Previously, under existing accounting rules, Bitcoin was typically classified as an intangible asset. Companies had to recognize losses in the form of impairment charges on their financial statements if Bitcoin’s market value plummeted after purchase. This practice negatively affected reported income and threatened the overall health of a company’s balance sheet. Furthermore, companies could only benefit from Bitcoin’s price appreciation if they sold their holdings, thus losing potential long-term profits.
The new FASB rules will allow companies to disclose Bitcoin’s true fair value on their balance sheets during quarterly financial reporting in the form of an unrealized loss. This approach is more advantageous as it eliminates the need to report unrealized crypto losses as impairment charges on profit-and-loss statements. The guidelines also enable companies to recognize unrealized gains as assets, a practice previously discouraged.
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Source: Cryptocurrency - investing.com
