Author: Suzanne Morsfield, Global Head of Accounting Solutions in Academics
Today, the FASB voted unanimously to add a standard-setting project to their technical agenda on accounting for specific digital assets. They also voted not to include commodities in the project, but the Chair will keep it on the research agenda in a paused status at this time.
The next step will include establishing the exact scope of the standard-setting project, including which digital assets will be included. However, the project does not appear to only be focused on improving disclosures, but instead will likely cover recognition, measurement, presentation and disclosure. The Board was not in favor at this stage of a fair value option, but instead advocated for a fuller set of deliberations and decisions that would establish a valuation approach applicable to all the digital assets within the scope of the project.
Lukka welcomes the Board’s decision to add this project to their agenda. We support the thoughts shared by Chair Rich Jones May 4th at the Baruch College 20th Annual Financial Reporting Conference that convey the importance of authoritative standards that do not stifle innovation. In his words, “our standards benefit from a robust, thorough, and transparent process that results in high-quality standards that provide crucial decision-useful information to investors and other allocators of capital. Our standards are developed in full sunlight with the active participation of our stakeholders.” A formal project on digital assets will benefit from all of these attributes. Capital market participants ultimately will benefit from relatively more relevant and decision-useful information than is often provided under current interpretations of the applicable authoritative standards.
Some select observations made by Board members as part of their vote included:
- The outreach and research by the staff added to the Board’s understanding of the digital assets, markets and exchanges, such that the members had greater assurance that the project was both needed and feasible.
- The standard of pervasiveness was met, as one member noted, by the pervasiveness of digital assets in the economy at large, even if not in the number of public company Balance Sheets at present.
- Most FASB members preferred a recognition, measurement, presentation and disclosure project, as opposed to a disclosure only or disclosure first project.
- While there is current authoritative guidance to rely upon, many members felt the current accounting did not accurately reflect the economics.
- The ongoing role of ASC 820 was acknowledged, but there was some diversity of opinion on how or whether it might need to be modified for digital assets.
- Defining the scope of the project would be a very important step and would need to be done carefully.
The FASB Chair closed with a comment on the importance of providing unbiased and transparent information through the accounting, and not only through disclosure. Lukka is committed to high-quality standard-setting and will readily support our customers’ compliance with US GAAP and SEC reporting requirements, regardless of the direction and timing of standard-setting that follows from this decision. We also will support standard-setters and the standard-setting process in whatever ways we can.
Lukka is a firm that helps solve some of the greatest financial challenges in crypto and has the intellectual resources, along with the data and processing capabilities, to test hypothetical scenarios like the one here. For more information on how Lukka puts data to work across multiple finance sectors, traditional and decentralized, supporting industries from insurance to Formula E, go to our website at Lukka.tech
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