FASB issues final ASU on crypto asset accounting

The guidance applies to assets that satisfy the following criteria:

• Meet the US GAAP definition of an intangible asset
• Do not provide the asset holder with enforceable rights to or claims on underlying goods, services or other asset(s)
• Reside or are created on a distributed ledger (i.e. blockchain or similar technology)
• Are secured through cryptography
• Are fungible
• Are not created or issued by the reporting entity or its related parties

• Subsequently measured at fair value under ASC 820, with fair value changes recorded in net income (see ‘Presentation’ below) 
• Does not require or permit an alternative measurement (e.g. historical cost less impairment, for crypto assets not traded in an active market)
• Does not provide guidance on how to recognize or present commissions, transaction fees and other charges incurred to acquire crypto assets

• Balance sheet – In-scope crypto assets presented separately from other intangible assets.
• Income statement – Gains and losses from remeasuring in-scope crypto assets recorded in net income, separately presented from impairments or other changes to carrying amounts of other intangible assets.
• Statement of cash flows – In general, entities will simply follow the guidance in Topic 230. However, the Subtopic creates specific requirements for cash inflows from (1) the sale of in-scope crypto assets received as noncash consideration in the ordinary course of business and converted ‘nearly immediately’ into cash, and (2) the near immediate liquidation of crypto assets received by NFPs as donations.

‘Nearly immediately’ refers to a prompt conversion that should generally be interpreted as a short period of time (e.g. a matter of days, or even hours, rather than weeks).

The following disclosures are required in entities’ interim and annual financial statements:

• Name, cost basis, fair value, and number of units held for each significant (as determined by fair value) crypto asset holding (e.g. bitcoin, ether)
• Aggregate cost basis and fair value of crypto asset holdings that are not individually significant
• Name and fair value of crypto assets subject to contractual sale restrictions as of the balance sheet date, as well as information about:
  • the nature and remaining duration of the restriction(s); and
  • what conditions must be met to remove the restriction(s).
• The following disclosures are required only annually: 
• The fair value disclosures required by ASC 820;
• The method used to determine the cost basis of the entity’s crypto asset holdings (e.g. FIFO, specific identification);
• The line-item(s) in which gains and losses are reported in the income statement, if not separately presented;
• A rollforward of the entity's crypto asset holdings (other than crypto assets received as noncash consideration in the ordinary course of business and converted nearly immediately into cash) in the aggregate, showing additions, disposals, and remeasurement gains and losses, along with disclosure about the nature of additions (e.g. purchases or mining rewards) and/or disposals; and
• Total cumulative realized gains and losses from dispositions during the year.

• The new ASU must be adopted on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings (or other appropriate components of equity or net assets) as of the beginning of the fiscal year of adoption.