On Dec. 13, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-08, which amends the accounting and disclosure requirements for certain crypto assets. The objective of these amendments is to provide investors with more decision-useful information that better reflects the underlying economics of crypto assets while reducing the complexity associated with applying cost-less-impairment accounting.1
Key Provisions of ASU 2023-08
Scope of the Amendments
The amendments apply to all crypto assets that satisfy the following criteria:
- Meet the definition of “intangible asset” as defined in the FASB Accounting Standards Codification
- Do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets
- Are created or reside on 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 its related parties
Measurement and Recognition
- Entities must measure crypto assets within the scope of the amendments at fair value each reporting period
- Changes in fair value are recognized in net income
Disclosure Requirements
- Entities are required to provide disclosures about
- Significant holdings of crypto assets
- Contractual sale restrictions related to these assets
- Changes during the reporting period
Transition and Effective Dates
- The amendments are effective for all entities for fiscal years beginning after Dec. 15, 2024, including interim periods within those fiscal years.
- Early adoption is permitted for both interim and annual financial statements that have not yet been issued.
- A cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) is required as of the beginning of the annual reporting period in which an entity adopts the amendments.
ASU 2023-08 represents a significant step in providing clarity and consistency in accounting for crypto assets. Companies will now have a standardized approach to measuring and disclosing these assets, enhancing transparency for investors and stakeholders.
If you have questions about disclosing crypto assets in light of the amended standard, feel free to reach out to the team of PYA tax professionals for help. Contact them via email or by calling (800) 270-9629.
1“Cost-less-impairment” accounting assesses the value of an asset, particularly when indications suggest the asset’s value may be impaired.
