More Firms Set To Add Bitcoin To Balance Sheets After Major Accounting Rule Change

Authored by Jesse Coghlan via CoinTelegraph.com,

The rules now allow crypto-holding companies to report their paper gains, not just losses, which industry observers say could give firms more confidence to buy…

Bitcoin and crypto may soon see another mass wave of adoption by United States-based firms after a new accounting rule change that lets companies more accurately reflect the value of their crypto holdings. 

Cory Klippsten, the CEO of Bitcoin-only exchange Swan Bitcoin, told Cointelegraph that Bitcoin-holding companies like MicroStrategy and Tesla, which both had to report impairment on their holdings, “can now more accurately reflect their Bitcoin investments’ true value.”

“This change is crucial for a broad range of companies, not just those primarily focused on Bitcoin, encouraging more mainstream corporate adoption.”

The new Financial Accounting Standards Board (FASB) rules released on Dec. 13 that come into effect in December 2024 see the estimated market value of crypto held by companies represented accurately on companies’ accounting books by allowing them to record when they’re holding assets at a gain.

Previously, crypto held by companies was subject to impairment only when the value of crypto decreased on the books, which could not be increased until sold, even if its value increased while being held.

Klippsten added that companies could now use Bitcoin as a “strategic financial asset,” as they would be able to report on their value gains and losses, a feature that could help drive adoption.

Matrixport research head and Crypto Titans author Markus Thielen told Cointelegraph that the rule change “underscores the palpable corporate demand” for incorporating crypto into a firm’s accounting.

“Digital assets are increasingly becoming a crucial component of financial statements,” said Thielen, adding that companies will now have more confidence when valuing their crypto holdings.

“This signals a resounding confirmation that digital assets have firmly established themselves in the financial landscape.”

Others were also excited by the rule change. David Marcus, co-creator of Facebook’s binned stablecoin project Diem, posted to X (formerly Twitter) on Dec. 13, saying the new rules are “actually a big deal,” which remove “a large obstacle standing in the way of corporations holding Bitcoin on their balance sheet.”

You may think this is a small accounting change that doesn’t mean much. It’s actually a big deal. This removes a large obstacle standing in the way of corporations holding #Bitcoin on their balance sheet. 2024 will be a landmark year for $BTC. https://t.co/gV0KRISt8B

— David Marcus (@davidmarcus) December 13, 2023

In a Sept. 6 note following the FASB’s approval of the rules, Berenberg Capital’s senior equity research analyst Mark Palmer said crypto-holding companies could “eliminate the poor optics that have been created by impairment losses under the rules that the FASB has had in place.”