Herbert M Chain
Herbert M. Chain
Shareholder, Mayer Hoffman McCann. Deputy Technical Director, Global Audit Group, Kreston Global.

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Herbert Chain is a highly experienced author is a financial expert with 40 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance, and experience with SPACs.

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US issues final accounting standards for (certain) Crypto Assets

January 23, 2024

On December 13, 2023, the US issued the final accounting standards for Crypto Assets. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-08, titled “Accounting for and Disclosure of Crypto Assets”, an amendment of FASB Codification Intangibles—Goodwill and Other— Crypto Assets (Subtopic 350-60), to address the accounting challenges posed by cryptocurrency. The ASU aims to enhance accounting procedures and disclosure requirements for certain crypto assets, providing a more transparent view for investors, creditors, and other users of financial statements prepared by organizations with holdings of crypto assets.

Cost less impairment

As desired by many users and preparers of such financial statements, the new standard departs from the historical “cost less impairment” accounting model for crypto assets, requiring entities to measure qualifying assets at fair value with changes recognized in net income. In the ASU, the FASB noted that “accounting for only the decreases, but not the increases, in the value of crypto assets in the financial statements until they are sold does not provide relevant information that reflects (1) the underlying economics of those assets and (2) an entity’s financial position.”

Crypto Asset disclosures

The ASU also mandates disclosures about significant crypto asset holdings, contractual sale restrictions, and reporting period fluctuations to provide investors with comprehensive insights. To be subject to these amendments, crypto assets must meet specific criteria, including meeting the definition of an intangible asset as defined by FASB, not providing the asset holder with enforceable rights to or claims on underlying goods, services, or other assets, being created or residing on a distributed ledger based on blockchain or similar technology, being fungible, secured through cryptography, and not created by the reporting entity.

Fair value measurement

There are certain implications on businesses’ operations and recordkeeping resulting from the pronouncement. Fair value measurement introduces the need to stay informed about market prices and markets, and to report the impact of price fluctuations on financial performance. The detailed disclosures now mandated will require organizations to maintain comprehensive records of crypto transactions, and real-time tracking and valuation systems will be necessary to meet reporting demands.

2024 deadline

Entities are expected to comply with the new standards for fiscal years starting after December 15, 2024, with early adoption permissible for yet-to-be-issued financial statements. The changes, if adopted in an interim period, must be retroactively applied from the start of the fiscal year.

For more advice on the recent update from the FASB, please get in touch.