New Bitcoin Accounting Rules for Businesses in the US to come to effect in 2025
The new Bitcoin accounting rules for businesses in the US will come into effect in 2025. As part of the transition to a decentralized, digital currency economy, businesses must be prepared to adopt and adhere to these regulations.
Chris.P
New Bitcoin Accounting Rules for Businesses in the US to come to effect in 2025
Crypto companies and businesses holding significant cryptocurrency assets will soon be subject to long-awaited accounting rules.
On Wednesday, US accounting standard-setters unanimously voted in favor of regulations that will measure the value of Bitcoin, Ethereum, and other crypto in company coffers.
This is extremely bullish for crypto, it means that any corporation (like Apple, Microsoft, Amazon etc) will be able to claim the fair value of Bitcoin on its balance sheet.
Expected to be published by the end of this year, the new rules will require companies to report their cryptocurrency holdings at fair value. (source)
This approach aims to provide an accurate measurement of assets, taking into account fluctuations in value, including rebounds after price dips. Although this may introduce volatility into the earnings of companies heavily invested in crypto, it is seen as an improvement over current practices.
While the rules will officially come into effect in 2025, companies will have the option to adopt them earlier.
Some prominent companies like MicroStrategy Inc., Tesla Inc., and Coinbase Global Inc. will need to determine how to recognize and measure the digital currencies they own, as current accounting standards do not specifically address this.
Michael Saylor tweeted:
Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.https://t.co/MjVzUJRVjX — Michael Saylor⚡️ (@saylor) September 6, 2023
Currently, most cryptocurrency is treated as intangible assets under the American Institute of CPAs practice guide. This method records crypto at the historical price paid and evaluates holdings regularly for impairments. If the price of Bitcoin, for example, declines during the evaluation period, it is considered impaired. However, companies are unable to revise the values upward if the market subsequently recovers.
The introduction of fair-value reporting will provide investors with a more relevant view of a company's financial standing. Christine Botosan, a member of the Financial Accounting Standards Board (FASB), expressed support for the new rules, highlighting the opportunity to reduce costs while improving decision-making.
