FASB proposes guidance on crypto assets
ARTICLE | April 05, 2023
Authored by RSM US LLP
The Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which is intended to improve the accounting for and disclosure of certain crypto assets.
Under current accounting, except as required by certain specialized industry guidance, crypto assts are treated as indefinite-lived intangible assets, reported at cost less any impairment loss. Stakeholders have informed the FASB that this accounting model does not provide decision-useful information. More specifically, current generally accepted accounting principles may not allow an entity to reflect its true financial position or financial performance because it only captures decreases and not increases in the value of crypto assets until they are sold. In addition, certain financial statement users have requested disclosure requirements about the types of crypto assets that an entity holds and changes in those holdings.
The proposed ASU would require an entity to subsequently measure certain crypto assets at fair value with changes in fair value recognized in net income. Measuring crypto assets at fair value would align the accounting required for all holders of crypto assets with certain specialized industry guidance (e.g., investment company accounting).
An entity would be required to present crypto assets measured at fair value separately from other intangible assets in the balance sheet. Likewise, an entity would present changes in the fair value of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement.
The proposed ASU also would require an entity to recognize transaction costs to acquire a crypto asset as an expense as incurred unless applicable specialized industry guidance requires capitalization of those costs.
Although the proposed ASU would not affect the presentation requirements for the statement of cash flows, if an entity receives crypto assets as noncash consideration in the ordinary course of business (e.g., in exchange for the transfer of goods or services to a customer) and it converts those assets nearly immediately into cash, it would classify those cash receipts as cash flows from operating activities.
In addition, the proposed ASU would require enhanced disclosures for both annual and interim reporting, which are meant to provide financial statement users with relevant information to analyze significant crypto asset holdings. The annual disclosures would include a detailed rollforward of an entity’s crypto asset holdings.
The proposed ASU would require a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which an entity adopts the proposed ASU. Early adoption would be permitted in any interim or annual reporting period. The FASB will determine the effective date for the proposed amendments after it considers its stakeholders’ feedback.
Stakeholders are encouraged to review and provide comment on the proposed ASU by June 6, 2023.
Contact us at one of our locations or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2023-04-05.
2022 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Johnson & Sheldon, PLLC is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.