On December 13, 2023, the Financial Accounting Standards Board (FASB) issued its much-anticipated Accounting Standards Update (ASU) on accounting for and disclosure of crypto assets. This ASU is the first official guidance under US generally accepted accounting principles that addresses the accounting for and disclosure of crypto assets. Prior to issuance of this ASU, crypto assets were to be accounted for as indefinite-lived intangible assets.

Such assets are tested for impairment annually and more frequently if events or circumstances indicate that it is more likely than not that an asset is impaired. Given the significant volatility in the crypto markets, this has resulted in instances where crypto assets were deemed to be impaired and thus written down to their then fair value. However, subsequent reversals of impairment losses are prohibited. So, even if the value of the crypto asset recovered, this recovery in the value of the crypto asset could not be recognized.

ASU No. 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60), Accounting for and Disclosure of Crypto Assets

Under the standard, entities are now required to account for crypto assets at fair value, with changes in fair value being recorded through net income. The ASU provides specific criteria for what constitutes a crypto asset and thus falls within the scope of the ASU. Such assets must be presented separately from other intangible assets in the balance sheet and changes in the fair value must be reported separately from changes in the carrying amounts of other intangible assets in the income statement.

Required disclosures

The ASU also requires various disclosures surrounding these holdings, including:

1. The name, cost basis, fair value, and number of units for each significant crypto asset holding and the aggregate fair values and cost bases of the crypto asset holdings that are not individually significant
2. Descriptions of contractual sale restrictions
3. A roll forward of activity in the reporting period
4. Information on dispositions of crypto assets
5. The line item in the income statement in which gains and losses are recognized, if not presented separately
6. The method for determining the cost basis of crypto assets

ASU No. 2023-08 is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. As always, should questions arise, please don’t hesitate to reach out to your BerryDunn team.