financial accounting standards board

The new standard aims to improve accounting treatment of certain digital assets under GAAP and may pave the way for increased institutional adoption.

By Jack Barber, Robert J. Malionek, Marlon Q. Paz, Heather Waller, and Deric Behar

On September 6, 2023, the Financial Accounting Standards Board (FASB)[1] voted to approve Accounting for and Disclosure of Crypto Assets, an Accounting Standards Update (ASU) to FASB Accounting Standards Codification (ASC) Topic 350 (Intangibles—Goodwill and Other), originally proposed in March 2023. The ASU will standardize the treatment of certain digital assets under US generally accepted accounting principles (GAAP) (the Update).

According to FASB, market feedback indicated concern with the current accounting methodology for crypto assets under ASC 350 as indefinite-lived intangible assets (whereby assets must be calculated at a historical cost less impairment, such as for trademarks). The methodology reflects “only the decreases, but not the increases, in the value of crypto assets in the financial statements until they are sold,” and therefore “does not provide investors . . . with decision-useful information . . . that reflects (1) the underlying economics of those assets and (2) an entity’s financial position.”

To address FASB’s concern, the Update now requires an entity to measure crypto assets at fair value[2] each reporting period with changes in fair value recognized in net income.

The Update also mandates enhanced disclosure requirements concerning an entity’s crypto asset holdings, intended to improve information available to investors.