FASB: Accounting for and Disclosure of Crypto Assets Topic Project Update (Agenda Paper 12A)

This paper summarised the results of the FASB’s research and outreach related to digital assets. Specifically, the paper summarised the information the staff gathered during its pre-agenda research for purposes of evaluating whether the FASB’s standard-setting agenda criteria were met, which led the FASB to add a project to its technical agenda in May 2022 to address the Accounting for and Disclosure of Digital Assets (renamed to the Accounting for and Disclosure of Crypto Assets in August 2022). The paper also summarised the scope criteria considered by the FASB at its recent decision-making meeting in August 2022, and the related stakeholder feedback on those criteria.

IASB: Digital Assets—IASB consideration of cryptocurrencies and related transactions (Agenda Paper 12B)

The IFRS Interpretations Committee published an agenda decision titled Holding of Cryptocurrencies in June 2019. The agenda decision sets out that if the entity holds the cryptocurrency for sale in the ordinary course of business an entity applies IAS 2 and if not, the entity applies IAS 38. An entity does not account for holdings of cryptocurrencies as cash or a financial asset. The agenda decision also sets out which disclosure requirements apply.

In March 2021, the IASB published Request for Information (RFI) Third Agenda Consultation. The RFI asked stakeholders about new financial reporting issues that could be given priority in the IASB’s work plan. As part of that process the IASB set out possible projects the IASB could undertake on cryptocurrencies and related transactions.

Most respondents rated a potential project on cryptocurrencies and related transactions as high priority, some rated it as medium priority and a few rated it as low priority.

Based on the feedback received, the IASB decided not to add a project on cryptocurrencies and related transactions to its workplan. However, the IASB continues to monitor developments in this area.

Discussion

The papers were discussed together.

The discussion mainly focused on when to start addressing the crypto asset issue, particularly whether the boards should act now while the issue is not pervasive (i.e. leading the market) or wait until it becomes pervasive (i.e. following the market). There were different views as to whether the issue was already pervasive with the IASB Chair saying it is not and an IASB member disagreeing (citing the fact that the IFRS Interpretations Committee had previously taken on a project on crypto assets, which it would only do if the issue is pervasive).

The IASB Chair said that a project should only be added if there was a gap in IFRS Accounting Standards for these assets or, if there is no gap, whether the information produced by IFRS Accounting Standards is confusing. He warned that issuing guidance before regulators do (like the Financial Stability Board) could mean that IFRS guidance potentially conflicts with regulator guidance, which should be avoided. Furthermore, the two projects on intangibles and on cash flow statements in the IASB’s research pipeline would be well placed to address some of the issues that arise with crypto assets. The IASB member in favour of adding a project now said that in his view, there was no gap in IFRS Accounting Standards, but the information resulting from applying IFRS Accounting Standards to crypto assets does not make sense. He also noted that the IASB started addressing ESG-linked features in financial instruments which are also not seen as pervasive yet but will become pervasive in the future.

One IASB member asked whether the FASB had discussed derecognition of crypto assets. The FASB staff replied that the main focus was measurement and disclosure. As it is an intangible asset in the FASB’s view, derecognition would follow the guidance for intangible assets and not that for financial instruments.

Another IASB member asked whether the Federal Reserve (Fed) had been consulted by the FASB on the project. The FASB Chair confirmed that the Fed and the SEC are informed of the project but have not provided a formal response yet.