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Under new rules, companies will measure cryptoassets at fair value
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The change will further cement BTC’s dominance in the fabric of modern finance.
Following in the footsteps of MicroStrategy, the company with the most Bitcoin (BTC) in the world, will be much easier now that an update to the Financial Accounting Standards Board (FASB) came into effect that makes it easier for companies to file accounting reports with digital assets.
The standards, approved in 2023, but which entered in effect today, allow companies to now value their bitcoin holdings based on current market prices, making financial reports are more transparent and accurate. This is contrary to what happened previously, when they could only value their BTC at the price they bought, not adjusted for profits.
Michael Saylor, founder of MicroStrategy, had predicted in 2023 that: “This update to accounting standards will enable the adoption of BTC as a strategic reserve asset by companies around the world.”
The ability to use fair value accounting could drive more companies to adopt Bitcoin. Source: X/pete_rizzo_.
Previous regulations required companies to record a reduction in the books when the value of a Cryptocurrency decreased. However, the rule did not allow unrealized gains to be reflected when cryptocurrency prices increased; These could only be recorded as profits once the assets were sold.
Now, under the new rules, companies will update the value of bitcoin in their financial reports each reporting period, showing both profits and losses based on market prices.
The new scheme sets out the following specific criteria that must be met for a cryptocurrency to be included in its scope: cryptoassets must be intangible, recorded in a shared digital system and protected by cryptography; They must also be interchangeable with others of the same type and cannot be created by the same company that reports them. Therefore, some types of cryptoassets, such as non-fungible tokens (NFT-non-fungible/” target=”_blank” rel=”noreferrer noopener”>NFTs), and certain special tokens (such as Ethereum-erc20/” target=”_blank” rel=”noreferrer noopener”>wrapped tokens), do not meet these conditions and are outside the norm.
In addition, The FASB will require corporate entities to present crypto assets valued at their current market price (fair value) and any other adjustments made, separately from other intangible assets.
The regulations can now be used as a model anywhere in the world to facilitate the accounting process with digital assets, in case the method has not been adopted yet. In this way, the financial statements will reflect greater accuracy and not as happened in the past.
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