Crypto accounting and disclosure

Subsequent to the adoption of ASU 2023-08, entities are to treat crypto assets as intangible assets under ASC 350, where they are to be recorded at cost and evaluated for impairment. At long last, the ASU provides clear guidance for the presentation and disclosure of investments in cryptocurrency.

Scope and main provisions

ASU 2023-08 applies to assets that:

1. Meet the definition of intangible assets;
2.  Do not provide the holder with enforceable rights to, or claims on, goods, services, or other assets;
3.  Are created or reside in a distributed ledger based on blockchain or similar technology; 
4.  Are secured through cryptography;
5.  Are fungible; or
6. Are not created or issued by the reporting entity or related parties.

Bitcoin, Ether and other similar cryptocurrencies are covered under this criteria.

Under this ASU, these assets are to be measured at fair value with changes recorded in net income each reporting period. Further, the crypto assets measured at fair value are to be presented separately from other intangible assets, and the changes from remeasurements of fair value presented separately from the changes in carrying values of other intangible assets. 

Cash receipts from crypto assets which are received as non-cash consideration in the ordinary course of business (or as a contribution to a non-profit entity) and converted nearly immediately into cash are to be specifically presented as cash receipts in the statement of cash flows.

Disclosures

Disclosure requirements include, among other things:

1. The name, cost basis, fair value, and number of units for each significant crypto asset holding, and the aggregate fair values and cost bases of the crypto asset holdings which are not individually significant;
2.  Details related to contractual sale restrictions;
3.  A roll forward, in the aggregate, of activity in the reporting period for crypto asset holdings, including additions, dispositions, gains, and losses;
4.  For any dispositions of crypto assets in the reporting period, the difference between the disposal price and the cost basis, and a description of the activities which resulted in the dispositions; 
5.  If gains and losses are not presented separately, the income statement line item in which those gains and losses are recognised; and 
6.  The method for determining the cost basis of crypto assets. 

Effective dates

These amendments are effective for all fiscal years beginning after 15 January 2024. Early adoption is permitted. A cumulative-effect adjustment to the opening balance is required in the period of adoption.

Jeffrey A. Ford is a Founding & Managing Partner at Grossman Yanak & Ford LLP. He has over 30 years of experience, focused in audit and assurance, M&A transactions, and technology consulting. Jeff has served on a variety of ownership groups including public and private companies, private equity groups and international investors.