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FASB ASU 2023-08 Explained: Crypto Assets at Fair Value, Effective Dates, and the Disclosures Required

By chrisomo

FASB ASU 2023-08 digital assets accounting moves qualifying crypto holdings from a cost-less-impairment model to fair value with changes recorded in net income each period. The standard takes effect for fiscal years beginning after December 15, 2024, which means calendar-year reporters apply it for the first time in their 2025 annual statements. It is the first US GAAP standard written specifically for crypto, and the change rewrites how every covered balance sheet, income statement, and disclosure footnote looks.

What is FASB ASU 2023-08?

Accounting Standards Update 2023-08, issued by the Financial Accounting Standards Board in December 2023, creates a new Subtopic in the Codification: ASC 350-60, Crypto Assets. Before this update, US GAAP did not address crypto directly. Holders fell back on ASC 350-30 (indefinite-lived intangibles), which required cost less impairment with no upward recovery. ASU 2023-08 replaces that asymmetry with fair value through net income.

Scope is narrower than the popular shorthand suggests. Subtopic 350-60 applies only to crypto assets that meet all six criteria in ASC 350-60-15-1: the asset must meet the definition of an intangible asset, must not provide the holder with enforceable rights to or claims on underlying goods, services, or other assets, must be created or reside on a distributed ledger secured by cryptography, must be fungible, must not be created or issued by the reporting entity or its related parties, and must not be received by the entity as consideration for goods or services. Bitcoin and ether satisfy all six. Most NFTs, stablecoins issued by the reporting entity, wrapped tokens with enforceable claims on the underlying, and crypto received directly as payment do not.

Why ASU 2023-08 matters

The standard fixes a measurement model that almost nobody thought reflected economic reality. Holders of long-dated bitcoin positions argued for years that cost-less-impairment understated the asset on the balance sheet and overstated the volatility of net income, because every dip below carrying value produced an impairment charge that could never be reversed. The fair value model lets the asset move both directions.

It also pulls crypto holdings out of footnote disclosure into the face of the income statement. Public filers who hold material positions now report mark-to-market gains and losses on a recurring line, the way a trader reports a securities portfolio. Analysts can model the position, auditors can test valuation against observable market prices, and investors can see the swing. None of that was true under the prior model.

For tax accounting, ASU 2023-08 is irrelevant. The IRS treats crypto as property under Notice 2014-21, and the cost basis and realization rules in the Code drive the 1040 outcome regardless of how GAAP measures the asset. Book-tax differences from the new fair value model show up on Schedule M-3 for filers required to prepare it.

The mechanics: scope, measurement, and a worked example

Three steps: scope the asset, measure it on day one, remeasure each reporting date.

Scope

Apply the six ASC 350-60-15-1 criteria to each holding. A holding that fails any criterion stays under prior guidance. In practice direct holdings of bitcoin and ether qualify; NFTs, stablecoins with enforceable redemption rights, and tokens received as payment for goods or services do not.

Initial measurement

ASC 350-60-30-1 records the asset at fair value at acquisition. Acquisition cost (price paid plus transaction fees) is normally the best evidence of fair value. Non-purchase acquisitions look to ASC 820.

Subsequent measurement

ASC 350-60-35 requires fair value at each reporting date with the change running through net income. There is no other comprehensive income detour and no impairment assessment. Fair value is determined under ASC 820’s three-level hierarchy. For exchange-traded crypto with active markets the inputs are Level 1.

Worked example: 1 BTC purchased at $50,000

Company A purchases 1 BTC on January 15, 2024, for $50,000. On December 31, 2024 (the first reporting date after the standard’s effective date for a calendar-year filer that early-adopted), the fair value of 1 BTC is $80,000. Company A holds the position through December 31, 2025, when the fair value is $90,000.

Under the prior ASC 350-30 model (cost less impairment), no early adoption:

January 15, 2024:

• Dr. Crypto asset (intangible) 50,000
• Cr. Cash 50,000

December 31, 2024: No entry. Fair value of $80,000 exceeds carrying value. Impairment is not triggered, and recovery is not recognized. Carrying value remains $50,000.

December 31, 2025: No entry. Same logic. Balance sheet carries the asset at $50,000 while the actual market value is $90,000.

Under ASU 2023-08 (fair value through net income):

January 15, 2024:

• Dr. Crypto asset 50,000
• Cr. Cash 50,000

December 31, 2024:

• Dr. Crypto asset 30,000
• Cr. Unrealized gain on crypto assets (net income) 30,000

December 31, 2025:

• Dr. Crypto asset 10,000
• Cr. Unrealized gain on crypto assets (net income) 10,000

The fair value model adds $40,000 to retained earnings over the two-year hold. The cost-less-impairment model adds nothing. Symmetrically, if the position had moved against Company A and fair value at December 31, 2024 was $30,000, the new model would book a $20,000 unrealized loss to net income. The old model would book a $20,000 impairment, but it would never recover that impairment even if the price returned to $50,000.

For an entity that early-adopted in fiscal 2024, the transition entry on the adoption date is a cumulative-effect adjustment to opening retained earnings. The asset is remeasured from carrying value to fair value, and the difference (net of any deferred tax) lands in beginning retained earnings rather than current-period net income.

