The California Society of Certified Public Accountants (CalCPA) is wanting clarity on Crypto Holdings from the Financial Accounting Standards Board (FASB).
In one letter, CalCPA said that the accounting of the cryptocurrencies in not captured under the existing United States Generally Accepted Accounting Principles (GAAP) formed by the FASB, and should be properly aligned with the accounting model for foreign currency. The organization also stated that various features and risk of cryptocurrencies are the same as those of the foreign currency.
The society further said:
“...while no government backs cryptocurrencies, the ‘gold standard’ is long gone, and governments only influence, but do not really back their own respective currencies. Instances of massive currency devaluation are not infrequent and well known. And while bitcoin is not legal tender in the U.S., neither is Canadian dollar or any other foreign currency.”
The 54-member Committee's main issue is the reporting methods used by the companies who itemize digital currencies on their financial statements and check if the varying affect the nature and risk of holding cryptos.
The accounting confusion is being linked with various ways crypto assets are being viewed, where, based on the situation cryptos can be recorded as "lower of cost or market.", at fair value or as intangible assets. This results as on the balance sheet cryptos can be reported as anything from commodity or investment or even be counted as working capital, as per Andrew Parrish co-founder of Alternate Tax Solutions.
CalCPA thus invites the FASB to launch a project for the accounting cryptocurrencies and add it to the Board's or Emerging Issues Task Force's technical agenda as it expects that the cryptocurrencies will continue to expand in terms of volume as well as various fields of application. The classification model is similar to accounting for foreign currencies. However, the added rules will address currencies which are active in the market and are retained by an entity as a way of exchange or investment.
“We anticipate it will not be long before major public companies start using cryptocurrencies, as illustrated by JP Morgan’s decision to issue JPM Coin in February 2019,” stated Nancy Rix, the main head of CalCPA’s accounting principles and assurance services committee in a letter to the FASB.
As of now, Parrish stated that GAAP policies properly reflect the risks involved in holding cryptocurrencies.
Parrish stated, "A balance sheet is a snapshot and every asset carries risk of changing price tomorrow. Even banks can go bankrupt."
He further added, “If Bitcoin is $100,000 today, and $90,000 tomorrow, you just have to write down the loss.”
Whenever the asset is recorded in the books, it calculates its value relative to other liabilities and equity, and also checks whether it is subject to impairment cost. Also, it checks whether it will affect income statements and cash-flow statements.
