The name ASU 2023-08, which stands for Accounting Standards Update 2023-08, follows a naming convention used by the Financial Accounting Standards Board (FASB) to organize and reference changes in accounting standards. Here’s how it breaks down:
1. ASU (Accounting Standards Update): FASB issues these updates to amend the Accounting Standards Codification (ASC), which is the comprehensive source of GAAP in the U.S. Each ASU provides guidance on how companies should implement new or revised accounting rules.
2. 2023: The year the update was officially released. In this case, ASU 2023-08 was issued in December 2023 .
3. 08: This is a sequential number assigned to the specific update within that year. Since it’s the eighth ASU released in 2023, it is numbered 08 .
Why This Update Was Needed:
ASU 2023-08 was introduced to address deficiencies in the previous accounting treatment of crypto assets under U.S. GAAP. Prior to this update, crypto assets were treated as intangible assets, meaning they were measured at historical cost and could only be written down if impaired. Gains in value were not reflected unless the assets were sold. This led to concerns about transparency and accuracy in financial reporting, particularly for companies heavily invested in cryptocurrencies.
The new standard allows for fair value accounting of crypto assets, requiring companies to report both gains and losses as market prices fluctuate. This change responds to calls from stakeholders for more realistic financial reporting that reflects the true economic impact of holding cryptocurrencies .
The update applies to crypto assets like Bitcoin and Ethereum but excludes other digital assets such as NFTs and stablecoins .
generally accepted accounting principles (GAAP) for public companies, private companies and nongovernmental not-for-profit organizations in the United States.