Crypto accounting before vs after ASU 2023-08

Required disclosures under ASC 350-60-50

The disclosure package is the part of the standard that does the most work. Subtopic 350-60-50 requires:

• Disaggregation by significant holding. For each significant crypto asset, disclose name, cost basis, fair value, and number of units held at the balance sheet date. “Significant” is judged at the holding level, not the portfolio level. A filer that holds bitcoin and ether reports both separately if either is significant on its own.
• Aggregate of insignificant holdings. Holdings below the significance threshold are reported in aggregate, with cost basis and fair value.
• Annual roll-forward of fair value. Beginning balance, additions, dispositions, gains, losses, ending balance. Gains and losses are split between realized and unrealized. The roll-forward is required on an annual basis, not in interim periods.
• Cost basis reconciliation. Disclosure of how the entity tracks cost basis (FIFO, specific identification, average cost), and a reconciliation of cost basis to fair value at the end of the period.
• Contractual sale restrictions. Crypto held subject to lockups, vesting, or other restrictions on disposal must be flagged, including the nature of the restriction and the duration. The disclosure parallels the restricted-stock disclosure under ASC 260.
• Realized gains and losses on disposition. Separate from unrealized remeasurement gains and losses for the period.

Filers that hold material positions will typically include this package in a dedicated crypto assets footnote, with the income statement line for remeasurement gains and losses presented separately on the face of the statement.

Recent changes and effective date

ASU 2023-08 was finalized in December 2023. The effective date is fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. For calendar-year filers, the first applicable annual period is fiscal 2025, with first interim adoption in Q1 2025. Early adoption was permitted for any annual or interim period for which financial statements had not yet been issued or made available for issuance. Several public crypto-treasury holders early-adopted in 2024 to capture the upward remeasurement.

Transition uses a cumulative-effect adjustment to opening retained earnings as of the beginning of the year of adoption. The asset is remeasured from prior carrying value (cost less impairment) to fair value as of that date, and the net-of-tax difference is recorded as a retained earnings adjustment. Prior periods are not restated.

The SEC staff in 2024 confirmed that crypto held under ASU 2023-08 is not a “marketable security” for Rule 3-09 or Rule 3-05 of Regulation S-X purposes, and that the prior SAB 121 custodial-liability rule (which required custodians to gross up crypto held for customers on their own balance sheet) was rescinded in January 2025. The rescission of SAB 121 is separate from ASU 2023-08 but lands in the same area of practice.

Common pitfalls

Scoping NFTs into 350-60. NFTs fail the fungibility criterion. They stay under ASC 350-30 or, if held for sale in the ordinary course, under ASC 330.

Treating fair value as a one-direction signal. The new model has no impairment test. Every reporting date is a remeasurement date, and the change goes through net income in both directions.

Missing the contractual sale restrictions disclosure. Crypto subject to staking lockups, vesting, or exchange custodial restrictions has to be flagged in the footnote. The restriction is not a measurement adjustment, but it must be disclosed.

Confusing book and tax. Unrealized GAAP gains create a deferred tax liability and a temporary difference reported on Schedule M-3. Filers who run the GAAP entries through net income without booking the deferred tax line understate liabilities.

Treating payment-received crypto as in scope. ASC 350-60-15-1 excludes crypto received as consideration for goods or services. A merchant that takes bitcoin in payment for a product holds that bitcoin outside Subtopic 350-60 until disposition.

FAQ

When does ASU 2023-08 take effect?

Fiscal years beginning after December 15, 2024, including interim periods within those years. For calendar-year filers the first applicable annual period is fiscal 2025. Early adoption was permitted for periods for which financial statements had not yet been issued.

Does ASU 2023-08 apply to bitcoin and ether?

Yes. Both meet the six scope criteria in ASC 350-60-15-1: they are intangible assets, residing on a distributed ledger secured by cryptography, fungible, not created or issued by the reporting entity, not providing enforceable rights to underlying goods or services, and (when purchased) not received as consideration for goods or services sold by the entity.

Does ASU 2023-08 apply to NFTs?

No. NFTs fail the fungibility criterion. They remain under ASC 350-30 as indefinite-lived intangibles or, if held for sale, under ASC 330.

Does ASU 2023-08 apply to stablecoins?

Generally no for the holder, but the analysis turns on whether the stablecoin gives the holder an enforceable claim against the issuer for the underlying. USDC and USDT carry redemption mechanics that, depending on the specific terms, may fail the “no enforceable rights” criterion. Filers should document the analysis for each stablecoin held.

How does the transition work?

Through a cumulative-effect adjustment to opening retained earnings on the adoption date. The asset is remeasured from prior carrying value to fair value, and the net-of-tax difference is recorded in beginning retained earnings. Prior periods are not restated.

Where do unrealized gains and losses appear on the income statement?

In net income, presented separately from operating items. The standard does not prescribe a specific line caption, but most filers use “Gain (loss) on crypto assets” or similar.

How is crypto received as payment for goods or services treated?

Outside the scope of ASU 2023-08. Revenue is recognized under ASC 606 at the fair value of the consideration received. The crypto then sits on the balance sheet either as inventory (if held for resale in the ordinary course) or as an intangible under ASC 350-30.

What changes for the cash flow statement?

Purchases and sales remain in investing activities. ASU 2023-08 adds a requirement that crypto received as noncash consideration that is converted nearly immediately into cash be presented in operating activities, with a reconciliation when the crypto is held rather than converted.