FASB pushes crypto, tax rules over finish line

By Maura Webber Sadovi for CFODive.com

• The Financial Accounting Standards Board took two final and largely anticipated steps in its rules-making process, separately issuing two of this year’s highest-profile new accounting standards updates — on the topics of crypto and taxes — effectively starting the clock for companies to prepare for the changes.

• The narrowly-focused new crypto standard issued Tuesday, which brings specific guidance for digital assets into generally accepted accounting principles for the first time, applies to Bitcoin and certain other crypto assets but excludes non-fungible tokens, and will require companies to account for them at fair value rather than treating them as an intangible asset. The rules are effective for all entities’ fiscal years beginning after Dec. 15, 2024, according to a FASB release.

• The standards update for income tax accounting issued Thursday will require companies to break out more information in their reports on the income taxes they pay. For example, they will be required to report the jurisdictions — such as a country or state — that receive more than 5% of its total tax payments. The rules are effective for public companies for annual periods beginning after Dec. 15 2024 while private firms have another year before it’s effective, according to the release.

Both the crypto and the tax changes are among the more consequential new standards coming out of FASB this year. The crypto industry has long clamored for the fair value fix as, without any specific guidance, many companies previously resorted to treating crypto as an intangible asset, which entails impairing an asset to the lowest observable value within a given reporting period.  

The FASB issued the crypto standard just days before Securities and Exchange Commission denied a petition from Coinbase Global, the publicly traded crypto asset exchange, seeking rules to end confusion over which crypto assets are securities, Industry Dive sister publication Legal Dive reported.

But Lynn Turner, formerly a chief accountant at the Securities and Exchange Commission, told CFO Dive that FASB’s new standard didn’t go far enough to address issues highlighted by the collapse of Sam Bankman-Fried’s now bankrupt cryptocurrency exchange FTX last year.  

“The FASB’s new standard that will tell people to report their crypto assets at market is a step forward,” Turner said, characterizing it as a “baby step.” What it does not do is, “address if crypto assets, and liabilities, such as the liability (guaranty) for crypto held for others, should be on the balance sheet or not … The FTX exposure to such liabilities was an issue with its financial statements.”

Separately, FASB got the new tax disclosure standards over the finish line despite some corporate and political opposition, with 15 Republican House members urging the board to withdraw the planned new requirements, asserting that the standard update could harm U.S. multinational companies “because their foreign competitors will have access to a greater level of detail on U.S. companies’ operations and tax strategies,” CFO Dive previously reported.

At a meeting in August FASB Chair Richard Jones noted that the board sought to be mindful of the cost of the new standard with the benefits to investors. “I think we have the right balance here,” he said. 

To date this year FASB has issued a total of nine new standards updates, compared to six in all of 2022, according to a FASB spokesperson.