What Changed with ASU 2023-08
Before ASU 2023-08, US companies accounting for crypto under US GAAP used the cost-less-impairment model under ASC 350 (Intangibles — Goodwill and Other). Under this model, crypto assets were recorded at cost when purchased and tested for impairment at each reporting date. If the fair value dropped below cost, an impairment charge was recognised. However, if prices subsequently recovered, the recovery could not be recognised — the impaired value became the new cost basis.
This created a well-documented asymmetry: losses were recognised immediately (through impairment), but gains were not (until disposal). For companies like MicroStrategy (now Strategy) which began accumulating Bitcoin in 2020, this meant their balance sheet showed a carrying value far below market value, and their income statements showed large impairment charges in down markets but no offsetting gains in up markets.
ASU 2023-08 eliminates this asymmetry for qualifying crypto assets by mandating fair value accounting at each reporting date. Gains and losses — both positive and negative — flow through net income. The balance sheet reflects the current market value. This makes financial statements more decision-useful for investors assessing companies with crypto treasury holdings.
5 Qualifying Criteria for Crypto Assets
Not all crypto assets qualify for ASU 2023-08 treatment. An asset must meet all five of the following criteria:
- Criterion 1 — Intangible asset: The asset meets the definition of an intangible asset under ASC 350 (identifiable, non-monetary, without physical substance).
- Criterion 2 — No enforceable rights: The asset does not provide the holder with enforceable rights to or claims on underlying goods, services, or other assets. This excludes stablecoins (which represent a claim on fiat or other assets) and tokenized real-world assets.
- Criterion 3 — Distributed ledger: The asset is created or resides on a distributed ledger based on blockchain or similar technology.
- Criterion 4 — Cryptographic security: The asset is secured through cryptography.
- Criterion 5 — Fungibility: The asset is fungible — one unit is interchangeable with another unit of the same asset. This excludes NFTs (non-fungible tokens).
In Scope: Bitcoin (BTC), Ethereum (ETH), most major layer-1 cryptocurrencies (SOL, ADA, AVAX, etc.) — provided they meet all criteria. Out of Scope: NFTs, USD-pegged stablecoins (USDC, USDT), wrapped tokens (wBTC may fail criterion 2), tokenized commodities, securities tokens, and any crypto with rights to underlying assets.
How Fair Value Is Measured
Under ASU 2023-08, qualifying crypto assets are measured at fair value using the fair value hierarchy under ASC 820. For Bitcoin and Ethereum, fair value is typically Level 1 — the quoted price on the principal or most advantageous market (typically a major regulated exchange like Coinbase or Nasdaq/CME for futures-implied).
The standard requires using the principal market for the crypto asset — the market with the greatest volume and level of activity. For institutional holders, this is typically a regulated exchange with deep order books. For companies that transact on multiple platforms, they must identify the principal market and use that price consistently.
For less liquid qualifying crypto assets where Level 1 prices are not available, Level 2 or Level 3 fair value techniques apply. This is rare for the assets most companies hold (BTC, ETH) but may apply to smaller tokens received as payment or in investments.
Required Disclosures Under ASU 2023-08
| Disclosure Item | Annual | Interim | Notes |
|---|---|---|---|
| Roll-forward table by asset type | Yes | Yes | Beginning balance, additions, disposals, FV changes, ending balance |
| Fair value at period end | Yes | Yes | By asset type |
| Gains/losses in income statement | Yes | Yes | Must be on face or in notes |
| Cost basis of holdings | Yes | Optional | For investor transparency |
| Fair value methodology | Yes | No | Principal market, Level 1 inputs |
| Restrictions on holdings | Yes | No | e.g., pledged as collateral, locked staking |