Crypto Asset Accounting: Fair Value and Journal Entries
Crypto asset accounting under U.S. generally accepted accounting principles (GAAP) means measuring qualifying crypto assets, such as bitcoin, at fair value at every reporting date under Accounting Standards Codification (ASC) 350-60. Increases and decreases both go to net income, even when nothing is sold. ASU 2023-08 created this model, and it applies to fiscal years beginning after December 15, 2024.
Before ASU 2023-08, companies generally treated crypto holdings as indefinite-lived intangible assets: cost less impairment, with no write-ups when prices recovered. The new model replaces that for qualifying holdings. Students who apply only impairment losses to qualifying Bitcoin holdings can miss gains, misstate the asset, and calculate the next period’s adjustment incorrectly.
Video context: this January 2023 Farhat Lectures case-study segment (3:49 to 6:47) looks at a volatile token that the company issued itself. It was recorded before ASU 2023-08, so treat it as background on valuation risk. It also connects to today’s rules: a token issued by the holder or its related parties fails the ASC 350-60 scope test, so it would not get fair value accounting under this model.
Which holdings qualify for crypto asset accounting?
The Financial Accounting Standards Board (FASB) added Subtopic 350-60 through Accounting Standards Update (ASU) 2023-08. Its amendments apply to all entities for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption was permitted. This article explains the resulting model rather than the earlier impairment-only approach.
A holding must satisfy all six scope conditions:
- It meets the accounting definition of an intangible asset.
- It provides no enforceable claim to underlying goods, services, or other assets.
- It exists on a blockchain or similar distributed ledger.
- Cryptography secures it.
- It is fungible: units are interchangeable.
- The reporting company and its related parties did not create or issue it.
Ordinary Bitcoin holdings commonly meet these conditions. A unique nonfungible token fails the interchangeability condition. A token carrying an enforceable claim to another asset requires a different scope analysis. Do not decide from the words “coin,” “digital,” or “blockchain” alone.
For example, suppose two businesses each hold something called a digital token. One owns interchangeable units purchased from outside parties; the other holds a token it issued itself. Even if their trading screens look similar, the two holdings do not necessarily qualify for the same accounting model.
Fair value is different from amortization and impairment
| Item | Subsequent measurement focus | Automatic annual amortization? |
|---|---|---|
| Finite-lived patent | Allocate cost; evaluate impairment when required | Yes, over its useful life |
| Ordinary indefinite-lived trademark | Cost less recognized impairment | No |
| Crypto holding within ASC 350-60 | Fair value, with changes in net income | No |
Fair value, as defined in ASC 820, is the price a company would receive to sell the asset in an orderly transaction between market participants at the measurement date. Carrying amount is the amount currently recorded. To make a reporting-date adjustment, compare the required fair value with that existing carrying amount.
The calculation is not a forecast of next month’s market price. Nor does recognizing a gain mean the company received cash. The company may still hold exactly the same number of units after the entry.
Review the types of intangible assets for the classification overview and patent, copyright, and trademark accounting for traditional rights.
Hypothetical Bitcoin journal-entry example
Maple Services buys two bitcoins for a total of $100,000. Assume the holding qualifies for ASC 350-60 and the transaction is a simple cash purchase. There are no fees or taxes. After the initial purchase, there are no additional purchases or sales during steps 1–3. These are invented teaching amounts, not current market prices.
1. Record the purchase
| Account | Debit | Credit |
|---|---|---|
| Crypto Assets—Bitcoin | $100,000 | — |
| Cash | — | $100,000 |
The entry exchanges cash for the holding. It does not create an immediate $100,000 expense.
2. Adjust upward at the first reporting date
The two bitcoins have a combined fair value of $118,000. Required increase: $118,000 − $100,000 = $18,000.
| Account | Debit | Credit |
|---|---|---|
| Crypto Assets—Bitcoin | $18,000 | — |
| Gain on Crypto Remeasurement | — | $18,000 |
The balance sheet now reports $118,000. Net income includes the $18,000 gain. Cash does not change.
3. Adjust downward at the next reporting date
The combined fair value later becomes $91,000. Compare it with the latest carrying amount of $118,000: $91,000 − $118,000 = −$27,000.
| Account | Debit | Credit |
|---|---|---|
| Loss on Crypto Remeasurement | $27,000 | — |
| Crypto Assets—Bitcoin | — | $27,000 |
The second period’s loss is $27,000, not $9,000. The $9,000 difference from original cost is the cumulative decline across both periods: the earlier $18,000 gain less the later $27,000 loss.
4. Record a sale
Early in the following period, before any further remeasurement, Maple sells both bitcoins for $95,000 in cash. The carrying amount is still $91,000. Keep the same simplifying assumptions: no fees or taxes.
| Account | Debit | Credit |
|---|---|---|
| Cash | $95,000 | — |
| Crypto Assets—Bitcoin | — | $91,000 |
| Gain on Sale of Crypto Assets | — | $4,000 |
This period’s net income includes a $4,000 gain: $95,000 minus the $91,000 carrying amount. Notice that Maple still sold for $5,000 less than it paid. Across the whole holding period, net income picked up an $18,000 gain, a $27,000 loss, and a $4,000 gain, which nets to a $5,000 loss. That matches the $95,000 sale price minus the $100,000 cost. Annual disclosures report this sale-price-versus-cost-basis difference, so readers see both numbers.
