AICPA updates guidance on digital assets
In January 2022, the AICPA updated its nonauthoritative guide on best practices for accounting for digital assets, the “Accounting for and auditing of digital assets practice aid.” Originally published in December 2019, the guide is a living document that is periodically expanded to answer emerging questions. The guidance is based on existing professional literature and the experience of members of the AICPA’s Digital Assets Working Group.
Digital assets are broadly defined as records that are made using cryptography for verification and securities purposes on a distributed ledger called a blockchain. They may be a medium of exchange, a representation to provide or access goods or services, or a financing vehicle.
Earlier versions of the guide addressed such questions as:
- How should the purchase of crypto assets for cash be classified and measured?
- What are the proper initial and subsequent measurements of digital assets, which are generally classified as indefinite-lived intangible assets?
- How should the cost basis of derecognized digital assets be determined?
- On what date should digital assets be recognized for an entity that uses a third-party wallet service?
- When would an entity meet the definition of an investment company, permitting accounting for the digital assets at fair value instead of as an indefinite-lived intangible asset?
- How should broker-dealers specifically recognize, measure and present digital assets?
- If permitted, what are fair value measurement special considerations?
- How should stable coin holdings, which are designed to minimize price volatility by linking to a more traditional asset, be accounted for?
The updated version of the guide includes the following added questions:
- How should an entity evaluate whether contracts that include the right to receive a fixed quantity of crypto assets contain embedded derivatives?
- How should lenders and borrowers account for lending of crypto assets?
- How should a cryptocurrency miner recognize and measure transaction fees and block rewards?
- How should shared computing infrastructure arrangements related to cryptocurrency mining operations be accounted for?
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