U.S. FASB changes accounting standard to “valuation value”, perhaps a tailwind for corporate virtual currency investment

Changes in virtual currency accounting rules

On the 13th, the US Financial Accounting Standards Board (FASB) announced new standards aimed at improving the accounting and disclosure of crypto assets (virtual currencies). With this revision of accounting standards, companies will be obligated to assess the value of their virtual currencies each reporting period and reflect the changes in their financial reports.

FASB is a private, non-profit organization in the public interest that sets accounting standards in the United States. Recognized by the U.S. Securities and Exchange Commission (SEC) as a designated accounting standard setting body for public companies, and companies listed in the U.S. are required to prepare financial reports in accordance with FASB standards. .

FASB Chairman Richard Jones said, “The new standard is in response to extensive stakeholder feedback that indicated that improving the accounting and disclosure of virtual currencies should be a top priority for the Board.” ing.

Under previous rules, virtual currencies are considered intangible assets, and if the price of a virtual currency held by a company falls below the purchase price, it must record an impairment loss on its books, even if it has not sold it. On the other hand, profits arising from increases in asset valuation cannot be recorded.

Under the new rules, companies will be required to assess their virtual currency holdings at a valuation each period, with changes in valuation recognized as net income. In addition, companies will be required to disclose information about their assets, contractual restrictions on sales, and changes during the reporting period.

Jones noted that the new standard will simplify current accounting complexities while providing more relevant information that reflects the real economic impact that cryptocurrencies have on a company’s financial health. .

Good news for companies holding virtual currency

Michael Saylor, chairman of U.S.-listed company MicroStrategy, welcomed the change to market-based accounting, which reflects valuations.

FASB has officially adopted Fair Value Accounting for #Bitcoin for fiscal years beginning after Dec 15, 2024. This upgrade to accounting standards will facilitate the adoption of $BTC as a treasury reserve asset by corporations worldwide. https://t.co/4GOuji6cr0

— Michael Saylor (@saylor) December 13, 2023

MicroStrategy purchased $250 million worth of Bitcoin in August 2020 as part of its capital allocation strategy. The company’s confidence in Bitcoin investment was unwavering, and the company continued to purchase Bitcoin. As of December 5, 2023, the amount held is 174,530 BTC (1,074 billion yen), making it the largest of any listed company.

connection:Why does MicroStrategy, a listed US company, continue to buy large amounts of Bitcoin?

The new accounting standards will apply to all companies from fiscal years starting after December 15, 2024 (including interim periods within those fiscal years), but only for companies that have not yet published interim or annual financial reports. In such cases, it is also possible to voluntarily apply the new standards early.

Companies such as MicroStrategy, which has invested heavily in Bitcoin, as well as Tesla and Block, are expected to benefit from the new standard.

connection:MicroStrategy’s Bitcoin investment reaches $1 billion in unrealized gains

Impact on institutional investors

Deloitte, one of the world’s four largest accounting firms, seems to believe that the FASB’s revised accounting standards may encourage companies to invest in cryptocurrencies.

According to Deloitte, only 39 publicly traded companies (19 in the US) hold Bitcoin, and their holdings account for just 1% of the Bitcoin supply.

However, he pointed out that the FASB’s revised standards will increase the transparency of financial reporting, allowing investors to more accurately understand a company’s financial health. In addition, it will be possible to better communicate the holding amount and performance of virtual currencies to stakeholders, which is expected to improve communication, which “may increase the attractiveness of virtual currencies to institutional investors.” claims.

PJ Theisen, audit and insurance partner at the firm, said:

connection: 2024 virtual currency market forecast, shift to altcoins and increase in corporate token holdings = VanEck

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