previously, companies could only value BTC at the price they bought, NOT the gains
THE CORPORATE ADOPTION WAVE
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— The Bitcoin Historian (@pete_rizzo_) December 16, 2024
Companies holding BTC as treasury reserve assets can now benefit from simplified reporting processes due to FASB’s decision to embrace fair value accounting. The update is anticipated to accelerate corporate adoption by providing greater transparency and a more precise valuation of crypto holdings for investors, creditors, and other stakeholders. As businesses increasingly turn to BTC as a long-term strategic reserve, this rule change will cement BTC’s dominance further into the fabric of modern finance.
Allowing companies to account for BTC, with BTC assets priced at fair value, does away with a major disjunction in corporate reporting, given that BTC used to be valued using its purchase price. Any gains were left out of the records, and only losses were recorded if the value decreased. Offering this option will also give retail investors an unrounded view of a company’s financial position.
The new rules, which mandate reporting of BTC at current market value, provide more transparency and accuracy of the financial statements, allowing investors to assess risks, cash flows, and performance more effectively. Differences between traditional markets and the crypto economy fade as BTC’s grip as a financial asset becomes firm and clearer, and fair-value accounting standards are now in place.
