Accounting for Cryptocurrency: Guidance for Nonprofits

Key Takeaways

• ASU 2023-08 provides specific guidance for the measurement, presentation, and disclosure of cryptocurrency assets for nonprofits, effective from December 15, 2024.
• Donated cryptocurrency that is immediately converted to cash should be classified within operating cash flows, or financing cash flows if restricted for long-term purposes.
• Nonprofits must disclose detailed information about cryptocurrency assets, including fair value, cost basis, gains and losses, and any contractual sale restrictions.

Guidance for nonprofits holding cryptocurrency assets

In the ever-evolving landscape of nonprofit fundraising, innovative approaches are at the forefront of driving impactful change. As digital currencies gain mainstream acceptance, cryptocurrency donations present a unique and promising avenue for organizations to diversify their funding strategies.

If your nonprofit is venturing into the intricate yet promising world of cryptocurrency donations, it is important to understand the following accounting requirements related to digital asset donations.

ASU 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60)

ASU 2023-08 gives specified guidance for subsequent measurement, presentation and the disclosure of crypto assets to increase transparency. Initial measurement, recognition, and derecognition of crypto assets remain in line with other generally accepted accounting procedures (GAAP). Crypto assets held as of reporting dates will be valued at fair value and gain and losses will be recognized within changes in net assets. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

Overview of disclosure requirements

1. Cash receipts resulting from sale of donated crypto assets (such as contributions) that are received and immediately converted, should be classified with operating cash flows. If the donor has restricted the use of the contribution to a long-term purpose, then cash receipts should be classified within financing cash flows.
2. Crypto assets measured at fair value must be presented separately from other intangible items on the statement of financial position and changes from remeasurement of crypto assets must be presented separately from changes in the carrying amounts of other intangible assets in the statements of activities.
3. If NOT immediately converting crypto assets received as contributions into cash, disclosure of the following details:

• • Name and number of units held, along with cost basis and fair value (can be aggregated if not individually significant)
  • Method used to determine cost basis for computing gains and losses (FIFO, specific identification, average cost, other)
  • If not presented separately, include within the line item on the statement of activities where gains and losses are reported
  • Reconciliation of activity from opening and closing balances (additions, disposals, gains and losses)
    • Description of the nature of activities that result in additions and disposals
    • Total cumulative realized gains and losses during the period
  • Fair value of crypto assets subject to contractual sale restrictions, nature and remaining duration of any sales restrictions and circumstances that could cause the restrictions to lapse.

Conclusion

Cryptocurrency donations are a growing part of nonprofit fundraising, offering exciting possibilities for innovation and engagement. However, careful planning and adherence to new standards like ASU 2023-08 are essential. By taking proactive measures, nonprofits can embrace cryptocurrency as a valuable asset in their mission to create positive change.

Your Keiter nonprofit team is closely monitoring new and changing regulations regarding cryptocurrency. Questions specific to your organization’s digital asset donations? Contact your Keiter Opportunity Advisor.

Source

FASB Accounting Standards Update | Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60)