Mark to market accounting meets crypto: New FASB changes

cointelegraph.com:

In early September 2023, the US Financial Accounting Standards Board (FASB) finally approved the commonly accepted accounting practice of mark to market accounting to apply to corporations and businesses holding crypto digital assets.

Previously, companies like Microstrategy and Tesla needed to file crypto digital assets as intangible assets like goodwill and Intellectual Property (IP). If the value of these intangibles went down, they needed to declare a loss. However, if the value of the intangible went up, these companies were not allowed to declare a gain of asset values. 

Michael Saylor of Microstrategy, perhaps the most visible Bitcoin bull who has accumulated a lot of Bitcoin for his company, pushed the FASB to make the move. Every time the Bitcoin spot price took a dive during reporting season, Microstrategy had to declare a loss. However, when the spot price rose during reporting season, they could not declare the higher asset price. Saylor felt it was unfair that the negative downside needed to show up in the balance sheet, but not the positive upside. 

The new FASB rule puts crypto in a separate digital asset category, where the gain or loss based on the acquisition price, would be declared in a mark to market fashion. Although the rule formally takes effect in 2025, companies that choose to adopt it earlier may do so.

This accounting rule change has massive consequences for Bitcoin and crypto adoption into the corporate treasury world. Previously, management and CEOs felt that acquiring digital assets would penalize their quarterly performance. With this change, corporate finance managers can determine the adequate portfolio allocation based on the upside potential (alpha) and volatility (beta) of the digital