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

The FASB included additional presentation requirements in ASU 2023-08 in response to stakeholder feedback, particularly from investors, indicating that the measurement model for crypto assets within the scope of the intangible asset guidance did not reflect the underlying economics of those assets.

ASC 350-60

45-1 Crypto assets shall be presented separately from other intangible assets in the statement of financial position. An entity is permitted to present crypto assets on a more disaggregated basis (for example, by individual crypto asset holding or intangible asset class).

45-2 Gains and losses from the remeasurement of crypto assets shall be included in net income and presented separately from changes in the carrying amount of other intangible assets.

45-3 For guidance related to the presentation of cash receipts arising from the sale of crypto assets that are received as noncash consideration in the ordinary course of business (or as a contribution, in the case of a not-for-profit entity) and are converted nearly immediately into cash, see paragraphs 230-10-45-21A and 230-10-45-27A.

6.2.1 Balance Sheet Presentation

ASU 2023-08 requires entities with in-scope crypto asset holdings to present on the balance sheet the aggregate amount of in-scope crypto assets measured at fair value separately from other intangible assets that are not measured at fair value. This guidance does not specify whether such assets should be presented as current assets or noncurrent assets, which is generally more common when presenting other traditional indefinite-lived intangible assets. ASU 2023-08’s Background Information and Basis for Conclusions states that the Board determined that incremental presentation guidance for in-scope crypto assets was unnecessary because ASC 210 is adequate “for determining the balance sheet classification of assets.” Therefore, reporting entities should consider the guidance in ASC 210 when determining the balance sheet presentation. The ASC master glossary defines current assets as follows:

Current assets is used to designate cash and other assets or resources commonly identified as those that are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. See paragraphs 210-10-45-1 through 45-4.

Further, ASC 210-10-45-3 expands on what could be considered a normal operating cycle, stating that a typical operating cycle is one year, although in some circumstances the operating cycle could be longer. Accordingly, an entity should use judgment when considering whether to present in-scope crypto assets as current or noncurrent.

6.2.2 Income Statement Presentation

Under ASU 2023-08, entities with in-scope crypto asset holdings must present, in net income, changes in the fair value of in-scope crypto assets separately from changes in the carrying amount (e.g., impairments and amortization) of other intangible assets, including other digital assets that are not measured at fair value.

The FASB acknowledged that some stakeholders were concerned about the net income volatility that could result from presenting fair value changes in net income. However, the Board believes that the benefits derived from holding an in-scope crypto asset are similar to those derived from holding equity securities that have a readily determinable fair value (i.e., holding and selling in-scope crypto assets at an appreciated value). As a result, the amendments require that changes in the fair value of in-scope crypto assets be presented within net income.

Although ASU 2023-08 does not stipulate whether fair value changes should be presented as operating or nonoperating income, the ASU’s Background Information and Basis for Conclusions states that the correct presentation is based on facts and circumstances. An entity should consider the nature of an investment in in-scope crypto asset holdings that are within the scope of the ASU. If the holdings are operational in nature, the entity may consider recognizing the gains and losses (both realized and unrealized) in operating income. However, if the holdings are for investment purposes, it may be more appropriate to include the remeasurement gains and losses below the operating income subtotal if the entity presents that subtotal. If an entity presents operating income, the determination of whether remeasurement gains and losses should be presented as operating or nonoperating income should be based on (1) how the entity is using the in-scope crypto asset (e.g., trading vs. holding for investment purposes) and (2) whether in-scope crypto assets are a core part of the entity’s business.

Entities should use judgment when evaluating the presentation of operating or nonoperating gains and losses related to in-scope crypto asset holdings. See Section 2.9.2.4 of Deloitte’s Roadmap SEC Comment Letter Considerations, Including Industry Insights for additional considerations related to presentation of operating versus nonoperating subtotals.

In addition to the above income statement presentation considerations, an entity should determine whether it is the principal or agent in sales of in-scope crypto assets to counterparties and the impact of such a determination on its income statement (i.e., gross vs. net). See Section 5.1 for more information.

6.2.3 Cash Flow Statement Presentation

An entity should generally classify cash flows resulting from the purchases or sales of intangible assets in cash, including crypto assets within the scope of ASU 2023-08, as investing activities in accordance with ASC 230-10-45-13(c) and ASC 230-10-45-12(c), respectively. However, ASU 2023-08 amended certain cash flow presentation guidance related to in-scope crypto assets. ASC 230-10-45-27A, as added by ASU 2023-08, states that “[i]f crypto assets accounted for in accordance with Subtopic 350-60 are received as noncash consideration in the ordinary course of business (for example, in exchange for goods and services transferred to a customer) and converted nearly immediately into cash, the cash received shall be classified as operating activities. In this context, the term nearly immediately refers to a short period of time that is expected to be within hours or a few days, rather than weeks.” Entities that plan to classify the cash flow activity from this type of arrangement within operating activities are encouraged to consult with their accounting and financial advisers.

In some cases, an entity may purchase goods or pay for services by using in-scope crypto assets that are classified as intangible assets. In a manner consistent with the guidance on noncash investing activities (i.e., investing activities that affect recognized assets or liabilities but that do not result in actual cash receipts or payments), a payment made for a good or service by using an in-scope crypto asset would be presented as a noncash reconciling item in the reconciliation of net income to net cash flows from operating activities. A payment made for property, plant, and equipment or another productive asset would be disclosed as a noncash investing activity.

In considering the guidance in ASC 230-10-45-28(b), an entity would also record other items through net income, such as the remeasurement of in-scope crypto assets and impairment of out-of-scope crypto assets that are classified as intangible assets. These represent noncash items that are presented as reconciling items in the reconciliation of net income to net cash flows from operating activities.

See Section 7.15 of Deloitte’s Roadmap Statement of Cash Flows for more information about noncash investing activities and cash flows related to digital assets, respectively.

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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.