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It’s treated as capital gain not fx gain
@GT1: what about asset class and leveling? I’d be interested in hearing how teams are defining “active markets”.
Something like bitcoin where you have actual exchanges where you purchase the currency with dollars based on quoted prices from the market sounds like level 1 to me. I would classify this as a currency and not an investment since you can use it to purchase products on the internet and some retail establishments. But then again I'm just making this up since I have never seen it before.
Does it matter that there aren’t actually that many participants in the market? I get that it’s “active” in terms of trade volume, but it’s also a relatively smaller number of people passing the same asset back and forth.
I think there are plenty participants....
Would you adjust down for the plunge in market value after 12/31?
yes i would consider it a highly liquid active market with quoted trading prices on multiple exchanges. this is the essence of a level 1 security. sure it’s a currency but it’s far too volatile to transact with. so how to disclose is totally a judgement call. whether to make any adjustment depends on the materiality of the cryptocurrencies to the overall financial statements. odds are, even a crypto hedge fund will have a diversified enough portfolio that the bitcoin nosedive is at most a subsequent event disclosure, and even that is assuming there are no indicators the market is turning around. I imagine you’d see a bunch of new risk disclosures in the FS too regarding the crypto market and the nature of the coins.
Level 1-2 depends on which currency but be careful for a possible sub event disclosure if value dropped to a material level afterwards. FASB is considering to issue a new standard for digital currency