The Financial Accounting Standards Board (FASB) in the United States has published a significant update to accounting rules for cryptocurrencies.

It will now allow companies to use fair-value accounting for certain digital assets.

This change, effective for fiscal years beginning after December 15, 2024, marks a shift from the previous model where crypto was treated as an "indefinite-lived intangible asset" based on original purchase price and cumulative impairment charges.

Under the new standards, businesses must report the fair value of cryptocurrencies, reflecting both increases and decreases in market price, rather than only recording losses when the value drops below the purchase price.

This approach aims to provide more relevant and transparent financial information, aligning with the volatile nature of digital assets like Bitcoin and Ethereum.

The rule change is expected to significantly impact companies with substantial crypto holdings, such as MicroStrategy and Tesla, allowing them to report the real-time highs and lows of their crypto assets.

The FASB's decision was influenced by extensive feedback from various stakeholders, including nearly 500 respondents to a 2021 invitation to comment, who highlighted the need for improved crypto asset accounting and disclosure.

The new fair value measurement approach is anticipated to reduce cost and complexity associated with the previous model and provide a more accurate representation of a company's financial position.

This development is seen as a major step forward for the industry, fostering greater trust and confidence in the financial reporting of crypto assets, despite the challenges in implementing robust valuation methods due to the inherent volatility of these digital assets.

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