Cryptographic assets (crypto assets) are transferable digital representations that are designed in a way that prohibits their copying or duplication. The technology that facilitates the transfer of crypto assets is referred to as blockchain or distributed ledger technology. Blockchain is a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network and enables the encryption of information.
Crypto assets come in a variety of forms, and new crypto assets (sometimes referred to as digital tokens or digital assets) continue to be created. These assets may function as a medium of exchange, provide a right to use a product or service, provide rights to an underlying asset, provide voting rights, or provide rights to profits and losses among others.
New guidance
In December 2023, the FASB issued ASU 2023-08, Intangibles — Goodwill and Other — Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. This guidance requires all entities holding crypto assets that meet certain requirements to subsequently measure those in-scope crypto assets at fair value, with the remeasurement recorded in net income. The new guidance requires separate presentation of in-scope crypto assets from other intangible assets on the balance sheet. Remeasurement of those crypto assets is also required to be recorded separately from amortization or impairment of other intangible assets in the income statement. Additional disclosures are required, including significant crypto asset holdings as well as a reconciliation of the beginning and ending balances of crypto assets.
Before the ASU, in-scope crypto assets were generally accounted for as indefinite-lived intangible assets, which is a cost-less-impairment accounting model.
The new guidance should be applied using a modified retrospective transition method with a cumulative-effect adjustment recorded to the opening balance of retained earnings as of the beginning of the year of adoption. All calendar year-end entities with holdings in crypto assets are required to adopt the new guidance in 2025, with early adoption permitted. See CA 2.4 for accounting considerations related to crypto assets in the scope of ASC 350-60 and CA 5.4 for presentation and disclosure requirements for those in-scope crypto assets.
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