Fair Value Accounting for Bitcoin: FASB Rules Take Effect

The Financial Accounting Standards Board will promulgate fair value accounting rules for BTC and other eligible crypto assets as of today.

Under the new rules, companies will measure their crypto assets at fair value and update them in their financial statements each reporting period. This will help companies realize both their profits and losses based on the market prices of Bitcoin (BTC) and help them keep up with the currency’s frequently fluctuating trading situation. FASB ASC Subtopic 350-60 outlines a new accounting standard suitable for exchangeable cryptoassets that meet certain requirements. However, NFTs, wrapped tokens, and internally created digital assets are excluded.

HISTORY: FASB FAIR VALUE ACCOUNTING RULES #BITCOIN IT WILL OFFICIALLY ENTER INTO FORCE TODAY

Previously, companies could only value BTC based on the price they purchased it at, not earnings.

WAVE OF CORPORATE ADOPTION 🙌 pic.twitter.com/3NHmLsEauX

— Bitcoin Historian (@pete_rizzo_) December 16, 2024

Companies that hold BTC as treasury reserve assets will now benefit from simplified reporting processes due to the FASB’s decision to adopt fair value accounting. The update is expected to accelerate institutional adoption by providing greater transparency and more accurate valuation of crypto assets for investors, creditors, and other stakeholders. As businesses increasingly turn to BTC as a long-term strategic reserve, this rule change will further cement BTC’s dominance into the fabric of modern finance.

Allowing companies to account for BTC by pricing their BTC holdings at fair value eliminates a major departure in corporate reporting, given that BTC used to be valued using the purchase price. Gains were unrecorded and losses were recorded only if the value decreased. Offering this option will also provide retail investors with a comprehensive view of a company’s financial health.

New rules requiring BTC to be reported at current market value provide greater transparency and accuracy of financial statements, allowing investors to more effectively evaluate risks, cash flows and performance. The differences between traditional markets and the crypto economy are diminishing as control of BTC as a financial asset becomes firmer and clearer and fair value accounting standards are now implemented.