The first domino of the Bull Run has officially fallen. American companies can now display their bitcoins at their fair value.
Bitcoin gets an accounting facelift
The FASB (Financial Accounting Standards Board) has updated its accounting rules to allow companies to report their bitcoins at fair value (“Fair value accounting”).
“The new standard responds to feedback from all quarters telling us that improving the accounting and disclosure of crypto-assets should be a top priority for the FASF”said Richard Jones, Chairman of the FASB.
“It will provide investors with more relevant information that better reflects the value of certain crypto-assets on company balance sheets”can we read in the press release from FASB.
Bitcoin has until now been considered an intangible asset. This accounting category includes registered trademarks, patents, etc. And the fact is that the depreciation of bitcoins was accounted for, but not their appreciation. Capital losses appear in the balance sheet, but not capital gains!
The added value was only taken into account after the sale of the bitcoins. Which obviously posed a problem for companies like Microstrategy who have no intention of selling it.
The accounting changes apply to all assets that meet the following criteria:
-Meet the definition of an intangible asset
-Do not provide the asset owner with enforceable rights or claims over the underlying goods, services or other assets.
-Are created or reside on a distributed ledger based on blockchain or similar technology.
-Secured by cryptography.
-Fungibles.
-Are not created or issued by the reporting entity.
This new accounting will allow companies wishing to invest their cash in bitcoin to present investors with a much more realistic image of their financial situation.
We bet that some multinationals were waiting for this accounting development to take the plunge.
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