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Corporate Holding of Coins is a Big Advantage? The US's First Cryptocurrency Accounting Standard: Reflecting Coin Holdings Gains and Losses at Fair Value

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Corporate Holding of Coins is a Big Advantage? The US

The Financial Accounting Standards Board (FASB) has issued the first accounting standard for cryptocurrencies. Companies holding cryptocurrencies such as BTC, ETH are required to account for them at fair value, reflecting the true gains and losses from holding these assets.

FASB's adoption of fair value accounting standards by the end of the year benefits companies holding cryptocurrencies like MicroStrategy

FASB Accounting Standard: Cryptocurrency to be Valued at Fair Value

According to FASB documents, the new standard requires companies holding cryptocurrencies such as BTC, ETH to be valued at fair value, which is the latest market price. The standard will be effective for public and private companies with fiscal years beginning after December 15, 2024.

This standard will allow companies holding cryptocurrencies to more accurately reflect their financial position.

Fund manager James Lavish explained how the new standard will be more favorable for companies holding cryptocurrencies.

Fund Manager: Holding Cryptocurrencies a Big Advantage for Companies

James Lavish pointed out that in the past, if a company bought $1 million worth of BTC and included it on the balance sheet as an asset, even if BTC rose by 20%, the company couldn't highlight this gain in the financial statements as the price of BTC on the balance sheet remained at $1 million.

However, if BTC were to drop by 50%, the company would have to recognize this decrease as an impairment and include the loss on the balance sheet.

Even if Bitcoin were to recover later, the $500,000 worth of BTC would still be the carrying value on the company's future balance sheet, with the only way out being to sell Bitcoin and trigger a "capital gain," which is the predicament MicroStrategy faced before.

Michael Saylor purchased billions of dollars worth of Bitcoin, and as the price rose, he had to hold Bitcoin on MicroStrategy's balance sheet at the "purchase price"; when Bitcoin fell, MicroStrategy had to acknowledge the impairment and list it as a loss.

He stated:

Mainstream media has continuously criticized Michael Saylor for repeatedly mentioning "impairment losses" in headlines. This is why many companies are reluctant to hold Bitcoin on their balance sheets, even though they may prefer BTC as an alternative to cash.

James Lavish believes this could mean more companies are willing to invest idle cash into Bitcoin now that accounting barriers have been removed. However, companies will still have other considerations, such as tax regulations and investment risk, especially since Bitcoin remains a volatile asset compared to many stocks and bonds.

Michael Saylor: Upgrade Will Drive Global Adoption of BTC

Michael Saylor quickly retweeted this news on Twitter, stating that the upgrade in accounting standards will drive global enterprises to adopt BTC as a reserve asset.