The Securities and Exchange Commission (SEC) accepted third quarter supplemental updates to the Financial Accounting Standards Board’s (FASB) Generally Accepted Accounting Principles (GAAP) Financial Reporting Taxonomy, which companies use in their financial reporting, the SEC and FASB announced this week.
The changes relate to tagged company disclosures needed to safeguard crypto-assets held by an entity for platform users as well as a change requiring business development companies to submit financial statement information using Inline Extensible Business Reporting Language (XBRL).
- Inline XBRL is a structured data language used by companies to prepare digital financial reports that can be read by both humans and machines, according to the SEC, which issued rules mandating XBRL use in 2009. Proponents say the agreed-upon format increases transparency and accessibility in financial markets.
Financial executives filing reports with the SEC submit electronic financial statements built on GAAP taxonomy, essentially a dictionary of electronic financial statement terms, according to a FASB. FASB regularly updates the taxonomy to reflect new accounting and reporting guidance.
Companies that are not subject to either of the latest changes can continue using the 2022 GAAP Taxonomy accepted by the SEC in March, FASB said.
The updates related to crypto accounting come as digital asset valuations have taken a beating this year and drawn increasing regulatory scrutiny. In April the SEC issued guidance saying that companies should disclose the risks to investors from cryptocurrencies held on behalf of customers and account for the assets as liabilities.
FASB members in May unanimously agreed to prioritize setting new accounting standards related to crypto assets, marking a change in its stance since 2020 when it decided against doing so.