The AICPA has updated its practice aid for digital assets – what is new?

In June 2024, the American Institute of CPAs (AICPA) updated its practice aid on the accounting for and auditing of digital assets. The practice aid is intended to provide nonauthoritative guidance on how to account for and audit digital assets under U.S. generally accepted accounting principles (GAAP) for nongovernmental entities and generally accepted auditing standards (GAAS), respectively. Practitioners who prepare financial statements and auditors with a fundamental knowledge of blockchain technology will find the guidance most useful.

The following highlights the essential aspects of accounting for digital assets:

• Digital assets like cryptocurrencies are generally classified as intangible assets under U.S. GAAP.
• Digital assets are initially recognized at cost, including the purchase price and directly attributable acquisition costs.
• If received as noncash consideration, they are measured at fair value at the time of receipt.
• Indefinite-lived intangible assets are not amortized but tested annually for impairment.
• If the fair value drops below the carrying amount, an impairment loss is recognized.
• Upon sale or disposal, a gain or loss is recognized, calculated as the difference between the carrying amount and the consideration received.
• The accounting treatment depends on whether the organization or the custodian controls the digital assets.
• Fair value is determined based on quoted prices in the principal market.

What's New in the Updated Guidance

The updated guidance from the AICPA on accounting for digital assets under U.S. GAAP introduces several significant changes compared to previous guidance. Here are the key updates:

• Reflects the Financial Accounting Standards Board (FASB) ASU No. 2023-08 for crypto asset accounting and disclosure.
• Clarifies procedures for recognizing impairment and addresses post-cut-off period impairment indicators.
• Provides more structured guidance on determining fair value, especially in non-active markets.
• Includes guidance on accounting for digital assets acquired through forks, airdrops, and validating activities.
• Emphasizes the need for updated training, use of specialists, and careful client acceptance processes.

Effective Date

FASB ASU No. 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adaption is permitted. The new standard must be applied on a modified retrospective basis with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the adoption fiscal year.