Crypto Accounting Under ASC 350-60: What Firms and CFOs Must Resolve Now
ASC 350-60 is live. For fiscal years beginning after 15 December 2024, eligible crypto assets must be measured at fair value every reporting period, with all gains and losses flowing directly through earnings. That resolves one long-standing problem, the asymmetric impairment-only model that recognised losses but never gains. It does not, however, resolve every problem. Stablecoin accounting, wrapped token classification, derecognition on smart-contract interactions, and the treatment of gas fees all remain subject to professional judgment, and the quality of that judgment will define audit outcomes for corporate clients holding digital assets in 2025 and beyond.
Why the Old Framework Failed and What ASC 350-60 Changes
Before the Financial Accounting Standards Board acted, crypto assets sat uncomfortably in US GAAP. They did not clearly meet the definitions of cash, financial instruments, or inventory, so preparers defaulted to indefinite-lived intangible asset treatment under ASC 350-30. That meant writing carrying values down when fair value fell, but never writing them back up. For a Bitcoin treasury that appreciated 60 percent in a quarter, earnings reported nothing; for one that fell 20 percent, earnings took the hit. The asymmetry distorted financial statements and frustrated analysts trying to assess exposure.
The 2023 FASB update addressed this directly. ASC 350-60 requires fair-value measurement at each reporting date for in-scope assets, with unrealised gains and losses recognised in net income. Eligible assets must be presented separately from other intangibles on the balance sheet, and enhanced disclosures are mandatory: quantities held, cost basis, end-of-period fair values, period-over-period changes, and any restrictions on use or transfer.
The Two-Part Eligibility Test
Not every crypto asset qualifies for ASC 350-60 treatment. The standard sets two threshold conditions. First, the asset must not give the holder any enforceable right to underlying goods, services, or other assets. Second, it must not have been created or issued by the reporting entity or its related parties. Bitcoin and Ether satisfy both conditions clearly. Security tokens that convey a claim on a pool of real-world assets, or governance tokens issued by the reporting entity's own protocol, generally do not.
Assets that fail the eligibility test revert to ASC 350-30 indefinite-lived intangible treatment, or, depending on contractual rights, to financial instrument guidance. The classification decision is not cosmetic: it determines measurement basis, the recognition of unrealised gains, disclosure requirements, and earnings volatility profile.
Where Judgment Replaces Rules: The Hard Cases
FASB's stated intent was to reduce diversity in practice, and it has done so for vanilla cryptocurrencies. For everything else, the framework shifts from rule-based classification to what the standard's drafters acknowledge is judgment-driven reporting. Two structurally similar tokens can produce different accounting conclusions, and auditors are entitled to disagree with management's assessment if the documentation does not hold up.
Stablecoin Accounting: Three Possible Destinations
Stablecoins are the clearest example of classification complexity. A fiat-backed stablecoin such as USDC might be treated as an in-scope crypto asset under ASC 350-60, as a financial instrument if the redemption right is sufficiently enforceable, or, in a narrower set of circumstances, as a cash equivalent if it meets the short-term, low-risk, and high-liquidity criteria in ASC 305. Each outcome produces a different balance sheet presentation, a different volatility profile in earnings, and different disclosure obligations.
Classification as a cash equivalent is the highest bar. Preparers would need robust evidence of liquidity depth, negligible credit risk, and stable redemption at par on demand, characteristics that most stablecoins do not consistently demonstrate across all market conditions. FASB's own advisory panels have discussed but not resolved this question; the FASB PMAC and IAC both took it up in 2026 without issuing definitive guidance. Firms advising corporate clients holding material USDC or similar balances should document the specific legal structure of the stablecoin, the enforceability of redemption rights, counterparty exposure to the issuer, and the basis for whichever classification is adopted. For more on those ongoing FASB deliberations, see our coverage of the FASB PMAC stablecoin cash equivalents and wrapped token debates and the FASB IAC stablecoin cash equivalent threshold discussion.
