FASB Greenlights New Guidelines on Crypto

The key takeaway from the new guidance from FASB is that it allows businesses with specific crypto assets to do Fair Market Value instead of Impairment rules. However, NFTs and Wrapped Tokens (example: WETH) are not in the scope of the guidance. Luckily, Integral is equipped with extensive NFT and wrapped token support. Whether it's tracking, reporting or valuing, Integral makes the process of crypto asset accounting for you seamless.

Why is this important?

Understanding the new guidelines that are set by FASB is not only about compliance, but also ensuring accurate representations of a web3 business's financial health where traditional metrics are not always present. Businesses that are well-versed in the new guidelines will be better positioned to navigate the unique financial implications that running a web3 business brings.

Integral stands ready to assist businesses in navigating these changes, offering automation tools and advanced reporting to simplify the crypto accounting processes in line with the new guidelines.

Key Changes Businesses Must Note:

Eligibility Criteria:

The new set of guidelines as set by FASB is applicable to crypto assets that:

• Meet the definition of an intangible asset;

• Originate or exist on a blockchain or analogous technology-based distributed ledger;

• Do not constitute a contract or entail enforceable privileges;

• Have cryptographic security;

• Are fungible;

• Aren't produced or issued by the company making the report or its affiliates.

Takeaways:

Fair Value Reporting: Unlike the past practice of retaining crypto assets at cost less impairment, the new directives mandate reporting these assets at their fair market value. Fluctuations in this value will directly affect earnings, eliminating the need for impairment analysis. However, Non-fungible tokens (NFTs) and issuer tokens aren't covered by these directives.

Wrapped Tokens: These tokens remain unaffected by the new guidelines. Businesses should continue valuing them on their balance sheet at cost less impairment.

Financial Statement Presentation: Firms will have distinct line items on both their income statement and balance sheet specifically for their crypto transactions, offering stakeholders a clearer view.

Mandatory Disclosures: The revamped guidance insists on detailed crypto asset disclosure, including:

• Significant Holdings: Every quarter, firms must disclose major holdings, detailing asset names, quantities, cost basis, and market value.

• Annual Roll-forward: Annually, a comprehensive breakdown of crypto asset movements including initial balances, additions, disposals, gains/losses, etc.

• Restricted Asset Valuation: Companies holding inaccessible tokens must disclose these, indicating their liquidity status.

• Fair Value Disclosures: Compliance with ASC 820's disclosure requirements on fair value measurements becomes paramount.

GAAP vs. IFRS: Though these changes bring US GAAP closer to IFRS standards, nuances remain.

The above alterations cater to both private and public firms, enhancing crypto asset reporting, reflecting the assets' economic truth more accurately.

How does Integral help?

While NFTs remain outside the scope of these new guidelines, Integral offers support with extensive NFT features. Our suite ensures that businesses can effortlessly manage, report, and value their NFT inventory.

As for wrapped tokens, which also aren't covered by the new directives, they can be confidently accounted for using Integral. We provide tailored solutions that seamlessly align with the specific policies your Accounting team follows. Whether it's tracking, valuation, or reporting, Integral ensures your approach to wrapped tokens is both compliant and efficient.

What's Next?

With FASB's approval, final drafting of the Accounting Standards Update (ASU) is underway. Expected to be available by Q4 2023, businesses can adopt it right away, but it becomes mandatory only from December 15, 2024 onward.

For affected firms, this implies revisiting their current accounting practices, spotting deficiencies, sourcing pricing data, adjusting their accounting systems to mirror fair value modifications, and being ready for required disclosures.

We encourage accounting professionals and CFOs to contact Integral. Whether you need assistance in revamping your accounting processes, ensuring compliance with the updated guidelines, or setting up a crypto accounting system that works for your team and financial stack, Integral is your trusted partner in navigating these changes

Ready to supercharge your crypto accounting?

To help CFOs and web3 accounting professionals keep pace and ensure compliance, Integral offers an all-in-one solution. Our platform effortlessly integrates all your wallet addresses, CEX accounts, and more, streamlining the process and reducing manual workload. The benefits aren't just about compliance; Integral's robust feature set offers minute-by-minute pricing for countless tokens and automated capital gains/losses calculations, giving businesses the real-time insights they need to make informed decisions in the dynamic world of crypto.

Moreover, with the new FASB guidelines requiring distinct crypto line items and detailed disclosures, Integral's automatic classification and synchronization capabilities come in especially handy. Seamlessly integrate your transactions and balances with your preferred accounting software, and achieve quicker month-ends with our platform.

Stay ahead of the FASB crypto accounting curve. To see Integral in action, book a demo with our team today.