Key Points:
- The Financial Accounting Standards Board (FASB) decided to put out a new proposal for the accounting and disclosure of cryptocurrencies.
- The plan would also mandate that cryptocurrency holdings be segregated from intangible assets like patents and trademarks in public and private firms’ financial accounts.
- By the end of March, the FASB plans to release a formal proposal and solicit feedback from the general public for 75 days.
According to the Wall Street Journal, the US Financial Accounting Standards Board (FASB), which sets accounting standards for US public companies and private companies, said on Wednesday that it would issue a proposal to require companies to use Bitcoin and other encrypted assets.
The proposal would also require the financial statements of public and private companies to separate their crypto assets from intangible assets such as patents and trademarks. Companies must include gains and losses on crypto assets in their net income. Businesses currently classify crypto assets such as Bitcoin as intangible assets with indefinite duration, similar to intellectual property such as trademarks.
Companies and accountants had long advocated for this change since it would enable them to instantly recognize losses and gains and consider digital assets as financial assets rather than as intangible assets with an indeterminate life span.
The FASB aims to issue a formal proposal by late March and seek public feedback within 75 days, a spokeswoman for the FASB said. The spokesman said the board could issue a final rule as early as the fourth quarter of this year.
The FASB added the crypto project to its agenda in May. FASB board member Christine Botosan said:
“This is pretty quick for us and this is a pretty big change. I’m really pleased with the transparency that this proposal will provide to investors.”
The standard-setter updated the proposal’s scope on Wednesday to make it clear that it shouldn’t apply to those who create or issue crypto tokens or other relevant parties. Additionally, the plan would forbid the use of so-called wrapped tokens, which enable the representation and usage of digital assets from one blockchain on another. Non-fungible tokens and a few stablecoins were left out of the FASB’s August description of the requirements for the project’s assets.
Few companies outside the cryptocurrency sector possess cryptocurrency, and according to Chairman Rich Jones, thus, the new regulation would have a lower impact on a smaller group of corporations than some other recent FASB initiatives.
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Harold
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