Commenters Press Dire Need for Crypto Accounting Rules
FASB should develop an accounting framework to address cryptocurrencies because the value of such assets are not being properly reflected on balance sheets, the International Swaps and Derivatives Association’s (ISDA) accounting committee said. The board should craft rules to allow all entities, not just investment companies and broker dealers, to account for crypto assets at fair value, ISDA’s committee suggested to the board in a June 7 letter. “A more appropriate accounting model for highly liquid crypto assets that would meet the definition of readily convertible to cash, similar to the derivative definition would be to allow the fair value option,” Committee Chair Jeannine Hyman, and Director Antonio Corbi, wrote. “Since derivatives, an instrument that is readily convertible to cash and tied to an underlying, is accounted for at fair value, we believe similar instruments such as crypto assets should be permitted as well.” Crypto assets generally do not meet the definitions of cash, inventory, or financial asset, as there is no right to receive cash or another financial instrument from a second entity, the letter states. However most cryptocurrencies, including the most common, Bitcoin and Ethereum, currently meet the definition of an intangible asset and are accounted for under Topic 350, Intangibles—Goodwill and Other. CPAs can refer to the AICPA Practice Aid, Accounting for and Auditing of Digital Assets, when determining the appropriate accounting treatment of digital assets. The letters come on the cusp of the board’s efforts to establish its five-year technical agenda. FASB’s agenda consultation document will be issued by June 30; it will solicit the public’s feedback on whether to tackle digital currencies, among other topics.
More Guidance on Auditors’ Use of Specialists Issued
The AICPA’s Auditing Standards Board (ASB) issued a new auditing standard to give additional guidance to auditors on the use of specialists and pricing information for complex accounting estimates, including fair value instruments on June 8. Statement on Auditing Standards (SAS) 144, Amendments to AU-C sections 501, 540 and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained From External Information Sources, becomes effective for audits of financial statements for periods ending on or after December 15, 2023. “We heard feedback that more guidance on auditing the fair value of financial instruments would be helpful. This new standard provides that and has a particular focus on the use of pricing services,” AICPA Chief Auditor Jennifer Burns said in a statement. “We’ve also taken the opportunity to modernize our standards on management’s and auditors’ use of specialists, which is becoming more common due to the growing complexity of today’s financial reporting.”
IFRS Foundation Establishes Fourth Panel on Sustainability Board
The IFRS Foundation has established the Eminent Persons Group, a fourth panel that will advise and give counsel to trustees about the formation of the International Sustainability Standards Board (ISSB). The announcement comes two days after the Group of Seven (G7) Finance Ministers and Central Bank Governors threw their support behind the introduction of mandatory climate-related financial disclosures. The Eminent Persons Group is chaired by Jean-Claude Trichet, former president of the European Central Bank. Other members are: Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp.(FDIC); Nandan Nilekani, chair and co-founder of Infosys; Guillermo Ortiz, former governor of Banco de Mexico and former Chair of the Bank of International Settlements; and Min Zhu, former deputy managing director of the International Monetary Fund (IMF). The Eminent Persons Group’s advisory work will complement that of the three other panels: the Trustees’ Steering Committee, which gives strategic direction and project oversight; the Technical Readiness Working Group, which is aimed at providing the ISSB with a “running start”; and the Multilateral Working Group, which does preparatory work for building-blocks approaches to facilitate interaction with other international/jurisdictional initiatives.