The Financial Accounting Standards Board (FASB) will not include NFT and some stablecoins in its crypto accounting review, the Wall Street Journal reported on Aug.31, citing sources.
According to the report, the FASB standard will cover digital assets that are intangible, fungible and do not confer any contractual rights to cash flow or ownership of goods and services: Bitcoin (BTC) and Ethereum (ETH) would fall under this jurisdiction.
Explanation of NFT and some stablecoin exclusions
NFTs will be excluded from the rule because they are non-fungible and sometimes confer rights to underlying goods and services, while some stablecoins are tangible assets.
Speaking about the exclusion of these resources, Susan Cosper, a member of the board of directors of the FASB, told WSJ:
“[NFTs are] not pervasive or material at this juncture. It’s definitely something we can focus on later if needed. “
The cryptographic accounting rules are on the way
Companies and investors holding digital assets have repeatedly clamored for more clarity on accounting for crypto assets in their portfolios. However, the FASB only added cryptography to its technical priorities in May.
The new policy framework marks the first step in the council’s regulatory process. The FASB should still submit and review a proposal before making the rules.
Meanwhile, excluding NFTs and some stablecoins would remain a challenge for the companies that hold these assets.
The current accounting rules used by companies that hold NFTs and other cryptocurrencies are the non-binding guidelines of the Association of International Certified Professional Accountants (AICPA).
The AICPA guidelines consider these assets as intangible assets with an indefinite life such as trademarks. According to the guidelines, companies must review the value of the asset annually.
They get a write-down if the asset’s value falls below its purchase cost, and they only need to post a profit when they sell at a price above the purchase price.
These accounting standards have drawn criticism from companies holding cryptocurrencies for a fair value accounting rule due to the volatile nature of the space.
According to the Wall Street Journal, a spokesperson for the FASB said all preliminary discussions on cryptocurrency accounting rules would end this year. The board will then vote to determine whether it will issue a proposal.