Bitcoin Now Shines on Balance Sheets of American Companies

The first domino of the Bull Run has officially fallen. American companies can now report their bitcoins at their fair value.

Bitcoin Gets an Accounting Makeover

The FASB (Financial Accounting Standards Board) has updated its accounting rules to allow companies to report their bitcoins at fair value (“Fair value accounting”).

“This new standard responds to feedback from many quarters telling us that improving the accounting and disclosure of digital assets should be a high priority for the FASB”, stated Richard Jones, chairman of the FASB.

“It will provide investors with more relevant information that better reflects the value of certain digital assets on companies’ balance sheets”, reads the announcement from the FASB.

FASB has officially adopted Fair Value Accounting for #Bitcoin for fiscal years beginning after Dec 15, 2024. This upgrade to accounting standards will facilitate the adoption of $BTC as a treasury reserve asset by corporations worldwide. https://t.co/4GOuji6cr0

— Michael Saylor⚡️ (@saylor) December 13, 2023

Until now, bitcoin was considered an intangible asset. This accounting category includes trademarks, patents, etc. And the fact is that while the depreciation of bitcoins was accounted for, their appreciation was not. Losses appear on the balance sheet, but gains do not!

The gain was only taken into account after the sale of bitcoins. This clearly posed a problem for companies like MicroStrategy, which have no intention of parting with them.

The accounting changes apply to all assets that meet the following criteria:

• Meet the definition of an intangible asset
• Do not provide the asset holder with enforceable rights or claims to goods, services, or other underlying assets.
• Are created or reside on a distributed ledger based on blockchain technology or a similar innovation.
• Are secured by cryptography.
• Are fungible.
• Are not created or issued by the reporting entity.

This new accounting will allow companies wanting to place their treasury in bitcoin to present investors with a much more realistic picture of their financial situation.

Let’s wager that some multinationals were waiting for this accounting evolution to take the plunge.