Presentation and disclosure basics
Present in-scope crypto separately from other intangible assets. Present remeasurement gains and losses separately from changes in other intangibles, within net income. Important disclosures include each significant holding’s name, units, cost basis, and fair value; combined cost basis and fair value for holdings that are not individually significant; and any restrictions. Each year, companies also give an opening-to-closing reconciliation (a rollforward) of the crypto balance, the method used to determine cost basis, such as specific identification or first-in, first-out (FIFO), and, for sales during the year, the difference between the sale price and cost basis. These requirements appear in ASC 350-60-45 and 50 within the FASB update.
For Maple’s first reporting period, the teaching reconciliation is simple: zero opening balance, plus $100,000 of purchases, plus an $18,000 gain, equals $118,000. Units remain two throughout the remeasurement. A useful check is that the note, ledger, and balance-sheet amount agree.
Current or noncurrent classification requires the applicable classification assessment, including the intended holding period. A liquid market alone does not automatically make every holding a current asset. See intangible-asset presentation for the broader reporting layout.
On the statement of cash flows, cash from selling crypto that a company received from customers as noncash payment in the ordinary course of business, and converted to cash nearly immediately, is an operating cash flow. For other situations, ASU 2023-08 points companies to the general rules in ASC 230.
Common mistakes
- Using historical guidance: applying only downward impairment to a holding within the current fair-value model.
- Comparing every period with original cost: ignoring the previous remeasurement.
- Posting the adjustment to cash: a valuation entry is not a purchase or sale.
- Using other comprehensive income: these remeasurement changes enter net income.
Key takeaways
- Qualifying crypto assets under ASC 350-60 are measured at fair value at each reporting date.
- Remeasurement gains and losses go to net income, not other comprehensive income, even without a sale.
- Each adjustment compares the new fair value with the latest carrying amount, not with original cost.
- All six scope conditions must be met. NFTs and tokens issued by the holder or its related parties fall outside this model.
- Present crypto separately from other intangible assets, and disclose holdings, cost basis, fair value, and an annual rollforward.
Want more lessons like this one? Work through the Intermediate Accounting course, or start with the Farhat Lectures free sample course to see how the lessons are taught.
Interactive Bitcoin Accounting Practice for CPA FAR
Under U.S. GAAP, Bitcoin holdings within ASC 350-60 are measured at fair value at each reporting date. Unrealized gains and losses are recognized in net income while the company still holds the Bitcoin. Use the three questions below to compare this treatment with the impairment model for traditional indefinite-lived intangible assets.
Practice questions with answers
1. A qualifying holding bought for $40,000 rises to $46,000 at the first reporting date. What is the entry?
Answer: Debit Crypto Assets $6,000 and credit Remeasurement Gain $6,000. The new carrying amount is $46,000.
2. The same holding later falls to $42,000. What is that period’s result?
Answer: A $4,000 loss. The comparison starts from $46,000, even though $42,000 still exceeds the original purchase amount.
3. Does a unique nonfungible token qualify simply because it uses blockchain?
Answer: No. It fails a required scope condition. Other applicable accounting guidance must be evaluated.
Frequently asked questions
Must the company sell before recognizing a gain?
No. A reporting-date remeasurement can recognize a gain while the company continues holding the asset.
Is Bitcoin amortized like other intangible assets?
No. Bitcoin within ASC 350-60 is remeasured to fair value at each reporting date, so there is no amortization schedule. Even under the older cost-less-impairment approach, crypto holdings were not amortized, because companies treated them as indefinite-lived.
Does this article explain cryptocurrency taxes or every token type?
No. It addresses the holder’s financial accounting for qualifying assets. Tax treatment and out-of-scope digital assets require separate analysis.
Are stablecoins and NFTs covered by ASC 350-60?
NFTs fail the fungibility condition. A stablecoin is outside ASC 350-60 if it gives the holder enforceable rights to or claims on underlying goods, services, or other assets, including cash. A stablecoin without those rights must still meet all six scope conditions to qualify. Assess the terms applicable to the specific holding and apply other U.S. GAAP when it is outside this scope.
When did fair value accounting for crypto assets take effect?
ASU 2023-08 applies to all entities for fiscal years beginning after December 15, 2024, including interim periods. Early adoption was permitted. Companies adopt it with a cumulative-effect adjustment to opening retained earnings in the year of adoption.
Where does selling crypto show up on the statement of cash flows?
If a company received the crypto from customers as noncash payment in the ordinary course of business and converted it to cash nearly immediately, the cash received is an operating cash flow. For other situations, ASU 2023-08 points companies to the general rules in ASC 230.
Does ASC 350-60 say how to handle purchase fees?
No. ASU 2023-08 does not say how to recognize transaction costs, such as broker commissions, paid to acquire crypto assets. Companies apply other applicable guidance and their own accounting policy, which is why the example above assumes no fees.
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