The Financial Accounting Standards Board drafted proposed rules on Tuesday intended to clarify how the current definition of cash equivalents applies to certain digital assets, such as stablecoins, and to increase transparency about the significant components of cash equivalents.
During an agenda consultation project last year and through other feedback, stakeholders noted uncertainty about whether certain digital assets, including stablecoins, meet the definition of cash equivalents under U.S. GAAP.
That uncertainty has led to diversity in practice, FASB was told.
To address that feedback from stakeholders, FASB’s proposed Accounting Standards Update would provide illustrative examples to promote more consistent application of that definition and improve comparability among entities that elect to present qualifying digital assets as cash equivalents.
According to the proposed ASU, the examples illustrate certain attributes that a digital asset designed to maintain a stable value relative to a reference asset, such as a fiat currency, would need to meet that current definition, including:
- An on-demand contractual cash redemption right;
- A direct redemption right with the issuer for known amounts of cash; and
- Segregated reserve assets held by the issuer on at least a one-to-one basis (relative to the issued and outstanding digital assets in circulation) in short-term, highly liquid assets.
“By illustrating how the definition of the term cash equivalents may apply to certain digital assets, the guidance would (1) promote consistent and comparable presentation in financial statements among entities that elect to present certain digital assets as cash equivalents and (2) provide investors with more decision-useful information,” the proposed ASU states. “In addition, the guidance also would assist entities when applying judgment about whether certain digital assets may meet the definition of cash equivalents.”
The proposal wouldn’t change the current definition of the term “cash equivalents.”
It would also require all entities to provide enhanced disclosures of significant components and related amounts of cash equivalents, regardless of whether any of those assets are digital assets. That proposed disclosure would provide investors and other financial statement users with more transparent information about the significant components of cash equivalents, FASB says.
The proposed ASU goes on to say:
The amendments in this proposed Update would require an entity that presents qualifying assets as cash equivalents to disclose, in annual reporting periods, the significant components (for example, U.S. Treasury bills, commercial paper, stablecoins, and money market funds) and related amounts of cash equivalents (regardless of whether any of those assets are digital assets). This proposed disclosure would better align with a similar disclosure requirement under IFRS Accounting Standards, increase transparency, and enhance an investor’s ability to assess asset classes that an entity presents as cash equivalents.
The proposed illustrative examples would apply to entities that have certain digital assets. The proposed disclosure requirement would apply to entities that present assets as cash equivalents, FASB says.
After FASB decided to push forward with this project last April, top 10 accounting firm CBIZ said in a blog post that issuers and holders of stablecoins should pay attention to any developments regarding the classification of certain digital assets as cash equivalents.
“Stablecoin issuers may face increased pressure to demonstrate the quality and liquidity of reserve assets, while holders will have clear examples to assist them in assessing whether their stablecoin positions qualify as cash equivalents under the proposed examples,” the blog post says. “Financial statement preparers will also need to evaluate whether any cash equivalent balances require more granular disclosure, update internal controls, and revisit how stablecoin activity is presented in the statement of cash flows.”
FASB is asking stakeholders to review and provide comments on the proposed ASU by Nov. 19, 2026.
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