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FASB Chair: Crypto Accounting Proposal Coming in First Half of 2023

Denise Lugo  Editor, Accounting and Compliance Alert

Denise Lugo  Editor, Accounting and Compliance Alert

A FASB proposal on the accounting for cryptocurrencies will be issued during the first half of next year to solicit public feedback, chair Richard Jones told an industry conference on Nov. 8, 2022.

“It’s probably not as broad as some would like,” Jones said at the Corporate Financial Reporting Insights Conference hosted by Financial Executives International in New York. “But when we look at the population and we look at the transactions that are out there and look where the accounting and the economics probably aren’t the best, this is the area that we heard that it was important to focus on – narrow our focus,” he said. “It’s something we can complete.”

About two months ago the board decided to limit the guidance to fungible tokens, deemed to be intangible assets, secured through cryptography on a blockchain or distributed ledger, and do not provide the asset holder “with enforceable rights to or claims on underlying goods, services, or other assets.”

Further, the tokens would be measured at fair market value as that reflects the underlying economics of those transactions, the board agreed.

Next, decisions will be made on three more areas to complete the proposal: presentation, disclosure and transition.

“Presentation – think of it as not only where in the income statement but income statement and other comprehensive income,” Jones said. “I’ll just share I’d be surprised if it’s not the income statement but it will take the four board members to decide where that will go.”

The project was added to the FASB’s technical agenda in May after the board heard that current accounting rules do not necessarily reflect the underlying economics of crypto assets. Cryptos such as Bitcoin and Ethereum, are today accounted for as intangible assets and reported on the balance sheet at historical cost. Those assets are deemed to be impaired when the price drastically drops but that loss cannot be recovered in financial reports when the price rebounds.

“The most important thing was scoping because in the current environment everything is digital,” Jones said. “And as we looked at that it came down to what I’d commonly call plain vanilla on crypto assets.”

Jones’ remarks were part of a FASB panel with David Gonzales, Vice President – Senior Accounting Analyst at Moody’s Corp., moderated by Holly Grennan, Senior Director, Global Technical Accounting & Policy at Nike, who asked about the project.

“Is this a particular area of interest for investors as well?” Grennan also asked.

“As with everybody, it’s a very big area of interest, we’ve seen the comment letters, we do get a lot of questions about it from investors. Just to be fair I cover corporate entities – so nonbanking entities at Moody’s and it’s not very pervasive,” Gonzales responded. “I think there isn’t a lot of issue with the idea that the accounting doesn’t work for these types of assets to not have them at fair value, and I think the FASB has done a really good job of putting out the major fires that we’re going to deal with with all of the complications [involving digital assets],” he said.

 

This article originally appeared in the November 9, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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