The 'first cryptocurrency accounting rules in U.S. history' officially took effect on December 15, allowing companies to include unrealized gains and losses of their cryptocurrency holdings in quarterly financial reports, with expectations that companies like MicroStrategy and Tesla, which hold large amounts of cryptocurrency, will benefit.
Last year, the U.S. Financial Accounting Standards Board (FASB) established the first set of accounting rules for cryptocurrencies, set to take effect in fiscal years beginning after December 15, 2024.
After the new system is implemented, cryptocurrency companies and any other companies holding Bitcoin and Ethereum must record the 'fair value' of their cryptocurrency holdings, which is the measurement method used to present the latest value of cryptocurrencies, and changes in fair value will be included in net income.
Prior to this, there were no specific accounting rules in the United States to guide companies on how to log and measure the cryptocurrencies they hold.
In the absence of regulations, companies can only follow the accounting rules for 'Intangible Assets' when registering cryptocurrencies, recording them at 'the price at the time of purchase', and must perform 'permanent impairment' when the value declines. Only when selling cryptocurrencies can the appreciation of assets be recorded as profits.
However, companies betting on Bitcoin have long been dissatisfied with this one-sided accounting treatment. Due to the significant volatility of cryptocurrency values, this means that any decline in the cryptocurrency held on the balance sheet must often be recorded as 'impairment losses', leading to reduced profits for the company.
According to the new rules, companies must separately log the cryptocurrency assets they hold on the balance sheet as 'special items'. While the new accounting method may bring volatility to related earnings, it allows companies to record the financial recovery brought about by the rise in cryptocurrency prices.
It is worth noting that cryptocurrency accounting rules do not apply to NFTs, stablecoins, and Wrapped Tokens.
"The first cryptocurrency accounting rules in the United States are officially in effect! MicroStrategy and Tesla will benefit". This article was first published in (Block客).
