Companies like enterprise software maker MicroStrategy, electric auto manufacturer
Crypto companies and any other companies that hold Bitcoin or Ethereum will be required to record their coins at fair value, a measurement technique that aims to capture their most up-to-date value, the Financial Accounting Standards Board said in its first crypto accounting rules. Changes in fair value will get recorded in net income.
Outgoing practice only lets companies record the lows, and businesses that bet on Bitcoin have long bemoaned this one-sided accounting treatment. Crypto values can swing wildly, meaning companies often end up reducing the value of their holdings, which shrinks earnings.
The new rules take effect for both public and private companies with fiscal years that begin after Dec. 15, 2024, which means 2025 for calendar year-end companies. Companies can choose to follow the rules ahead of the deadline.
“It’s just a phenomenal time of year to get this holiday gift of commonsense accounting,” said Edward McGee, CFO of Grayscale Investments LLC, the crypto asset manager that has been battling US regulators to build a spot Bitcoin exchange-traded fund.
No specific US accounting rule has so far addressed how companies need to recognize and measure the digital currencies they own. The crypto industry asked FASB to write rules three times since 2017, but the accounting rulemaker has resisted until now.
In the absence of rules, businesses that don’t qualify as investment companies have defaulted to an American Institute of Certified Public Accountants practice guide that treats cryptocurrencies as intangible assets, a category that includes things like trademarks, copyrights, and brands—assets that, unlike crypto, rarely get traded.
The treatment means companies record their coins at the price they paid and mark them down permanently if their value decreases. They only get to record gains if they sell crypto holdings at a profit.
