Make the switch to the new FASB crypto Fair Value accounting rules: Cryptio makes compliance seamless

On September 6th, 2023, the Financial Accounting Standards Board (FASB) released updated guidance for crypto asset accounting, aiming to increase transparency and standardization in this evolving space. These new rules, effective December 14th, 2023, require companies holding qualifying crypto assets to adopt the fair value accounting method, marking a significant shift from the previous cost-based approach.

Cryptio anticipated these changes and has built a fully compliant Fair Market Value Module, designed to seamlessly integrate with your existing accounting and audit workflows. This module, developed with careful consideration of the new rules and industry feedback, goes beyond mere compliance to optimize efficiency and streamline your reporting processes.

In this blog post, we’ll dive into the details of the changes and explore Cryptio's innovative solution for navigating the new crypto accounting landscape.

Recap of new FASB crypto Fair Value rules and scope

Early adoption and mandatory adoption:

Companies have the option to early adopt the new rules starting after December 14th, 2023. This allows them to familiarize themselves with the new requirements and gain a head start on compliance. However, mandatory adoption for all entities begins on December 15th, 2024, including interim periods within those fiscal years.

Key dates:

Scope:

The new rules apply to crypto assets meeting the following criteria:

• Meet the definition of an intangible asset: This means the asset lacks physical substance and is expected to generate economic benefits for the company over time. In the context of crypto, this includes things like tokens used for utility or access to a platform or service.
• Not represent a contract or provide enforceable rights: This excludes things like debt instruments, equity instruments, and other financial assets that represent contractual obligations or ownership rights.
• Reside on a distributed ledger based on blockchain or similar technology: This ensures the asset is decentralized and transparent, with a secure record of ownership and transactions.
• Secured through cryptography: This means the asset is protected by strong encryption algorithms, preventing unauthorized access and manipulation.
• Fungible: This means each unit of the asset is identical and interchangeable with any other unit of the same asset. This excludes unique assets like NFTs.
• Not created or issued by the reporting entity or its related parties: This excludes assets that the company itself has created or issued, as these are considered to be within the company's control and subject to different accounting rules.

Key overview:

Here are the primary high-level points that will impact your reporting process:

Early adoption workflow streamlined with Cryptio

For companies choosing early adoption, Cryptio's innovative Fair Market Value Module offers a streamlined solution to be fully compliant with the new regulations:

• Automated Fair Value revaluation: Choose your preferred schedule (daily, weekly, etc.) for automatic revaluations based on real-time market data from a principal market of your choosing. This functionality is immensely important for banks who needs to do daily reevaluation to make sure portfolio value reflects the market.
• Unit lot level tracking: Cryptio's module allows for in-depth tracking at the unit lot level, providing a granular view of asset movement. Whether you need to account for the cost, book, or fair value of assets, Cryptio has you covered.
• Comprehensive mapping: With Cryptio, you can generate ledger entries without a recorded transaction and new CoA accounts mappings e.g. mark-to-market, adjustments (unrealized gains), and realized gains. This means you can account for changes in asset values based on fair market value, opening up new possibilities for financial clarity.
• Transparent reporting: Generate comprehensive, audit-ready reports with ease. Cryptio's FMV module reports provide lot-level details and asset valuation adjustment information, providing portfolio transparency for both public and private entities.
• Flexible asset pricing: Our module provides companies the flexibility to choose what principal market drives their asset revaluations. A relevant feature to capture the wide variety of reporting needs and jurisdictions in the industry.
• Compliance and cost basis management: Ensure compliance while maintaining accurate cost basis information, allowing continued use of impairment and cost basis features for exempted assets.

Cryptio's Fair Market Value reporting guide

Cryptio's Fair Market Value Module simplifies this process by automating key tasks and providing comprehensive reporting tools. This guide outlines the essential steps for using Cryptio to ensure compliant and efficient reporting under the new rules.

Step 1: Schedule Fair Value adjustments:

Cryptio offers flexible scheduling options for automatic fair value adjustments, allowing you to choose the frequency that best aligns with your reporting needs. Options range from daily, weekly, monthly, quarterly, and annually, ensuring your asset values are always up-to-date. Consider matching the frequency based on reporting requirements or your existing reporting cycle for optimal integration.

Step 2: Generate asset roll forward report:

Cryptio's asset roll forward report ensures accuracy and consistency by automatically pulling in all revaluations from the previous period into the current starting balances. This eliminates manual data entry and ensures a seamless transition between reporting periods.

Step 3: Utilize lot level detail report:

For in-depth analysis and reconciliation, Cryptio's lot level detail report provides a comprehensive breakdown of all individual holdings and revaluations within the period. This report offers detailed information about each asset, including cost basis, fair value changes, and transaction history, allowing for thorough review and verification.

Step 4: Leverage ledger entries report:

Cryptio's flexible mapping functions enable you to fully customize your mark-to-market and unrealized profit and loss (PnL) accounts for assets and sources, ensuring your ledger entries accurately reflect the new accounting standards. The ledger entries report provides a clear and concise record of all journal entries associated with fair value adjustments, facilitating accurate financial reporting.

Step 5: Manage exempt assets:

For assets exempt from fair value accounting, such as issued tokens, wrapped tokens, and NFTs, Cryptio offers a dedicated Cost Basis Roll Forward and Impairment Module (see guides here). This two-pronged approach allows for proper segregation of the two asset classes based on the new rules, enhancing clarity for financial statement readers.

Beyond core processes

Following these steps in conjunction with your regular month-end closing procedures allows you to comply with the new FASB rules seamlessly and efficiently. Cryptio's advanced reporting tools further enhance compliance by:

• Providing a complete audit trail: All data and calculations are recorded and easily accessible, ensuring transparency and accountability.
• Offering flexible reporting formats: Cryptio allows you to export reports in various formats, allowing for easy integration with existing accounting systems and reporting tools.
• Facilitating continuous monitoring: Cryptio's real-time dashboard provides instant access to key metrics and performance indicators, enabling you to closely monitor your crypto holdings and make informed decisions.

Cryptio’s Fair Market Value Module: Your strategic solution for effortless compliance

The new FASB rules present an opportunity for businesses to improve transparency and enhance financial reporting. Cryptio's Fair Market Value Module simplifies the compliance process, enabling accurate valuation, seamless reporting, and confidence in financial statements.

Next steps

Schedule a demo today to see how Cryptio can help you navigate the new FASB crypto fair value rules with ease.