FASB to examine Accounting Rules for Digital Assets Held on Balance Sheets

Key takeaways:

  • The Financial Accounting Standard Board (FASB) unanimously approved a project to review the accounting for digital assets and commodities traded on exchanges.
  • The Board will consider adding an exchange-traded digital assets and commodities initiative to its technical agenda.
  • Supporters of bitcoin claim that a more transparent and balanced approach would make it significantly easier for businesses and other organizations to hold the cryptocurrency in their treasuries.

The Financial Accounting Standards Board (FASB) unanimously decided on Wednesday to handle the recognition and measurement of digital assets, this can be a major milestone amid a global meltdown in the cryptocurrency market. Considerations on accounting for exchange-traded digital assets and commodities would be held in this context.

The meetings will be audio webcast and archived for 90 days after the meeting on the FASB website.

MicroStrategy (MSTR) CEO Michael Saylor shared the announcement on Twitter. As of Q1 2022, Saylor’s business MicroStrategy (Nasdaq: MSTR) has about 129,000 Bitcoins.

MicroStrategy’s Bitcoin holdings are worth $4.1 billion now, according to the numbers. That is one of the world’s largest Bitcoin collections.

The FASB website lists “Accounting for Exchange-Traded Digital Assets and Commodities” as an item on the board meeting agenda for today’s meeting, but it has not yet been refreshed with the conclusions of any vote.

The staff will present a summary of the study completed to date to the Board, including feedback collected on this topic at the June 2021 Invitation to Comment, Agenda Consultation. The Board will consider adding an exchange-traded digital assets and commodities initiative to its technical agenda.

The goal of the decision-making meeting, according to the FASB’s board meeting handout, was to ask the panel whether to add a project to its technical agenda to handle accounting for some digital assets and commodities. Although the development does not guarantee any certain outcome in a specific time frame, it has the potential to be a major breakthrough in the long run.

This will more likely bring corporations one step closer to being able to own Bitcoin on their balance sheet and account for it properly.

This study will look into the accounting and disclosure of a selection of digital assets and commodities traded on exchanges.

As previously stated by Saylor, present accounting laws may hinder corporations from storing bitcoin on their balance sheets because the accounting compels charges when values fall but does not allow for any recoupment when prices rise.

For company balance sheets, the territory of digital assets introduces a unique horizon of possibilities and potential. Few of the rules that apply to traditional investments in securities, fiat money, or treasuries may apply to that frontier. 

Consider MicroStrategy, a publicly-traded supplier of business analytics tools, which began purchasing big amounts of bitcoin in August 2020 with cash on hand. Other companies have followed MicroStrategy’s lead and added bitcoin to their financial sheets, including Tesla and Square, the payments provider.

Fasb To Examine Accounting Rules For Digital Assets Held On Balance Sheets
Fasb To Examine Accounting Rules For Digital Assets Held On Balance Sheets

Some businesses that regard bitcoin as a passing fad have altered their names to capitalize on the trend.

Those who have incorporated bitcoin into their balance sheet and integrated it into their corporate treasury, on the other hand, have gone far beyond the conceivable. They have plenty to offer after their review.

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Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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