The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (ASU), Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets.
The proposed requirements would be applicable to crypto assets that—
- Meet the definition of an intangible asset as defined in the Codification Master Glossary;
- Do not provide the asset holder with enforceable rights to, or claims on, underlying goods, services, or other assets;
- Are created or reside on a distributed ledger based on blockchain technology;
- Are secured through cryptography;
- Are fungible; and
- Are not created or issued by the reporting entity or its related parties.
Such crypto assets would be marked to fair value, with changes in fair value recognized in net income. Transaction costs, such as commissions and other related fees, would be recognized as an expense when incurred. Crypto assets also would be presented separately from other intangible assets, and fair value changes would be shown separately from changes in the carrying value of other intangible assets.
When crypto assets are received as noncash consideration in the ordinary course of business (e.g., to pay tuition and fee charges, etc.) and are converted nearly immediately into cash, the cash flows would be classified as cash flows from operating activities. However, the draft does not explicitly indicate how crypto assets received by donors to establish endowments and immediately converted to cash for investment would be treated. Currently, financial assets received as endowment gifts and converted to cash for investment are treated as financing activities for cash flow reporting (ASC 230-10-45-21A).
Required disclosures will include—
- The name, cost basis, fair value, and number of units for each significant crypto asset holding and the aggregate fair values and cost bases of the crypto asset holdings that are not individually significant;
- For crypto assets subject to restriction(s), the fair value of those crypto assets, the nature and remaining duration of the restriction(s), and the circumstances that could cause the restriction(s) to lapse;
- A roll-forward of the activity in the reporting period for the aggregate crypto asset holdings, including additions (describing activities that resulted in the additions), dispositions, gains, and losses. If gains and losses are not presented separately, the entity is required to disclose the income statement line item in which those gains and losses are recognized;
- For any dispositions of crypto assets in the reporting period, the difference between the sale price and the cost basis and a description of the activities that resulted in the dispositions; and
- The method for determining the cost basis of crypto assets (e.g., FIFO, specific identification, or other method).
FASB is accepting comments on this proposed ASU until June 6.