The Financial Accounting Standards Board (FASB), a U.S. body that details how companies should report assets on their balance sheets, released an update to standards on Wednesday that will allow companies to include “fair value” changes in Detect crypto holdings.
The move benefits companies that have cryptocurrencies on their balance sheets, such as MicroStrategy (MSTR). Under existing rules, companies must report a loss if the cryptocurrencies they hold are worth less than the purchase price, even if they have not sold the assets. Under the new rules, companies must disclose the fair value, cost basis and type of assets they hold.
Stakeholders who provided feedback to the FASB said the existing guidance did not provide useful information for investors or other parties, the update document said.
“Considering only the impairments, but not the increases in value, of crypto assets in the financial statements until they are sold does not provide relevant information that reflects (1) the underlying economics of these assets and (2) the financial position of a company,” says it in the document.
The new rules were unanimously approved by the board and will take effect after Dec. 15, 2024, the document said.
In a section explaining how the FASB came to adopt new guidance, it said it received a large amount of feedback supporting a new approach to digital assets.
“Feedback from stakeholders, including respondents to the 2021 FASB Invitation to Comment (ITC) and Agenda Consultation, indicated that improving accounting and disclosure of crypto assets should be a top priority for the board,” it said Document. “Nearly 500 respondents at ITC 2021 demanded that the board add a project related to crypto assets to its agenda.”
The FASB has been working on updating accounting standards for crypto holdings in recent months and announced in September that it would adopt the new guidance.
Michael Saylor, founder and former CEO of MicroStrategy, had previously tweeted that the move would make it easier for companies to adopt Bitcoin as a treasury asset, an argument he reiterated Wednesday morning after the FASB guidance was released.
The price of Bitcoin (BTC) rose by more than 1% after the forecast was published and was around $42,150 at press time.
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