Though many companies have been investing in crypto assets for several years, the FASB had remained silent on the matter until December 2023 when it issued ASU 2023-08. Until adoption of this guidance, entities are to treat crypto assets as intangible assets under ASC 350, where they are to be recorded at cost and evaluated for impairment. At long last, ASU 2023-08 provides clear guidance for the presentation and disclosure of investments in cryptocurrency.
Scope and Main Provisions
This ASU applies to assets that:
- Meet the definition of intangible assets
- Do not provide the holder with enforceable rights to or claims on goods, services or other assets
- Are created or reside in a distributed ledger based on Blockchain or similar technology
- Are secured through cryptography
- Are fungible
- Are not created or issued by the reporting entity or related parties
Bitcoin, Ether and other similar cryptocurrencies are covered under this criteria.
Under the ASU, these assets are to be measured at fair value with changes recorded in net income each reporting period. Further, the crypto assets measured at fair value are to be presented separately from other intangible assets, and the changes from remeasurements of fair value presented separately from the changes in carrying values of other intangible assets. Cash receipts from crypto assets that are received as noncash consideration in the ordinary course of business (or a contribution to a nonprofit entity) and converted nearly immediately into cash are to be specifically presented as cash receipts in the statement of cash flows.
Disclosures
Disclosure requirements include, among other things:
- The name, cost basis, fair value, and number of units for each significant crypto asset holding and the aggregate fair values and cost bases of the crypto asset holdings that are not individually significant
- Details related to contractual sale restrictions
- A rollforward, in the aggregate, of activity in the reporting period for crypto asset holdings, including additions, dispositions, gains, and losses
- For any dispositions of crypto assets in the reporting period, the difference between the disposal price and the cost basis, and a description of the activities that resulted in the dispositions
- If gains and losses are not presented separately, the income statement line item in which those gains and losses are recognized
- The method for determining the cost basis of crypto assets.
Effective Dates
These amendments are effective for all fiscal years beginning after January 15, 2024; early adoption is permitted. A cumulative-effect adjustment to the opening balance is required in the period of adoption.
