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Bitcoin and Business: Will More Companies Buy BTC Under New FASB Rules?

Last Updated December 14, 2023 12:30 PM
Josh Adams
Last Updated December 14, 2023 12:30 PM
Key Takeaways
  • The FASB has just published new accounting guidance for crypto assets.
  • Previously, crypto on balance sheets didn’t reflect fair value.
  • The new changes give more reasons for businesses to invest in high-performing digital assets.

The Financial Accounting Standards Board (FASB) has introduced new guidance  that will change how companies account for cryptocurrency holdings. The amendments, which will take effect in 2025, require firms to record digital assets like Bitcoin (BTC) and Ethereum (ETH) at fair market value on financial statements instead of just recording impairments.

The Normalization of Crypto Accounting

The new guidelines say that they are not just about reflecting crypto economics. They say: “Measuring those assets at fair value will likely reduce cost and complexity associated with applying the current cost-less-impairment accounting model for many entities.” 

This shift to a fair value methodology gives businesses a more accurate picture of their crypto investments. Under old standards, companies could only present losses on their books, even if holdings surged in value. Now gains and losses will both be reflected in income statements. The old rules likely made many big investors wary of putting their money into Bitcoin or other digital assets. With the new rules, companies can present a more complete picture of their investments.

[The new rules] will provide investors and other capital allocators with more relevant information that better reflects the underlying economics of certain crypto assets and an entity’s financial position while reducing cost and complexity associated with applying current accounting,” said FASB Chair Richard R. Jones, in a statement .

By presenting the fair value, entities can use cryptocurrency similarly to other financial assets used for treasury management or investment purposes. This transparency and recognition of volatility allows firms to have more informed discussions about portfolio construction. A win for both businesses and investors.

The changes also simplify the accounting process, moving away from the previous, more complicated system that required regular checks for value loss in certain intangible assets. This makes it easier for firms to include digital assets like Bitcoin in their regular financial reports, instead of treating them as unusual assets that need special treatment

More Bitcoin Investing by Businesses? 

Though some industries like investment managers already utilized fair value accounting for digital assets, the new guidance creates consistency for crypto accounting across different business types. Taken together, the changes represent a legitimization of cryptocurrency on corporate balance sheets. And there’s plenty of reasons why you’d want them included.

Bitcoin has had a good 2023 so far.
Bitcoin’s (BTC) price over the previous 12 months. Source: CoinMarketCap.

Despite last year’s crashes, Bitcoin has been a high-performing asset  in 2023. It broke past $40,000 in early December and has demonstrated a remarkable 140% increase since the start of the year. 

This impressive growth not only outshines the Nasdaq 100, Gold, its traditional hard money counterpart, but also eclipses most other blue chip digital assets in the market. Bitcoin’s robust performance mirrors patterns seen in previous cycles, reinforcing its status as a form of digital gold—albeit a very volatile one.

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