• Wed. Jun 22nd, 2022

FASB makes defining digital currency accounting rules for businesses a priority

ByHazel R. Lang

May 16, 2022

The Financial Accounting Standards Board (FASB), the body responsible for setting accounting and financial reporting standards for businesses in the United States, has turned its attention to digital currencies.

At its recent board meeting, the nonprofit discussed adding a project to review “accounting for digital assets and exchange-traded products.” According to a report by the Wall Street Journal (WSJ), the agenda has been adopted and the accounting standard setter will now embark on the project.

According to the WSJ, the FASB has now established rules that companies and nonprofits that hold digital currencies will report the asset in their accounting as a priority. However, the FASB only focuses on simple digital currencies, including BTC and ETH, and not NFTs.

The body said it made its decision due to the digital currency industry’s growing need for clarity. He has received a lot of feedback from industry players who point out that accounting and financial disclosure standards are urgently needed in the public interest, especially as the market capitalization of digital currencies has grown rapidly.

In the past, the FASB has dragged its feet in adopting the agenda because it did not consider digital currencies to have reached meaningful levels of adoption by institutional players.

What does the FASB decision mean for the adoption of digital currency?

Currently, companies that hold digital currencies report them based on the guidelines of the Association of International Certified Professional Accountants (AICPA). This method of reporting has been criticized for requiring the reporting of digital currencies as “indefinite-lived intangible assets”. Companies cannot gross up gains on their holdings unless they sell the assets, but must report impairments when the assets fall below their purchase price.

The FASB said it would consider adopting fair value accounting for digital currencies. This will allow digital currencies to be treated as financial assets in corporate books, reports the WSJ.

This move will notably fill a significant gap that many have noted as hindering the adoption of digital currency by institutions.

Getting clarification on the handling of digital currencies is always welcome by the community. Market bulls applauded other efforts to bring clarity to the industry, including the Biden administration’s plan to modernize digital currency laws and U.S. senators’ efforts to pass digital currency policies. favorable.

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