New FASB Rules to Evaluate Crypto at Fair Value

• New FASB Rules to Measure Crypto at Fair Value
• The Impact of New Rules
• The Rise of Digital Assets
• Crypto to be Measured at Fair Value Under New Rules
• Tokens Measured at Fair Value
• The Effect on Companies

New FASB Rules to Measure Crypto at Fair Value

New Financial Accounting Standards Board (FASB) rules, as reported by Bloomberg, have declared crypto will now be measured by fair value. These accounting rules are expected to come into effect in 2025 and are predicted to have a significant impact on crypto holdings.

The Impact of New Rules

The new rules will enable companies such as MicroStrategy and Tesla to record both the peaks and troughs of their cryptocurrency holdings. Furthermore, a token's fair value will be an estimation of the price at which an asset is bought when both the buyer and seller agree on the price freely.

The Rise of Digital Assets

The increasing prominence of digital assets has been remarkable in recent months. The rise of Bitcoin$42,260 -0.64% has been a notable narrative in the financial sector throughout this year. Along with this, the possible approval of a Spot Bitcoin ETF has accelerated regulatory discussions.

Crypto to be Measured at Fair Value Under New Rules

As per the new accounting rules implemented, crypto is set to be measured at fair value under FASB rules. These changes, reported by Bloomberg, will not come into effect next year but are expected to be fully integrated by 2025.

Tokens Measured at Fair Value

The accounting rules propose that companies holding Bitcoin (BTC) or Ethereum$2,315 -2.42% (ETH) are not required to record these tokens at fair value. This is a measurement that is used to estimate the most accurate and current value of the asset. The report also states that changes in fair value will be reported as net income.

The Effect on Companies

This change will allow companies to record more than just the lows of these assets, a practice that has previously affected the value of holdings and resulted in depleted earnings due to market volatility. Companies like MicroStrategy and Tesla, known for their substantial Bitcoin holdings, will benefit from the fair value implementation, which will measure liabilities and assets at the current market value.

The fair value amendment was originally unveiled in March, with FASB Chair Richard R. Jones identifying digital assets as a top priority for the board.

Edited by Jonathan Stoker