ASU 2023-08 created ASC Subtopic 350-60, Intangibles - Goodwill and Other - Crypto Assets. For assets in its scope, it replaced the old model, in which crypto holdings were indefinite-lived intangibles carried at cost less impairment, with measurement at fair value and changes in net income. The standard applies to all entities. It is relevant to audits of companies that hold or accept crypto, including some that hold only a small treasury position. For the broader fair value framework, see ASC 820 fair value measurement and the fair value hierarchy entry.
When does ASC 350-60 apply?
An asset is in scope only if it meets all six criteria in ASC 350-60-15-1. It must:
- meet the Codification's definition of an intangible asset;
- not give the holder enforceable rights to, or claims on, underlying goods, services or other assets;
- be created on or reside on a distributed ledger based on blockchain or similar technology;
- be secured through cryptography;
- be fungible; and
- not be created or issued by the reporting entity or its related parties.
Assets that fail any criterion, such as a token that gives enforceable claims on another asset or a token the entity itself issued, fall outside the subtopic. Practitioner guidance generally treats non-fungible tokens as out of scope because they are not fungible. Out-of-scope crypto intangibles generally stay under ASC 350-30, typically as indefinite-lived intangibles carried at cost and tested for impairment, according to KPMG's presentation handbook. Each holding must be assessed against all six criteria, which is a documentation point for the audit file.
How are in-scope crypto assets measured?
After acquisition, in-scope crypto assets are measured at fair value under ASC 820 each reporting period, with changes recognized in net income. No alternative such as cost less impairment is permitted. The ASU does not prescribe the initial measurement basis, which follows other GAAP depending on how the asset was acquired: fair value of consideration paid for a purchase, fair value of the crypto received in a revenue transaction under ASC 606, and so on.
Fair value depends on the market. For a token traded on active exchanges the price in the principal market is typically a Level 1 input, and thinly traded tokens move down the fair value hierarchy. ASC 820 requires the entity to identify the principal market, or the most advantageous market if there is no principal market.
How are crypto assets presented?
- On the balance sheet, in-scope crypto assets are presented separately from other intangible assets (ASC 350-60-45-1).
- In the income statement, remeasurement gains and losses are reported separately from changes in the carrying amount of other intangible assets. The subtopic does not say whether they are operating or nonoperating, so KPMG notes entities apply general classification principles and practice varies.
- Cash received from crypto assets that were received as noncash consideration in the ordinary course of business and converted nearly immediately into cash, meaning within hours or a few days, is classified as operating activities (ASC 230-10-45-27A). Other crypto cash flows are classified by the nature of the activity, as the ASC does not give explicit guidance.
Illustrative example
Figures are illustrative. A company buys 10 units of a qualifying token at $2,000 each, a $20,000 cost, on January 2.
- March 31: fair value is $2,600 per unit. The carrying amount is raised to $26,000 and a $6,000 gain goes to net income.
- June 30: the company sells 4 units for $3,000 each, $12,000 in total. The carrying amount of those units is 4 x $2,600 = $10,400, so the gain on sale is $1,600. The company applies ASC 610-20 if the buyer is not a customer.
- December 31: 6 units remain at $2,800, or $16,800, against a carrying amount of 6 x $2,600 = $15,600. The remeasurement gain is $1,200.
Total gains in net income are $6,000 + $1,600 + $1,200 = $8,800. Check: proceeds of $12,000 plus ending fair value of $16,800 is $28,800, less the $20,000 cost, which gives $8,800. For disclosure, under a first-in, first-out cost basis, the 4 units sold had a cost of $8,000, so cumulative realized gain on disposition against cost is $12,000 - $8,000 = $4,000. The ending cost basis of the 6 units is $12,000.
What must be disclosed?
Per KPMG's summary of the ASU, the disclosure requirements include:
- Interim and annual periods: for each significant holding, the name, cost basis, fair value and number of units (ASC 350-60-50-1); the aggregate cost basis and fair value of holdings that are not individually significant; and, for holdings subject to contractual sale restrictions, the name, fair value, nature and remaining duration of the restriction and the conditions for its removal.
- Annual periods: the ASC 820 fair value disclosures; the method used to determine cost basis for gains and losses, such as FIFO or specific identification (ASC 350-60-50-2); the income statement line items where gains and losses are reported, if not presented separately; a rollforward of holdings with additions, disposals and remeasurement gains and losses; and the cumulative realized gains and losses from dispositions during the year.
The ASU does not define "significant," so the entity applies judgment and documents it.
When is the standard effective?
ASU 2023-08 is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption was permitted in any interim or annual period for which financial statements had not been issued or made available for issuance at the start of the fiscal year. Adoption is through a cumulative-effect adjustment to the opening balance of retained earnings, or the appropriate equity or net assets component, as of the beginning of the year of adoption. For a calendar-year company, the first annual period under the standard is 2025. See ASU tracker for private companies.
What do auditors test?
These are practice procedures. Crypto adds existence, ownership and custody risk to the usual valuation questions. See AU-C 500 audit evidence and AU-C 540.
- Evaluate each holding against the six scope criteria, including whether the entity or a related party created the token.
- Obtain wallet addresses, custodian statements and blockchain evidence, and test existence and control of the keys. A custodian's holdings are an area for confirmation, and the custodian's own controls may be addressed in a service auditor's report (see AU-C 402).
- Test fair value to prices from the principal market at the reporting date and check the time stamp used. Confirm the entity's choice of market and the hierarchy level.
- Recompute remeasurement gains and the cost basis rollforward under the stated method, and check the adoption adjustment.
- Look for tokens received as payment from customers and for unrecorded wallets, including those controlled by owners or employees.
- Identify related party and issuer tokens that fall outside the scope.
- Check restrictions such as lockups and the disclosures that follow.
Frequently asked questions
Are all digital assets covered by ASC 350-60?
No. An asset must meet all six criteria. Tokens with enforceable claims on other assets, tokens issued by the reporting entity or its related parties, and non-fungible tokens are generally outside the scope.
Where do fair value gains go?
Into net income each reporting period, with presentation separate from changes in other intangible assets.
Can an entity still use cost less impairment?
Not for assets within the scope of ASC 350-60. The standard has no alternative measurement basis for them.
How is the transition recorded?
By a cumulative-effect adjustment to the opening balance of retained earnings, or the appropriate component of equity or net assets, at the beginning of the year of adoption.
Sources
- FASB, ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, December 2023, and ASC 350-60-15-1, 45-1 through 45-3, 50-1, 50-2. https://www.fasb.org
- FASB, ASC 230-10-45-27A, cash flow classification of crypto assets converted nearly immediately into cash.
- KPMG, Defining Issues: FASB to issue final crypto asset accounting ASU (2023), https://kpmg.com/us/en/frv/reference-library/2023/fasb-to-issue-final-crypto-asset-accounting-asu.html; KPMG Handbook: Financial statement presentation (2026) and Handbook: Statement of cash flows (2026), crypto intangible assets sections; KPMG ASU effective dates table (2026).
- The CPA Journal, "FASB's New Guidance on Accounting for Crypto Assets," December 2024. https://www.cpajournal.com/2024/12/25/fasbs-new-guidance-on-accounting-for-crypto-assets/
Related
- ASC 820 fair value measurement
- Fair value hierarchy
- ASU tracker for private companies
- Auditing accounting estimates (AU-C 540)
- Level 3 inputs
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