In a recent board meeting for The Financial Accounting Standards Board, the organization has announced that their new main focus will be laying down some ground rules for cryptocurrency in the tax realm. The addition of the new project within the organization aims to review “accounting for exchange-traded digital assets and commodities.” The motion to adopt the agenda was approved and will become the Financial Accounting Standards Board’s newest embarkment.
Crypto Rules Established
According to a report provided by the WSJ, the FASB has officially set rules and standards for how companies and other Non-Profit Organizations hold and report their digital currencies in the accounting books. These rules were established to target the common digital currencies such as Bitcoin and ETH, but not the new and upcoming NFT.
Clarity Needed Throughout the Industry
The FASB the decision to establish these ground rules stems from the industry’s dire need for clarity. Several professionals in both the crypto and accounting industries think this is a good move, citing the need for standards on the finances and accounting of crypto. It is also seen as a move that is in the best interest of the consumer, as the crypto market space continues to rapidly grow.
In the past, the Financial Accounting Standards Board did not see crypto reaching the historic levels we have recently seen. This ultimately caused the agency to become hesitant when it came to taking up an agenda to set some ground rules for crypto.
Current Guidelines
Currently, the Association of International Certified Professional Accountants (AICPA) is the agency that sets the guidelines for companies holding digital currencies. Their guidelines have been strongly critiqued, however, because they require the digital currency to be reported as “indefinite-lived intangible assets.” This means that companies are unable to mark up gains in their holding of the digital asset unless they sell it. The AICPA guidelines also force the companies to report impairment losses if the digital asset falls below the price it was purchased for.
FASB Guidelines
The board stated that they will strongly consider using fair value accounting for digital currencies moving forward. This is great news for companies who hold digital assets because the currencies will now be treated as legitimate financial assets in the company’s accounting books.
Wrap Up
The new guidelines that were put out come as a relief to everyone involved in the crypto industry as efforts to provide clarity have been strongly encouraged by investors of digital assets. Talk with your accountant or advisor to find out if this will affect the way you file next tax season.