Crypto Heavyweights Broadly Support FASB’s Fair Value Correction

[ad_1]

The Financial Accounting Standard Boards’ proposal to make fair value the primary accounting method for measuring certain crypto assets has garnered substantial support along with some criticism and calls for an expanded scope to include more types of assets over the period. of public consultation which ended on Tuesday with comments and letters. filed by 78 stakeholders.

That a number of big players in the crypto industry have expressed general support was not entirely surprising given that many industry players, like digital asset manager Grayscale Investments, have called for change, as previously reported by CFO Dive.

Crypto companies as well as financial report preparers have criticized the current practice, which generally treats cryptocurrency as an intangible asset, and have argued for change because under current practice, the guidelines have generally been interpreted to mean that crypto assets should be depreciated to the lowest observable fair value over a reporting period.

In theory, the fair value accounting method could also be more attractive to companies and simpler, as a company would report the value of the asset based on its level on a given exchange at the end of the reporting period. , rather than having to follow the highs and lows of an asset’s value over a reporting period to signal the lowest level.

But the letters of support contrasted with the story of tension between the fledgling industry and regulators that was underscored this week by separate lawsuits filed by the Securities and Exchange Commission against crypto firm Binance and the crypto trading platform. -Coinbase currency.

Many crypto respondents viewed the FASB’s plan as a good start albeit narrowly targeted toward more guidance, but noted that the growing industry would eventually need the guidance to be extended to other assets and issues.

In August, the FASB narrowed the scope of its crypto guidance product to exclude non-fungible tokens, also known as NFTs. The FASB decided that the cryptocurrencies they would process had to meet the generally accepted accounting principles definition of an intangible asset; they cannot provide the asset holder with enforceable rights to the underlying goods, services or other assets; they must be created or reside on a distributed ledger or blockchain and they must be cryptographically secure and they must be fungible.

Although we fully support the directions proposed in the [exposure draft]we consider this to be the first in a phased approach to addressing accounting for digital assets, including crypto assets, wrote Natalia Voronina, chief accounting officer at San Francisco-based crypto exchange Kraken, in a May 25 letter, describing the proposed guidance as appropriate and operational, but asserting that there is still an urgent need for additional guidance on stablecoins, wrapped tokens, and NFTs.

Michael Saylors MicroStrategy, one of the world’s largest bitcoin owners, also said he agrees with the FASB’s deliberately narrow scope criteria to speed up the standards-setting process.

There may be various complexities associated with non-fungible or wrapped tokens etc. and extending the standardization process to address the treatment of other digital assets, which are not as widely held, would delay the introduction of much-needed accounting standards for the entities. who hold the most widely held digital assets for relatively little profit, wrote Andrew Kang, chief financial officer of MicroStrategys, in a May 22 comment letter.

Grayscale, along with crypto exchange operator Coinbase, are among the companies in the industry that have provided prominent support for the US accounting standardization proposal.

[ad_2]