Crypto Asset Impairment: A Thing of the Past?

Elior Greenbaum, CPA
January 30, 2023
Recent years have seen a significant increase in the use and acceptance of Crypto Assets as a form of payment and investment. As a result, Crypto Asset accounting practices are now more important than ever for businesses and individuals who hold these assets.

Impairment vs. Fair Value

Prior to the October 12, 2022 announcement by the Financial Accounting Standards Board (FASB), one key accounting challenge in this respect revolved around the Crypto Asset impairment requirements. Accounting Standards Codification (ASC) 350—which provides guidance regarding how to manage impairment—dictates that Crypto Asset should be treated as an indefinite-lived intangible asset and tested for impairment on an annual basis. If an impairment were to be identified within a reporting period, then the asset's carrying value would be reduced to its lowest observable value on the balance sheet, with the corresponding impairment losses presented on the income statement. Unfortunately, any subsequent increases in value would be irreversible.

Highlighted below is an example of a balance sheet depicting how a business or individual would report Crypto Assets using the Impairment method (shown as of January 10, 2023).

As shown above, accounting for impairment is traditionally a complex and time- consuming process: particularly for those who hold multiple cryptocurrencies and engage in countless transactions. Keeping track of potentially millions of fractional crypto shares that are received and sent out and then tracking the lowest price of remaining tokens during the period held is often a daunting task.

However, as the use of Crypto Assets continues to become more widespread, the FASB has made a recent push towards fair value reporting rather than impairment. This approach involves regularly assessing the value of assets and reporting these at their fair market value on the balance sheet, as per ASC 820 guidance. One should determine fair value by using a reliable and active Crypto Asset exchange rate: allowing for a more accurate representation of the asset’s true value (as of the report date) and reducing the burden of tracking tokens and impairing them on a periodic basis.

Highlighted below is an example of identical assets reported using the Fair Value method (shown as of January 10, 2023).

As demonstrated above, reporting differences between the two methods used exceed $1.4 million. Thus, the implications of this shift in reporting are substantial and can tremendously impact the financial snapshot of a Crypto Asset balance sheet. With this in mind, it’s no wonder that Crypto Asset values listed on the balance sheet are sometimes misleading to investors, banks, and other prospective users of said financial data when the Impairment method is utilized.

Hoping to avoid this complicated process? Look no further than Tres: a financial data platform headquartered in Tel Aviv, Israel that recognized the painful process of Crypto Asset reporting endured by numerous crypto users and thus built a platform that supports both the Impairment and Fair Value methods. Accounting and finance professionals appreciate Tres’s customized reports, which allow users to accurately view their Crypto Asset portfolio whenever and however they’d like.


In closing, the FASB’s decision to shift from the Impairment method of Crypto Asset accounting to the Fair Value method will ultimately benefit the accounting, financial, and crypto industries: paving the way for a more accurate representation of the Crypto Asset's true value and minimizing the responsibility of holders to track assets by lot and impair them based upon the holding period.

Regardless of whether users choose to account for Crypto Assets using the Fair Value or Impairment method, they are wise to enlist the help of Tres: an excellent tool to stay compliant.