Investing.com
Published Sep 15, 2023 07:01AM ET
On Friday, it was reported that while the SEC is still reviewing multiple spot Bitcoin ETF applications, the Financial Accounting Standards Board (FASB) announced its intention to introduce new fair-value accounting rules specifically for Bitcoin and other cryptocurrencies on September 6. These guidelines are expected to be formally published by the end of 2023 and fully effective by 2025.
Previously, under existing accounting rules, Bitcoin was typically classified as an intangible asset. Companies had to recognize losses in the form of impairment charges on their financial statements if Bitcoin’s market value plummeted after purchase. This practice negatively affected reported income and threatened the overall health of a company’s balance sheet. Furthermore, companies could only benefit from Bitcoin’s price appreciation if they sold their holdings, thus losing potential long-term profits.
The new FASB rules will allow companies to disclose Bitcoin’s true fair value on their balance sheets during quarterly financial reporting in the form of an unrealized loss. This approach is more advantageous as it eliminates the need to report unrealized crypto losses as impairment charges on profit-and-loss statements. The guidelines also enable companies to recognize unrealized gains as assets, a practice previously discouraged.
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Written By: Investing.com
