Crypto is about to change bookkeeping rules and soon the accounting profession
The language of business is accounting, according to Warren Buffett. You have to know that language as well as you know your own native tongue in order to truly evaluate businesses.”
Buffett is right on this point. Modern accounting is so important that some consider double-entry bookkeeping to be one of the greatest innovations of all time. The Venetian and Tuscan merchants were able to keep track of extraordinarily intricate webs of transactions” around the Mediterranean in the 1300s, laying the foundation for the management of modern businesses around the globe.
A long history, vast size, and enduring usefulness might explain why the accounting profession takes time to update its rules and absorb new information.
As the asset class itself is only a decade old, there are no specific accounting rules for crypto. This has created some awkward jerry-rigging as the profession tries to make the old rules fit a new asset class. It may soon change.
Crypto-assets: Fair Value and Fair Treatment
Financial Accounting Standards Board concluded earlier this month that crypto-assets should be measured using fair value accounting, with gains and losses included in the current period’s comprehensive income. The decision has not been finalized, so it will take some time before these standards are incorporated into Us Gaap and other accounting rules. Nonetheless, this is an important step towards the day when companies will be able to carry crypto assets on their balance sheets in a practical and straightforward manner. The current lack of clarity in accounting standards for crypto assets is frequently cited as a reason for firms’ limited adoption of crypto assets.
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