Important milestone achieved for the adoption of BTC

  • The FASB said that the fair value accounting system will provide greater transparency for companies and accountants to disclose their cryptocurrency holdings.
  • MicroStrategy boss Michael Saylor said this move will drive institutional adoption of Bitcoin.

Regulatory measures for the operation of crypto assets have been under discussion and seek to provide greater clarity to investors. On Wednesday, October 12, the Financial Accounting Standards Board (FASB) made a groundbreaking announcement regarding accounting for crypto assets.

The FASB noted that companies must use fair value accounting to measure Bitcoin and other digital assets. This step could clear up uncertainty over reporting how much those holdings are worth.

Currently, there are no specific accounting or disclosure rules for digital assets. As a result, companies classify them as intangible assets with indefinite lives. Since crypto assets are extremely volatile, accounting in such cases becomes extremely difficult.

So businesses and accountants want the FASB to adopt a fair value accounting system. This would allow them to immediately identify gains and losses and treat digital assets as financial assets. On Wednesday, the FASB said that a fair value accounting system will help better capture the economics of digital assets, FASB board member Gary Buesser said:

We’ve heard from investors who want transparency through disclosure, and the only way to get there is fair value. The only way to get any kind of real information about holding bitcoin or Ethereum is through fair value.

Drive Institutional Crypto Adoption

The FASB’s recent comment on fair value accounting for crypto assets has been recognized by veterans of the crypto industry. Speaking about development, Bitcoin evangelist and MicroStrategy founder Michael Saylor said:

This is an important milestone on the road to institutionality. #bitcoin adoption.

For years, companies have been asking the FASB to come up with clear rules for disclosing their cryptocurrency holdings. Now, under the fair value accounting system, companies will have to prepare financial statements in a way that doesn’t accurately reflect the results of their operations or financial condition, said Phong Lee, CEO of MicroStrategy. During his comment letter to the FASB last year, he stated:

We expect the disconnect between the reported book value on our balance sheet and the fair market value of our bitcoin holdings to grow significantly over time.

He said that the volatile nature of Bitcoin makes it difficult for the company to adjust to future increases in value. After deciding on the fair value system, the FASB board will consider what will be included in disclosures about crypto assets and how companies should report to investors.

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