ASC 350-60 provides specific presentation requirements of in-scope crypto assets in a reporting entity’s financial statements. Additionally, ASC 350-60 discusses the disclosures required for both annual and interim reporting periods and the additional disclosures required for annual periods only.
5.4.1 Presentation of crypto assets in scope of ASC 350-60
In accordance with ASC 350-60-45-1, an entity that holds in-scope crypto assets is required to present those crypto assets separately from other intangible assets on the balance sheet. However, ASC 350-60 does not address the presentation of crypto assets as current or noncurrent in a classified balance sheet. In accordance with ASC 210-10-45
, Balance Sheet–Overall
, we believe in-scope crypto assets may be presented as noncurrent assets because they meet the definition of intangible assets. Nevertheless, a reporting entity could classify crypto assets as current assets when the investment time horizon at acquisition is less than one year. Reporting entities should evaluate their specific facts and circumstances.
In accordance with ASC 350-60-45-2, the gain or loss associated with the remeasurement of crypto assets is reported in net income separately from changes in the carrying amount of other intangible assets each reporting period. However, ASC 350-60 does not address whether the gain or loss related to the remeasurement of the crypto assets should be presented as operating or non-operating income in the income statement. We believe the gain or loss related to the remeasurement of in-scope crypto assets should generally be presented within operating income based on the guidance in ASC 350-30-45-2
. Reporting entities should evaluate their specific facts and circumstances.
Statement of cash flows
The cash flow presentation of in-scope crypto assets will generally follow the existing guidance in ASC 230
, Statement of Cash Flows
. However, if crypto assets are received as noncash consideration in the ordinary course of business (e.g., settlement of receivables) and then “nearly immediately” converted into cash, ASC 350-60-45-3 specifically requires that the cash received be classified as an operating activity in the statement of cash flows. “Nearly immediately” is defined as a short period of time that is expected to be within hours or a few days, rather than weeks.
Not-for-profit entities that receive crypto assets as a contribution that are converted nearly immediately to cash should be classified as operating cash flows if there are no donor restrictions in place. On the other hand, if the donor restricted the use of the contributed crypto assets to a long-term purpose, those cash receipts should be classified as financing cash flows. See ASC 230-10-45-21A
for additional information. As described in paragraph BC53 in the basis for conclusions of ASU 2023-08
, the term “nearly immediately” for not-for-profit entities was previously described as days, not months, for the liquidation of donated financial assets in paragraph BC8 of ASU 2012-05
, Statement of Cash Flows (Topic 230)—Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows
. Accordingly, the FASB determined it would be appropriate for not-for-profit entities to apply the same threshold to the sale proceeds of donated crypto assets as to the sale proceeds of donated financial assets.
Reporting entities may acquire crypto assets for trading purposes. Although ASC 350-60 does not specifically address the presentation of these trading activities in the statement of cash flows, we believe the cash receipts and cash payments from purchases and sales of crypto assets held for trading purposes should generally be presented as operating cash flows in accordance with ASC 230-10-45-20
5.4.2 Disclosure of crypto assets in scope of ASC 350-60
In addition to the required disclosures described below, reporting entities that hold in-scope crypto assets should also evaluate other relevant areas of GAAP that require additional disclosure. For example, because the in-scope crypto assets are subsequently measured at fair value, they are subject to the fair value disclosure requirements in ASC 820
Interim and annual periods
Reporting entities are required to disclose significant holdings of crypto assets and restrictions on the sale of crypto assets at both interim and annual reporting periods.
For holdings in crypto assets that are determined to be “significant” (based on fair value), reporting entities are required to disclose the following:
- Name of the crypto asset,
- Cost basis,
- Fair value, and
- Number of units held.
Reporting entities are also required to disclose the aggregated cost bases and fair values of the crypto asset holdings that are not individually significant.
In accordance with ASC 350-60-50-6, if an entity holds crypto assets that are subject to contractual sales restrictions, the entity will need to disclose the fair value of the crypto assets that are subject to the sale restrictions, the nature of the restriction, the remaining duration of the restriction, and circumstances that could cause the restriction to lapse. Sometimes an entity will hold multiple crypto assets with contractual sales restrictions. In that case, the reporting entity will need to evaluate the level of detail necessary to satisfy the required disclosures, including considering the level of aggregation/disaggregation and whether additional information is needed to assess the quantitative information disclosed.
Annual periods only
For annual reporting periods, ASC 350-60-50-2 requires entities to disclose the cost basis method (e.g., FIFO, specific identification) used to compute gains and losses as well as a reconciliation of the activity of its holdings in crypto assets. For the annual reconciliation, the following activities are required to be separately disclosed to reconcile the beginning and ending balances:
- Recognized gains in net income, determined on an individual crypto-asset-by-crypto-asset basis (for each individual crypto asset holding with a net gain in the annual period), and
- Recognized losses in net income, determined on an individual crypto-asset-by-crypto-asset basis (for each individual crypto asset holding with a net loss in the annual period).
In addition to the reconciliation, entities will be required to describe the nature of activities that result in additions (e.g., purchases, receipts from customers, or mining activities) and dispositions (e.g., sales, payments for services); the total amount of cumulative realized gains and cumulative realized losses from dispositions during the period; and, if not presented separately, the line item in which the gains/losses are presented.