Wrapped Tokens: When the Wrapper Matters
Wrapped tokens add another layer. A token that simply represents a bridged version of an underlying crypto asset, with no enforceable claim against a counterparty, may qualify under ASC 350-60. A token that represents a contractual right to redeem the underlying asset from a custodian likely does not. The economic substance of the wrapper, not the technical mechanism, drives the accounting outcome. Firms auditing clients with wrapped token positions need to review the smart contract terms and any off-chain legal agreements governing redemption before signing off on classification.
Gas Fees: Capitalise or Expense?
US GAAP provides no explicit guidance on transaction costs incurred to acquire crypto assets, such as network gas fees. The question is whether these costs are incremental to acquisition and should be capitalised into the asset's cost basis, or whether they are period costs to be expensed immediately. Either treatment can be defended, but it must be applied consistently, documented in accounting policy, and disclosed. Given that gas fees on high-throughput networks can be material over a fiscal year, the choice is not trivial for companies running active treasury operations.
Fair Value Measurement: Market Selection and Timing
ASC 820 governs fair value measurement, and applying it to crypto assets requires policy decisions that do not arise with traditional securities.
Selecting the Principal Market
Crypto assets trade simultaneously on dozens of venues with varying liquidity and pricing. ASC 820 requires fair value to be measured in the principal market, defined as the market with the greatest volume and level of activity. For most large-cap cryptocurrencies, the principal market can be identified with reasonable confidence by reference to publicly available volume data. For smaller or less liquid tokens, the analysis is more subjective and should be documented with contemporaneous evidence, not reconstructed at audit time.
The 24/7 Pricing Problem
Traditional equity markets close at a defined time, making closing-price policies straightforward. Crypto markets do not. Companies must establish and apply consistently a policy for the point in time at which fair value is captured on the reporting date. A common approach is the last observable price before midnight on the reporting date in a specified time zone, but the choice of time zone and the definition of "observable" both require policy documentation. Auditors will test consistency of application across periods, so a policy set in Q1 and quietly changed in Q3 creates audit risk.
Derecognition: Control, Not Custody
One of the more technically demanding areas under the current framework is derecognition. A crypto asset is removed from the balance sheet only when the reporting entity relinquishes control, not merely when it moves the asset to another wallet or deposits it into a protocol.
Smart Contracts, Collateral, and Third-Party Wallets
Depositing crypto into a decentralised finance protocol as collateral does not automatically constitute a sale. If the entity retains the right to withdraw the asset and the counterparty cannot direct its use without the entity's involvement, control has likely not transferred. Conversely, a transfer to a third-party custodian under terms that give the custodian full discretion over the asset may constitute derecognition even if the entity expects to receive an equivalent asset back. The analysis tracks closely to ASC 860 principles on transfers of financial assets, applied by analogy. Documentation of the specific contractual terms at the time of transfer is essential.
When crypto assets are transferred to customers as revenue, ASC 606 governs recognition. Disposals outside ordinary operations are treated under ASC 610-20, with gains or losses measured as the difference between fair value of consideration received and carrying amount. When multiple assets are transferred together, consideration is allocated based on relative standalone selling prices, and non-cash consideration is measured at fair value at contract inception.
Out-of-Scope Assets: The Impairment Regime Persists
Assets that do not qualify for ASC 350-60 remain subject to ASC 350-30's impairment model. That means they are carried at cost and tested for impairment whenever events or circumstances indicate the fair value has fallen below carrying amount. If impaired, the write-down is permanent: no recovery is recognised even if fair value subsequently rebounds. Companies with mixed portfolios, holding both in-scope and out-of-scope assets, will carry two distinct measurement models simultaneously, requiring clear classification registers and separate disclosure tracks.
Disclosure Requirements: What Auditors Will Scrutinise
Enhanced disclosures are not optional under ASC 350-60; they are a core component of the standard. In-scope assets require recurring fair value disclosures, reconciliations of opening and closing balances, and separate balance sheet presentation. Out-of-scope assets require non-recurring fair value disclosure when impairment testing is triggered. Both categories require explanation of valuation methods, key judgments, and material risk concentrations.
