New accounting rule allows companies to accurately reflect the value of their crypto holdings
Bitcoin and other cryptocurrencies may soon witness a surge in adoption by US-based firms, thanks to a recent accounting rule change that allows companies to more accurately represent the value of their crypto assets.
The new Financial Accounting Standards Board (FASB) rules, set to take effect in December 2024, will enable companies to record the estimated market value of their crypto holdings accurately in their accounting books. Previously, companies could only report impairment when the value of crypto decreased, and they were unable to increase the value until the assets were sold, even if the value increased while being held.
According to Cory Klippsten, the CEO of Bitcoin-only exchange Swan Bitcoin, this rule change will allow companies such as MicroStrategy and Tesla, which previously had to report impairment on their crypto holdings, to more accurately reflect the true value of their Bitcoin investments. Klippsten believes that this feature will encourage companies to view Bitcoin as a strategic financial asset and could drive further adoption.
The new rule has been met with excitement by industry experts. Markus Thielen, research head at Matrixport and author of Crypto Titans, stated that it underscores the growing corporate demand for incorporating crypto into financial statements. He believes that companies will now have more confidence when valuing their crypto holdings.
David Marcus, co-creator of Facebook's abandoned stablecoin project Diem, also expressed enthusiasm for the rule change. In a tweet on December 13, Marcus described the new rules as a "big deal" and as removing a significant obstacle for corporations looking to hold Bitcoin on their balance sheets.
Senior equity research analyst Mark Palmer from Berenberg Capital noted in a September 6 note that crypto-holding companies could eliminate the negative perception created by impairment losses under the previous FASB rules.
