Before ASU 2023-08, crypto assets were indefinite-lived intangibles carried at cost less impairment, so a holder booked the drops and ignored the rises. The ASU replaced that with fair value through net income. For audit teams this changes the work: impairment testing disappears for in-scope assets, and the file centers on scope, the fair value input, the adoption entry and a new set of disclosures.
This guide is for the client that holds crypto on its own balance sheet, such as an operating company with a treasury position, a founder-owned business that accepts payment in tokens, or a startup that was paid in tokens. For the standard itself, see the firm's ASC 350-60 page. For custody and reserves work, see the custody guide.
Step one: is each asset in scope
ASC 350-60 applies only to assets meeting all six criteria:
- The asset meets the Codification definition of an intangible asset.
- The holder has no enforceable rights to, or claims on, underlying goods, services or other assets.
- It is created or resides on a distributed ledger based on blockchain or similar technology.
- It is secured through cryptography.
- It is fungible.
- It was not created or issued by the reporting entity or its related parties.
Bitcoin and ether are the common examples. A token issued by the client or a related party fails the last criterion. A non-fungible token fails the fungibility test. A token that gives a claim on a physical asset or a revenue stream fails the second. Out-of-scope assets stay under their own model, and the auditor needs the client's written analysis for each asset held, not only the large ones. A short memo per asset, with the white paper or terms cited, supports the conclusion.
Measurement and presentation
In-scope assets are measured at fair value under ASC 820, with changes recognized in net income. The ASU does not permit cost less impairment as an alternative, even for assets that do not trade in an active market. Crypto assets appear as a separate line on the balance sheet, apart from other intangibles. Remeasurement gains and losses are shown separately from impairment of other intangibles. Cash flow presentation follows ASC 230, with specific rules for crypto received as noncash consideration and converted to cash nearly immediately.
The fair value guidance is covered in the firm's ASC 820 guide. The key inputs for crypto:
- Principal market. Identify the market with the greatest volume and activity that the entity can access. The audit tests whether the exchange the client uses is the principal market, not simply the cheapest source of a price.
- Price source and cutoff time. The client's policy states the time of day for the measurement date. Crypto trades continuously, so a 4 p.m. price and a midnight UTC price can differ materially at year-end.
- Transaction costs. Fair value excludes them. The ASU does not address how commissions and fees on acquisition are treated, so the client needs a stated policy, applied consistently.
Adoption
The ASU is effective for all entities for fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption is modified retrospective, with a cumulative-effect adjustment to opening retained earnings (or the appropriate equity or net assets component) at the start of the adoption year.
Worked example (illustrative numbers). A calendar-year company holds 40 units of a crypto asset. Cost was $2,000,000, and after prior impairments the carrying amount at December 31, 2024 is $1,600,000. Fair value on January 1, 2025 is $2,400,000.
- Adoption entry: debit crypto assets $800,000, credit opening retained earnings $800,000 (before tax effects, which are recorded under ASC 740).
- If fair value at December 31, 2025 is $2,900,000, the gain for 2025 is $500,000, recorded in net income.
- The cost basis of $2,000,000 is still tracked for disclosure and for the tax accounting.
Test the opening balance by agreeing the units to prior-year support and recomputing fair value on the opening date. Test the deferred tax effect, because the tax basis stays at cost while book value moves.
Disclosures
The ASU requires, for interim and annual periods, information about significant holdings (name, cost basis, fair value and number of units) with aggregate figures for the rest, and information about contractual sale restrictions. Annual statements also require the method used to determine cost basis, a roll-forward of holdings, and total cumulative realized gains and losses from dispositions during the year. Build the disclosure checklist before year-end, because the roll-forward needs unit-level data.
Procedures
- Existence and ownership. Obtain wallet addresses and exchange account statements, and test that the client controls them. See the custody guide.
- Completeness. Search for wallets and accounts that management did not list, using bank statements, payment processor activity and tax filings.
- Valuation. Recompute fair value from the price source at the measurement time, and compare it to a second source.
- Activity. Trace purchases, sales, transfers between own wallets, staking rewards and tokens received for services. Transfers between own wallets should net to zero.
- Revenue received in tokens. Measure noncash consideration at fair value at contract inception under ASC 606, and test the cash flow classification.
- Related parties. Identify tokens issued by the client or its affiliates, which are out of scope.
- Subsequent events. Prices move after year-end. Assess whether post year-end changes are disclosure items under AU-C 560.
PBC list
- Scope analysis memo for each asset type held
- Wallet inventory with addresses, custodians and signers
- Exchange and custodian statements at the balance sheet date
- Unit-level roll-forward from opening to closing, with cost basis method
- Fair value support: price source, principal market analysis, cutoff time
- Adoption workpapers and the opening equity entry
- Tokens received for services and the related contracts
- Trading and transfer logs with tax lot detail
- Sale restriction agreements and lockups
Red flags
- A token the client issued presented as a crypto asset in scope
- Fair value taken from an exchange that the client cannot access
- Roll-forward units that differ from wallet balances
- Wallets that appear in transfers but not on the management list
- Large transfers just before year-end to unnamed addresses
- No separate presentation or missing roll-forward disclosure
Sources
- FASB Issues Accounting Standard for Certain Crypto Assets, ASU 2023-08 summary (KPMG)
- FASB Issues ASU on Accounting and Disclosure of Certain Crypto Assets (RSM)
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AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error