The arrival of a new accounting rule in the United States regarding the valuation of Bitcoin (BTC) and other cryptocurrencies on corporate balance sheets could encourage companies to take an interest in our ecosystem
Bitcoin accounting valuation changes in the US
Last week, the Financial Accounting Standards Board (FASB) unveiled that new accounting rules would take effect regarding the valuation of Bitcoin and other cryptocurrencies on the balance sheets of companies in the United States.
The FASB is a non-governmental association, which has been given the authority by the Securities and Exchange Commission (SEC) to set accounting standards in the country.
Until now, the accounting classification of cryptocurrencies allowed US companies that held them to adjust their value on the balance sheet if they fell below their acquisition cost. However, the reverse manoeuvre was only possible if the cryptocurrencies were sold.
This could lead to inaccuracies, particularly exacerbated when companies like MicroStrategy hold large amounts of BTC, with no intention of selling them. This inefficiency now appears to be addressed, with the adoption of so-called “fair value” accounting for cryptocurrencies.
A step towards the adoption of cryptocurrencies
With an accounting valuation that is closer to reality, this new measure could encourage US-based companies to more easily turn to Bitcoin.
That’s what Michael Saylor, founder of MicroStrategy, thinks:
“The Financial Accounting Standards Board on Wednesday said companies should use fair-value accounting for measuring bitcoin and other crypto assets” – @WSJ
This is a major milestone on the road to institutional bitcoin adoption.https://t.co/b9r8Av9uys
– Michael Saylor⚡️ (@saylor) October 12, 2022
This company is famous for its strong appetite for Bitcoin and has 130,000 of them at the time of writing.
Last year, Phong Le, MicroSrategy’s new CEO, wrote to the FSAB arguing for fair value valuation. In his opinion, this option was the most logical one in order to keep up with reality:
“We anticipate that the value of the company will be higher in the future.
“We expect the disconnect between the book value reported on our balance sheet and the fair market value of our bitcoin holdings to increase significantly over time. “
While the FSAB has considered these requests, it will be interesting to see the impact of this new standard, on institutional adoption of cryptocurrencies in the future.
