Crypto companies and other businesses with significant crypto holdings will get long-awaited accounting rules to measure the value of the Bitcoin, Ethereum, and other crypto in company coffers, US accounting standard-setters unanimously voted Wednesday.
Under new rules expected to be published by year end, companies that hold or invest in cryptocurrency will be required to report their holdings at fair value, a measurement that aims to capture the most up-to-date value of an asset—including rebounds in value after price dips. While the new standard will inject volatility into the earnings of companies heavily invested in crypto, the ability to record recoveries will be an improvement over current practice, companies and accountants have told the Financial Accounting Standards Board for months.
The rules will go into effect as soon as 2025, but companies will have the option to apply them early, FASB agreed.
No part of the rulebook for US accounting specifically addresses how companies like enterprise software maker MicroStrategy Inc., automaker Tesla Inc., or crypto exchange Coinbase Global Inc. need to recognize and measure the digital currencies they own.
Companies currently default to an American Institute of CPAs practice guide that treats most cryptocurrency as intangible assets, a category that includes things like trademarks, copyrights, and brands—all items that, unlike crypto, are rarely traded. This means companies record their crypto at the historical price they paid and assess their holdings every quarter for impairments, or value declines. If the price of Bitcoin drops even briefly during the period, it’s considered impaired. Companies cannot revise values upward if the market recovers.