Nonprofits: New FASB Update Explained
Navigating the Crypto Frontier: A Guide for Nonprofits and the New FASB Update
The world of finance is constantly evolving, and the rise of cryptocurrencies has introduced a whole new asset class for organizations to navigate. For nonprofit organizations in particular, understanding the accounting and reporting implications of crypto can be daunting. Luckily, recent guidance from the Financial Accounting Standards Board (FASB) provides much-needed clarity.
Demystifying Crypto for Nonprofits
In December 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-08, specifically focusing on accounting for and disclosure of crypto assets. This update applies to all entities, including nonprofits, for fiscal years beginning after December 15, 2024. While early adoption is allowed, understanding the key points of this update is crucial for nonprofits venturing into the crypto space.
What are Crypto Assets?
One of the most significant aspects of ASU No. 2023-08 is its clear definition of crypto assets. This definition encompasses a wide range of digital assets, including:
- Bitcoin and Ethereum: The most well-known cryptocurrencies.
- Stablecoins: Cryptocurrencies pegged to a stable asset like the US dollar.
- Utility tokens: Tokens that provide access to goods or services on a blockchain platform.
For nonprofits, this definition is particularly relevant as it clarifies which digital assets they may hold for investment purposes or receive as contributions.
Valuing Crypto Assets in Your Financial Statements
ASU No. 2023-08 requires most crypto assets to be measured at fair value. This means that the value reported in your financial statements should reflect the current market price of the asset. Due to their volatile nature, determining fair value for crypto assets can be complex. Nonprofits may need to seek specialized expertise from valuation professionals to ensure compliance with the new guidance.
Crypto donations: exciting yet complex. Understand the accounting & reporting rules to manage risk and ensure compliance.
Enhanced Disclosures for Crypto Holdings
The update also mandates specific disclosures about the nature, amount, and location of held crypto assets. Increased transparency allows stakeholders to better understand the risks and opportunities associated with a nonprofit’s crypto holdings.
Preparing Your Nonprofit for the Crypto Future
While ASU No. 2023-08 provides a roadmap for accounting for and reporting crypto assets, nonprofits need to take proactive steps to prepare for the future. Here are some key considerations:
- Review your investment policies: Ensure your policies address the acquisition and holding of crypto assets.
- Invest in training: Train your staff on the accounting and reporting requirements for crypto assets.
- Seek professional guidance: Consult with your accountant or financial advisor to ensure proper implementation of the new update.
Embracing the Evolving Landscape: Opportunities and Challenges
The rise of crypto presents both opportunities and challenges for nonprofits. On the one hand, crypto donations can offer a new source of funding for worthy causes. On the other hand, the volatility of crypto assets can introduce new risks to financial stability. By understanding the accounting and reporting requirements outlined in ASU No. 2023-08, NPOs can navigate the crypto frontier with confidence, ensuring transparency and responsible stewardship of their resources.
Remember, staying informed and adapting to the evolving financial landscape is crucial for the continued success of any organization. By embracing new opportunities while managing associated risks, nonprofits can leverage the potential of crypto to further their missions and make a positive impact on the world.
Brady Ware Nonprofit Advisors want to help you fulfill your mission with financial health and compliance services and a network of nonprofit consultants who specialize in strategic decision-making.
Questions?
Thomas serves a wide range of clients with a special interest in nonprofit organizations. He works with his clients to address various needs, including the development and implementation of a strong internal control environment and various other accounting, tax, and system issues with the ultimate goal of helping organizations achieve their missions.