FASB Proposes Amendments to Crypto Assets Accounting Standards

The SEC Financial Accounting Standards Board ("FASB") proposed amendments to crypto asset accounting requirements to (i) align fair value measurement of crypto assets for all entities and (ii) enhance disclosures on annual and interim reporting periods.

In an "Exposure Draft," FASB proposed the amendments in response to stakeholder comments that current accounting standards for certain holdings of crypto assets as "indefinite-lived intangible assets" do not provide decision-useful information to investors. FASB stated that financial statements that reflect "only the decreases, but not the increases, in the value of crypto assets . . . until they are sold do[] not provide relevant information" with regard to (i) the underlying crypto assets’ economics and (ii) an entity’s financial position.

Under the proposed amendments, FASB would require entities holding crypto assets to:

• measure a crypto asset’s fair value with changes in net income each reporting period;
• recognize transactional acquiring costs of the crypto asset, including commission fees;
• present (i) crypto assets measured at fair value separately from intangible assets on balance sheets and (ii) changes in the fair value measurement of crypto assets separately from changes in the carrying amounts of other intangible assets on income statements; and
• identify crypto assets as cash flows from operating activities if they are received as noncash consideration in the ordinary course of business and are then converted nearly immediately into cash.

With regard to interim reporting periods and annual reporting requirements, FASB would require entities holding crypto assets to disclose:

• a rollforward of crypto asset holding activities, including additions, dispositions, gains and losses, as well as an income statement line item if gains and losses are not presented separately;
• the difference between the sale price and the cost basis for any dispositions of crypto assets, in addition to a description of the activities leading to the dispositions; and
• the methodology used to calculate the cost basis of crypto assets.

Comments on the proposed amendments must be submitted before June 6, 2023.