FASB Wrapped Tokens, ASC 350-60, and Stablecoin Cash Equivalent Guidance
FASB advanced wrapped token accounting under ASC 350-60 and proposed broader cash equivalent disclosures that could apply to all entities, not just stablecoin holders.
What the Board Decided
The Board made several key decisions that could matter well beyond a narrow subset of digital asset holders:
Include wrapped tokens within the scope of ASC 350-60, which would allow them to be measured at fair value.
Add illustrative examples to the Codification explaining how the definition of cash equivalents should be applied in determining whether certain stablecoins should or should not be classified as cash equivalents.
Propose annual disclosures of significant components of cash equivalents that would apply to all entities.
At its April 15 meeting, the Financial Accounting Standards Board discussed staff research and stakeholder feedback on two projects: accounting for transfers of crypto assets and the classification of certain digital assets as cash equivalents.
Wrapped Tokens and ASC 350-60
First, the Board decided to expand the scope of ASC 350-60 to include certain economically similar crypto assets, including wrapped tokens and receipt tokens, under the same fair value model as other in-scope crypto assets. The Board also decided that wrapped tokens should be disclosed separately from the underlying crypto asset.
Stablecoins as Cash Equivalents
Second, the Board considered stakeholder requests for more detailed guidance on when digital assets may qualify as cash equivalents. Rather than revising the definition of cash equivalents in the Master Glossary, the Board chose to move forward with illustrative examples. That approach keeps the existing definition in place while giving preparers more direction on how the Board expects it to be applied. Based on the Board’s discussion, those examples are expected to reinforce a high threshold, including the importance of maintaining at least 1:1 reserves in cash or traditional cash equivalents, and of a direct, on-demand contractual right to a known amount of cash.
New Annual Disclosures of Cash Equivalents
The Board also supported annual disclosure of the significant components of cash equivalents for all entities, extending well beyond the project’s original focus on stablecoins. Those decisions are expected to be reflected in an exposure draft for public comment with a 90-day comment period.
Practical Takeaways
If your organization holds, for example, WBTC (or other wrapped tokens), those assets could fall within ASC 350-60 and be measured at fair value if the Board’s proposal is finalized. WBTC holdings would need to be disclosed separately from BTC holdings.
The Board has not yet made decisions on crypto transfer derecognition issues.
The Board did not change the current accounting policy election framework for cash equivalents. Your organization can elect an accounting policy to classify certain stablecoins as cash equivalents, as long as all applicable requirements set in the glossary definition of cash equivalents are met.
The proposed annual disclosure of significant components of cash equivalents could affect all entities, not just those with stablecoin-related fact patterns. In that respect, the proposal has a broader reach than the project title might initially suggest.