New crypto accounting guidelines could ‘smooth the way’ for adoption

The United States Financial Accounting Standards Board’s (FASB) decision to allow companies to use “fair value” to account for their crypto holdings can be seen as another step towards wider institutional use of cryptocurrency.

During a meeting on October 12, the FASB board made the decision to require entities to measure crypto assets at “fair value.”

The board’s decision is “tentative” at this stage, and may change at future board meetings as they continue to consider their options.

The ruling, if approved, would allow companies to regularly update their balance sheets with the fair value of crypto assets instead of referring to digital assets such as Bitcoin (BTC) as “intangible assets”, where companies were required to measure assets at their lowest level . price in a reporting period.

The previous treatment of digital assets resulted in large write-downs on balance sheets even though their positions were currently in the green, with firms unable to regularly update the value of their holdings should their value increase.

Anthony Tuths, principal of KPMG’s alternative investments tax practice, said the guidance could be positive for wider mainstream crypto adoption, adding that it is likely to take effect in 2023:

“The FASB has just cleared the way for new accounting guidance that allows most cryptocurrencies to be accounted for at fair value. When this guidance comes into force (likely in 2023), it will go a long way towards paving the way for wider mainstream adoption.”

Tuths added that not all digital assets will qualify for the new accounting treatment. However, non-fungible tokens (NFT), asset-backed tokens and similar tokens are still subject to the previous guidelines.

Crypto tax firm CoinLedger’s director of strategy, Miles Brooks, said the new FASB ruling is “long overdue.”

The US standard setter had refused to consider new accounting rules for crypto until May. 11, when board members decided to add the project to their technical agenda after an increase in the market value of crypto assets made the matter more urgent.

Brooks went on to say that the new FASB standards will allow companies to report their current crypto holdings more accurately in their financial statements.

Related: Colorado Accepts Crypto For Tax Payments – It Could Be A Mess Or A Shining Example

Companies and investors have been seeking clarity on crypto accounting standards for years, for example the California Society of Certified Public Accountants (CalCPA) urged the FASB to treat crypto more like a foreign currency back in 2019.