Crypto Accounting Rules: Expertise is Key to Monumental Success.

TLDR:

• New accounting rules for crypto assets bring transparency and trust to the industry
• The rules require expertise in both accounting and crypto assets

The Financial Accounting Standards Board (FASB) issued new accounting guidance for crypto assets on December 13, 2023. These new rules require a large subset of crypto assets to be reported at fair value, a landmark change that has unique considerations for crypto assets. The process for improving financial reporting and implementing these changes also requires expertise in both accounting and crypto assets. The new rules emphasize fair value, enhanced presentation, and disclosures.

The FASB’s new requirements have garnered praise for their speed in addressing new reporting for a new industry and for their rigorous due process, which facilitates transparency and trust. The standard-setting due process involves public dissemination of research and outreach findings, public deliberation, public voting, and future public post-implementation reviews. The role of transparency in standard-setting is important as it brings all stakeholders along on the journey, maximizing input and minimizing surprises.

The new rules require expert knowledge and tools due to the unique considerations of crypto assets. Standardized and reliably sourced trading data, robust independent market identification, and detailed audit trails and documentation are all crucial for the implementation of the fair value requirements. The Alternative Investment Management Association has recently updated its investment valuation guide to include sections on crypto assets and choosing third-party pricing sources.

While the recent rules are a major achievement, there are still remaining issues to be addressed. One such issue is whether virtually all crypto assets should be classified as indefinite life intangible assets. Additionally, a project should be created for the FASB’s Emerging Issues Task Force to address the accounting issues raised in the SEC’s surprise Staff Accounting Bulletin 121.