Firms reviewing client disclosures should also assess whether significant subsequent events, such as a material price decline after the balance sheet date or a regulatory action affecting an exchange used as the principal market, require disclosure under ASC 855. The standard does not specifically address this, but general principles apply.
Building the Internal Control Framework
ASC 350-60 shifts the burden of crypto accounting quality from the standard itself to the strength of the preparers' policies, controls, and documentation. The standard provides a measurement principle; it does not provide an operational manual. Organisations that navigate this terrain effectively tend to share several characteristics: they maintain a classified register of every digital asset held, with the classification rationale documented at the time of acquisition; they have a written fair value policy specifying the principal market, pricing time, and data source for each asset class; they apply a consistent cost identification method, whether FIFO or specific identification, across all transactions; and they have a defined process for assessing derecognition whenever an asset is moved, staked, collateralised, or otherwise transferred.
Internal audit and external auditors will test all of these. A well-documented policy set reviewed and approved by management before the fiscal year begins is considerably easier to defend than one reconstructed during fieldwork. For accounting firms advising clients, helping them build this infrastructure now, rather than at year-end, is the higher-value service.
The IFRS Position and Cross-Border Considerations
US-focused preparers operating internationally, or firms advising multinational clients, need to hold both frameworks in mind. Under IFRS, crypto assets accounting does not yet have a dedicated standard. The IASB's general guidance directs preparers to IAS 38 for intangible assets as the default, which also uses a cost model with optional revaluation, but the revaluation model is only available when an active market exists and is rarely applied in practice for crypto. The IASB has an active project on crypto and digital assets, but no final standard had been issued as of the date of this article.
The divergence between US GAAP and IFRS crypto assets treatment creates real complexity for dual reporters. A company preparing both US GAAP and IFRS financial statements may recognise unrealised gains in its US GAAP income statement under ASC 350-60 while carrying the same asset at cost under IAS 38, producing a reconciling difference that requires clear explanation in the IFRS to US GAAP reconciliation or vice versa. Firms with these clients should ensure the reconciliation is built into the close process, not handled as an afterthought.
Frequently Asked Questions
Which crypto assets are eligible for fair-value treatment under ASC 350-60?
An asset qualifies if it does not give the holder an enforceable right to underlying goods, services, or assets, and if it was not created or issued by the reporting entity or its related parties. Bitcoin and Ether are the clearest examples. Security tokens, governance tokens issued by the reporting entity's own protocol, and most NFTs generally fall outside the scope.
How should USDC or other fiat-backed stablecoins be classified under US GAAP?
There is no definitive guidance specific to stablecoins. Classification depends on the legal structure of the specific token: whether redemption rights are contractually enforceable (potentially a financial instrument), whether the asset meets the low-risk, short-maturity, and high-liquidity criteria for cash equivalents under ASC 305, or whether it defaults to in-scope treatment under ASC 350-60. Each outcome has different measurement and disclosure consequences. Preparers must document the basis for their chosen classification with reference to the specific terms of the stablecoin.
Does moving crypto to a DeFi protocol or a third-party wallet trigger derecognition?
Not automatically. Derecognition requires transfer of control, not just physical movement of the asset. If the entity retains the ability to withdraw the asset and the counterparty cannot direct its use independently, control has likely not transferred and the asset remains on the balance sheet. The contractual and economic terms of each arrangement must be assessed individually.
How do companies determine fair value when crypto trades on multiple exchanges?
ASC 820 requires the use of the principal market, defined as the market with the greatest volume and level of activity for the asset. Companies must select and consistently apply a principal market for each asset class they hold, document the basis for that selection, and update the analysis if market activity shifts materially. Because crypto markets operate continuously, a policy must also specify the precise time at which the period-end price is captured.
What is the accounting treatment for gas fees incurred when acquiring crypto assets?
US GAAP does not provide explicit guidance. Preparers must determine whether gas fees are incremental costs of acquisition that should be capitalised into the asset's carrying amount, or period costs to be expensed. Either position can be supported, but the choice must be documented, applied consistently across all transactions, and disclosed as part of the entity's accounting policy for crypto assets.
Source: Accounting Today