Cryptio releases Impairment module as part of the Colossal update, its next-generation platform for crypto accounting

Impairment testing for intangible assets (including digital assets) has been a requirement for some time now under Financial Accounting Standards Board’s (FASB) Statement No.142. Despite being on the radar of accountants and bookkeepers, uncertainty around impairment remains.

FASB has yet to finalize specialized regulations around digital assets. Additionally, crypto enterprises and institutions lack guidance around best practices for impairment.

The challenges of Impairment testing

Impairment testing for digital assets remains a difficult task. Without a solution that can automate the categorization and valuation of different assets, crypto enterprises and institutions will struggle to complete impairment to the standard expected by regulators.

Several crypto accounting software providers lack the capacity to effectively impair digital assets. Our Impairment module was developed with feedback from our customer ConsenSys, the developer of MetaMask, to bridge the gap between passable accounts and true auditability.

Bringing auditability and integrity to crypto Impairments

We support some of crypto’s biggest enterprises, to prepare for their financial audits. We recognised the need for a purpose-built impairment module.

Key features introduced in the Impairment module include:

• Run impairment tests on all digital assets on a lot-by-lot basis.
• Apply impairment valuation with the flexibility to choose the impairment period most applicable to your needs.
• Set up impairment testing as frequently as you need. This can be annually, quarterly, monthly, weekly, or even daily.
• Generate impairment reports with a new cost basis for monthly reconciliation.

Helping our clients remain compliant with regulations and get audit-ready

FASB treats digital assets as “intangible assets”, as described in its Statement No.142.

Intangible assets are most commonly:

These types of intangible assets generally do not change much in value. Crypto assets, however, are subject to extreme price volatility.

Whenever the price changes, the cost basis calculations become outdated. As a result, the cost basis needs to be updated, requiring accountants and bookkeepers to manually keep track of impairment losses.

This instability makes the work of accountants and bookkeepers difficult and very time-intensive. And impossible at scale.

Many crypto enterprises handle millions of transactions in a short period of time. They need, therefore, a purpose-built solution that can manage large transaction volumes and automate cost basis computations.

Crypto enterprises and institutions need to test impairment on an asset-by-asset (BTC, ETH, ADA) and lot-by-lot (ETH purchased in 2022 vs. ETH purchased in 2020). To do this manually isn’t a realistic option.

Valuation of assets for Impairment

Since crypto is a new and evolving industry, new assets are constantly being developed. Each of these new assets needs to be priced correctly to run impairment testing.

Without accurate pricing, enterprises and institutions run the risk of becoming non-compliant with regulations.

However, manually pricing large volumes of assets is not feasible, especially those that are impairing assets frequently. Digital assets must be impaired at least once a year under FASB regulation however, some enterprises and institutions complete impairment testing daily.

Therefore, they need a solution that can accurately categorize the assets and lot automatically.

Cryptio’s reliable pricing system takes the pain out of pricing for crypto enterprises and institutions. Our platform uses a 5-min vWAP from pricing provider Kaiko - and also allows enterprise clients to choose thie principle market (Coinbase / Binance). There is a complete audit trail of how the price has been computed.

A word from our team and customers

“Enterprises and institutions that need to run impairment testing on their digital assets can now benefit from our newly-released Impairment module. The features within this module bring an added layer of auditability to Cryptio’s platform. We work closely with FASB to ensure that our Impairment module offers our clients everything they need to get through their audit.”

Jeff Rundlet, Head of Accounting Strategy at Cryptio

“We’re delighted to see Cryptio release its Impairment module to more clients. We need this function to pass our audit and know that many more enterprises will benefit from this feature on Cryptio. In the wake of turmoil in the market and the collapses of Silvergate, SVB and Signature, it is more important than ever to be in line with regulations. With Cryptio’s Impairment module, companies and institutions can bring themselves in line with regulation more readily”.

Chris Wright, Controller at ConsenSys

Start your journey with Cryptio Colossal today

Cryptio Colossal is your leading data layer for crypto accounting and reporting. Our software lets you instantly transform complex on-chain activity from Ethereum, BSC, Polygon, and 12+ blockchains into auditable-grade ledgers.

Get in touch with our team to book a demo.