The US encryption accounting rules take effect! MicroStrategy will benefit, and the financial statements will include the fair value of BTC.

The first “Cryptocurrency accounting rules” in the history of the United States officially took effect on December 15, allowing companies to include unrealized gains and losses on Cryptocurrency in their quarterly financial reports. It is expected that companies holding a large amount of Cryptocurrency such as MicroStrategy and TSL (Tesla) will benefit.

The Financial Accounting Standards Board (FASB) developed its first accounting rules for cryptocurrency last year and is scheduled to take effect for the fiscal year beginning after December 15, 2024.

After the new regulations are in place, cryptocurrency companies and any other companies holding Bitcoin or Ethereum must record the ‘fair value’ of holding cryptocurrency, which is used to present the latest value of cryptocurrency, and changes in fair value will be included in net profit.

Previously, there were no specific accounting rules for companies to log in and measure their holdings of cryptocurrency.

In the absence of regulations, companies can only refer to the accounting rules of ‘Intangible Assets’ when registering cryptocurrency, and register it at the ‘purchase price’. Moreover, when the value declines, ‘permanent impairment’ must be carried out. Only when selling cryptocurrency can asset appreciation be recorded in a profitable manner.

However, enterprises betting on Bitcoin have long been dissatisfied with this one-way accounting processing method. Because the value of Cryptocurrency may fluctuate significantly, this means that any decline in the Cryptocurrency held on the balance sheet must often be recorded as an “impairment loss” when the company publishes its financial statements, leading to a shrinkage in company profits.

According to the new rules, companies must separately record the held encryption assets in the balance sheet as a ‘special item,’ and although the new accounting method may bring fluctuations in related income, it can allow companies to record the financial rebound from the rising Cryptocurrency prices.

It is worth noting that the accounting rules for Crypto Assets do not apply to NFTs, stablecoins, and wrapped tokens.

【Disclaimer】There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific situation. Invest at your own risk.

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“The US encryption accounting rules are effective! MicroStrategy will benefit, and the financial statements need to include the fair value of Bitcoin.” This article was first published in “encryption city”