4.2 Crypto Assets That Are Within the Scope of ASU 2023-08

4.2.1 Fair Value Measurement

ASC 350-60

05-1 This Subtopic provides guidance on the subsequent measurement, presentation, and disclosure of crypto assets that are within the scope of this Subtopic.

05-2 This Subtopic does not address the initial measurement, recognition, and derecognition of crypto assets. Reporting entities shall account for the initial measurement, recognition, and derecognition of crypto assets in accordance with other generally accepted accounting principles (GAAP).

The FASB issued ASU 2023-08 because of the operational challenges of applying the impairment model to crypto assets that meet the definition of an intangible asset, the cost of performing the impairment analysis when crypto assets were acquired at different cost bases, and the fact that the amount presented in financial statements did not necessarily reflect the underlying economics of a company’s crypto asset holdings. The ASU addresses the subsequent measurement of in-scope crypto assets.

ASC 350-60

35-1 An entity shall measure crypto assets at fair value in the statement of financial position. Gains and losses from the remeasurement of crypto assets shall be included in net income.

ASU 2023-08 requires entities to subsequently measure certain in-scope crypto assets at fair value, with changes in fair value recorded in net income in each reporting period. Paragraph BC31 of ASU 2023-08 states that the Board “considered whether the guidance in Topic 820 provides a sufficient basis for entities to measure the fair value of crypto assets” and ultimately determined that “[ASC] 820 is operable and sufficient for measuring the fair value of crypto assets” within the scope of the ASU.

ASC 820 establishes a framework for measuring fair value and requires disclosures about fair value measurements. ASC 820-10-20 defines fair value as the “price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Thus, a fair value measurement is an “exit price.” As discussed in Chapter 3 of Deloitte’s Roadmap Fair Value Measurements and Disclosures (Including the Fair Value Option), an entity needs to perform various steps to (1) prepare a fair value measurement that complies with the measurement principles in ASC 820 and (2) meet the disclosure requirements in ASC 820. These principles should be applied to crypto assets that are measured at fair value.

The Background Information and Basis for Conclusions of ASU 2023-08 indicates that entities should use the existing guidance in ASC 820 in (1) determining the principal (or most advantageous) market, the levels of inputs in the fair value hierarchy, and the fair value of the transactions affected by related parties; (2) measuring fair value when the volume of transactions has decreased significantly; (3) identifying transactions that are not orderly; and (4) using quoted prices provided by third parties. As it does when assessing other assets measured at fair value, an entity should use judgment when evaluating the factors related to determining the fair value of in-scope crypto assets.

Connecting the Dots

Before the adoption of ASU 2023-08, only entities that are within the scope of the investment- company guidance in ASC 946 and certain entities applying the guidance for broker-dealers in ASC 940 are permitted to measure crypto assets at fair value. The amendments in ASU 2023-08 that allow entities to measure certain crypto assets at fair value are intended to address stakeholder concerns that the cost-less-impairment intangible asset model (1) did not faithfully represent the economics of crypto assets and (2) made the recognition of impairments needlessly complex by requiring entities to use a crypto asset’s lowest observable fair value within a reporting period.

While the fair value guidance discussed in this chapter applies more directly to in-scope crypto assets, it may also apply to ASC 350-30 crypto assets when an entity is determining whether those assets are impaired, since the impairment of ASC 350-30 assets is determined on the basis of their fair values.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.