Nonprofit accounting for Crypto assets: Should you early adopt ASU 2023-08?

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-08, Goodwill and Other—Crypto Assets (Subtopic 350-60), significantly impacting how non-profit organizations must account for crypto assets. This update introduces new guidelines for measuring and disclosing these holdings, requiring non-profits to adapt their financial reporting practices.

At a glance

• Main Takeaway: Adopting ASU 2023-08 allows nonprofits to value certain crypto assets at fair value. Under current GAAP, these assets are measured at cost and adjusted for impairment.
• Impact on Your Business: Reporting crypto assets as fair value provides more relevant information and is a more accurate representation of their worth at a given point in time.  
• Next Steps: If your nonprofit holds crypto assets or plans to soon, consider early adopting.

The full story:

What does ASU 2023-08 entail?

ASU 2023-08’s key aspect is requiring fair value measurement for certain crypto assets. This means the reported amount in financial statements must reflect the asset’s current market price under Topic 820, Fair Value measurements, rather than the original cost adjusted for impairment. Also, additional presentations and disclosures are required. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024; early adoption is permitted.

Impacts on Non-Profits:

• Enhanced transparency: Fair value measurement enhances transparency by reflecting the actual economic value of crypto assets at any given time. This can  benefit donors and stakeholders seeking accurate information on a non-profit’s financial health.
• Increased volatility: Crypto assets are notoriously volatile, meaning their market price can fluctuate significantly. This could also lead to recognizing large gains/losses, a risk that should be considered.
• Increased complexity: Implementing fair value measurement under Topic 820 can require additional time and resources. This requires policies and procedures regarding which crypto assets will be accepted and how they will be valued. It may not make sense to accept crypto assets that don’t have readily determinable fair values.
• Additional disclosure: additional information is required to be disclosed, including the following.
  • Cost, fair value, number of units held by significant assets.Contractual sale restrictions, if any.Roll forward of activity during the reporting period.Gains/losses reporting separately or disclosed.
  • Method for determining cost basis (e.g., FIFO).

Non-profit organizations holding or receiving crypto assets should take proactive steps to:

• Update policies and procedures: Crypto assets should only be accepted if there are established process and procedures. Update your gift acceptance policy if you plan to receive crypto assets as a donation. The policy should include what assets can be accepted and how they will be valued.
• Invest in infrastructure: Depending on the volume and complexity of your crypto holdings, make sure you have a way to receive and sell the asset. This is typically done by creating an account or virtual wallet in the nonprofit organization’s name.  
• Maintain clear documentation: Meticulously documenting the acquisition, transfer, and valuation of crypto assets is not just a task, it’s a key to ensuring accurate reporting and demonstrating compliance with the new standards, which is crucial for the success of your organization.

Conclusion:

ASU 2023-08 introduces a new era for non-profits holding crypto assets. While it presents challenges in volatility and complexity, it also offers increased transparency and aligns with the evolving financial environment. By seeking proper guidance and taking proactive steps, non-profits can navigate this change effectively and ensure their financial reporting practices remain compliant and accurate.

If you have questions regarding nonprofit account for crypto asset reach out to Mark Robins, Partner, Assurance Services @ mark.robins@aprio.com.

If you have questions regarding cryptocurrency & blockchain reach out to Emily Cheshire, Director Managed Services & Technology Practice, emily.cheshire@aprio.com.