How Companies Like MicroStrategy Could Benefit From FASB's 'Fair Value' Approach

The Financial Accounting Standards Board has new guidelines that will allow corporations to recognize fair value changes in crypto holdings. Joining us now to discuss this coin desk, global policy and regulation, managing editor Nick Day, who's also the editor of Coin Desks, State of crypto newsletter, Nick. Good morning. Good morning. All right, we are talking about accounting on this fine Thursday morning and it is going to be exciting. So, first, why don't you back up and explain to us what the Financial Accounting Standards Board actually does before we dive into these changes? Yeah, they're kind of, they are the standard setters that basically explain how, uh you know, different tax rules might be applied specifically for reporting purposes among other things. So, uh in our case, you know, we're talking about a group that basically tells corporations here's how you should account for different assets on your balance sheets, uh how you should report them, et cetera, how, you know, that's the kind of guidance we're talking about. That's what this group does. So let's get into this, uh this particular fa SB uh Financial Accounting Standards Board, uh the FA SB ruling and, and what exactly. It's going to mean, uh, as Jen brought up, uh, the Michael sailors of the world right now as crypto as the price of Bitcoin goes up, things are looking good according to this fa B ruling, if they, if they implement it on their balance sheets, but it might not be so good when prices go down if you can go into it a little bit. Yeah. So the existing, uh, you know, guys is what happened before yesterday basically is if you're a corporation and you have to report, you know, the assets and liabilities on your balance sheet, if you had Bitcoin, and let's say you bought it at $30,000 and the price dropped to $20,000 even if you didn't sell the Bitcoin, you still have to report that as an unrealized loss and marketing impairment. Uh So basically if you're a company in your corporation, you have, you know, Bitcoin or whatever crypto on your balance sheet and it's worth less even if you haven't sold it, even if you don't plan to sell it, you still have to say, ok, well, you know, I'm taking an thea on this uh under new guidance. What's gonna happen is uh basically not that you're gonna have to do, uh you know, kind of more uh fair value type reporting of the value uh based on, you know, the quarter to quarter thing. So, um you know, basically, instead of saying, ok, well, you know, this was worth $40,000 when I bought it and now it's worth a lot less. Uh, you just go off of, you know, ok, compared to the last quarter or whatever. So it should a, make it a little bit easier. And b it means you're not going to see a corporation like market strategy or Tesla have to mark. Ok. Well, you know, we're taking an impairment on our Bitcoin holdings because it's worth so much less now than when we bought it a year and a half. All right. And when will this change take effect? Nick, uh mid December next year? So a year for this thing to, you know, I guess, get sorted out and for anyone to complain if they have any concerns. Uh but as of December, I think 1520 24 this is gonna be an effect and companies can start saying, ok, well, yeah, here's the deal. Any push back that you're aware of on this. Any, any uh complaints. I haven't seen anything so far. The report that as we put out yesterday did say that they got a, you know, a lot of feedback from stakeholders about the process and by and large, most of them were urging them to, uh you know, make changes to the existing system for different reasons. So, um the one thing they did say is that some people said, ok, well, if you do this, it will be easier for companies to hold Bitcoin. And they had a specific paragraph calling that specific line of feedback out and saying that was not a consideration. Uh but by and large, the move seems to be supported by, you know, anyone who is, uh you know, either a corporation or like relevant or uh you know, who's deep in this world. All right, Nick, thanks for joining and providing that update. We will see you tomorrow every time I say we're gonna see you tomorrow. We don't actually. So hopefully we really do see you tomorrow. I'll be here tomorrow. All right. That was Coindesk global policy and regulation. Managing editor Nick Day. Don't forget to sign up for the state of crypto newsletter on coindesk.com.