America’s new crypto assets standard – the setting of new global GAAP or further global divergence?

In a landmark move, the US Financial Accounting Standards Board (FASB) issued the world’s first accounting standard for crypto assets. Despite the International Accounting Standards Board (IASB) having expressed no plans to issue a specific standard for crypto asset accounting, could this move set a new global standard for GAAP, or deepen the divide in accounting practices worldwide? 

What are the current accounting practices for crypto assets under IFRS and UK GAAP?

Under the existing IFRS and UK GAAP frameworks, entities need to determine how to classify their crypto assets. Whether treated as cash, inventories or intangible assets, this decision impacts how they are measured. This classification process, made on an asset-by-asset basis, means a company may value different crypto holdings in varying ways. For example, either at cost, cost less amortisation and impairment, fair value less costs to sell or fair value.

This variety in measurement can lead to significant differences in financial statements, reflecting the inherent complexity of accounting for crypto assets.

What does FASB’s new standard say?

There are three main aspects to the FASB’s new standard for accounting crypto assets: 

• Recognition and measurement: crypto assets must be recognised at fair value with gains or losses recorded in the profit or loss. 
• Impairment losses: unlike other intangible assets, crypto assets will not be subjected to impairment testing. Instead, they will be marked to market, reflecting real-time value fluctuations. 
• Disclosure requirements: enhanced disclosure requirements will ensure that stakeholders receive comprehensive information about the nature and extent of crypto holdings. This includes details about the fair value measurement techniques used and the associated risks. 

What does this mean for GAAP in the UK?

The FASB's standard sets the US apart in the accounting for crypto assets. The FRC has recently issued substantial amendments to UK GAAP FRS 102 with no proposed guidance on crypto assets, suggesting that UK GAAP will remain unchanged for the next four years.

As crypto asset holdings become more prevalent among companies reporting under IFRS, it will be interesting to see if the IASB revisits its stance. 

As the digital currency revolution continues, the need for clear and consistent accounting standards becomes more pressing. Whether FASB’s new standard will set a global precedent or contribute to further divergence remains to be seen. One thing is clear, businesses must stay informed and proactive in adapting to these changes.

How can RSM help?

For businesses navigating the complexities of crypto asset accounting, it’s crucial to establish clear and consistent accounting policies. Given the varied treatments under UK GAAP, a thorough review and documentation of each crypto asset's classification and measurement are essential.

Our financial reporting experts are experienced in working with businesses to establish accounting policies for the crypto assets that they hold. If you would like further information about how we can help your business, please do not hesitate to contact Paul Merris or your usual RSM contact.