Accounting and Tax Guidance for Crypto Assets
In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-08, entitled Accounting for and Disclosure of Crypto Assets. The provisions in ASU 2023-08 add Accounting Standards Codification (ASC) Subtopic 350-60, entitled Intangibles—Goodwill and Other—Crypto Assets to the accounting technical literature. This guidance applies to all entities that hold crypto assets that meet certain criteria. The provisions of ASU 2023-08 are effective for all reporting entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Reporting entities may adopt this guidance early for financial statements that have are not issued or available for issuance. The transition provisions require a cumulative-effect adjustment to the beginning retained earnings (or net assets) as of the beginning of the period the reporting entity adopts ASU 2023-08.
Prior to the issuance of ASU 2023-08, crypto assets were accounted for as indefinite-lived intangible assets using the historical-cost-less-impairment model in ASC 350-30, entitled General Intangibles Other than Goodwill. Under this model, crypto assets were reflected in the financial statements at historical cost, less any impairments. In addition, subsequent increases in the carrying amount of the crypto assets and the reversal of previous impairment losses were prohibited. The provisions of ASU 2023-08 in the new ASC Subtopic 350-60 require that crypto assets be measured at fair value and that the changes in the fair value of the crypto asset be recognized in net income each reporting period. This new guidance applies to an asset that meets the criteria shown in Exhibit I below.
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