According to a report from Bloomberg, new Financial Accounting Standards Board (FASB) Rules have stated that crypto will now be measured at fair value. Moreover, the report notes that these accounting rules are set to go into effect in 2025. However, they are poised to have a massive implication on crypto holdings when they do.
The report notes that companies like MicroStrategy and Tesla will be able to “capture both the highs and lows of their cryptocurrency holdings,” according to the new rules. Additionally, a token’s fair value is an estimation of the price at which an asset is purchased when both the buyer and seller agree on the price freely.
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New Crypto Accounting Rules Say Tokens Will be Measured at Fair Value
Over the last several months, the growing prominence of digital assets has been undeniable. Indeed, the ascension of Bitcoin has been a key story of the financial sector throughout this year. Moreover, the potential approval of a Spot Bitcoin ETF has seemingly fast-tracked regulatory discussions.
Now, according to new accounting rules put in place, crypto is set to be measured at fair value under FASB rules. Bloomberg reported the development and further noted that these changes were not to go into effect next year. Specifically, they would officially be integrated in 2025.
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The accounting rules state that any company that holds Bitcoin (BTC) or Ethereum (ETH) will not be required to record those tokens at fair value. Subsequently, this is a measurement that is used to determine the most accurate and up-to-date value of the asset. Additionally, the report states that fair value changes will be reported as net income.
This change allows companies to not just record the lows of these assets anymore. Indeed, such a practice has long affected the value of holdings, therefore depleting earnings due to the volatility of the market.
Companies like the previously stated MicroStrategy and Tesla have not been shy about their massive Bitcoin holdings. Now, the fair value implementation will allow the measurement of liabilities and assets at the most current market value. Conversely, the fair value amendment was first unveiled in March. Then, FASB Chair Richard R. Jones noted digital assets as a “top priority,” for the board.