The Financial Accounting Standards Board is gathering feedback from finance executives and others on whether the organization should start setting standards for cryptocurrencies, but nothing is in the works beyond gathering intelligence about the issues, the group’s chair, Richard Jones, told reporters at a press session this week.
“There's no doubt we get a lot of feedback from different stakeholders on looking at that from a standards-setting perspective,” said Jones, who has headed up the private nonprofit standards-setter since July 2020.
The wide variety of cryptocurrencies complicate the task of setting accounting and disclosure standards for them.
“Not all digital assets are the same,” said Jones, who met with reporters as part of a corporate financial reporting conference hosted by Financial Executives International. “They don’t all necessarily have the same rights, the same attributes. And there certainly are challenges in dealing with an unregulated market, in determining what accounting makes the most sense — fair value or some other kind of accounting model — not to mention it may vary based on the nature of the activities, holding rights.”
FASB staff are gathering input from stakeholders — users and preparers of financial statements — through a formal invitation to comment (ITC) process. Once that process closes, staff will prepare material for the board to look at.
“I am very confident our staff will be bringing that to our board at some point in time, to talk about the feedback from the ITC,” he said.
Resource constraints
One clue the board will be looking for is whether the use of and investment in cryptocurrencies by companies has become pervasive, although how that will be defined isn’t clear.
“Ultimately [pervasiveness] is a judgment call for each individual board member,” Jones said. “What we will look at is the presence of materiality in a financial reporting role. In other words, how significant is it, how many companies are doing it, how many companies have material balances?”
Resource constraints make it necessary for FASB to stay focused on the most pressing matters before it, he said. “We make two decisions — whether it’s an accounting issue to deal with or not, but also whether it rises to the level that it should be taking a spot on our agenda.”
Lease accounting standards
One pressing issue it will be looking at this week is whether to extend the deadline by which private companies and nonprofits must implement new lease accounting standards. The deadline has already been extended twice, but FASB is getting feedback that more time is needed. [Ed. note. The deadline wasn't extended.]
Under the new standards, organizations are to account for operating leases in the same way as capital leases, which means including them on their balance sheet rather than as footnote items. Public companies have been implementing the standards for almost a year, but private companies and nonprofits don't tend to have the same level of resources for making such an impactful change.
“We’ve heard different perspectives,” said Jones. “We’ve been doing a lot of outreach with folks to understand where they are in the adoption process, and what more time would mean.”
LIBOR accounting
LIBOR accounting relief is another pressing issue. The board is expected to take up whether to extend the deadline for how to account for the switch away from the scandal-plagued London Interbank Offered Rate as a benchmark index for pricing debt obligations.
“It’s really just a matter of when we can fit it onto the board calendar,” said Hillary Salo, FASB’s technical director. “There are a couple of different options of what we could do to extend that, whether it’s a date certain or whether it’s a time period after LIBOR cessation comes into play.”
Another matter to be taken up is fair value hedging, which is on the board’s agenda for this week.
