Accounting for Cryptocurrencies

Abstract

Corporate interest in cryptocurrencies is growing quickly, with Bitcoin and Ether emerging as the top-of-mind digital assets. This paper studies how U.S. public firms account for crypto assets using a hand-collected sample from 2013 to 2021. Our analyses yield three key findings. First, although corporate crypto holdings are rising, it is difficult to estimate the landscape due to the lack of disclosure requirements and authoritative rules. Second, firms exercise considerable discretion in accounting for and disclosure of crypto holdings. Our sample includes firms using both fair value accounting and accounting for indefinite-lived intangible assets, with the latter being more prevalent recently. We also observe variations in impairment test assumptions and the extent of fair value disclosures. Third, consistent with theory, firms, if unguided, are more likely to adopt fair value accounting or make fair value disclosures when cryptocurrencies are more liquid. Our results are timely and informative as crypto accounting is a current topic on the FASB’s recognition and measurement agenda, with authoritative rule setting underway.

Keywords: Cryptocurrency, Accounting, Liquidity

JEL Classification: M40, M41, M48