FASB’s proposed amendments to Topic 230 would clarify when certain digital assets may qualify as cash equivalents and would require new disclosures about the assets companies include in cash equivalent balances. Classification would remain an accounting policy election. An entity would not be required to present a digital asset as a cash equivalent solely because it has characteristics consistent with the proposed examples.
Why FASB Is Addressing Cash Equivalents & Digital Assets
Stakeholders told FASB that uncertainty regarding whether certain stablecoins meet the definition of cash equivalents has led to diversity in practice. Some entities have concluded that certain stablecoins meet the definition of cash equivalents, while others have concluded that they do not. To address that uncertainty, the proposed update would provide illustrative examples showing how the existing definition of cash equivalents applies to certain digital assets. The Board also proposes new disclosures about the significant components of cash equivalents to provide investors with greater transparency into the assets included in those balances.
Insight From Forvis Mazars: Stablecoins are increasingly used to move funds and settle transactions and are often touted as cheaper and faster ways to move money. As their use grows, companies may hold larger balances for operational purposes. The proposal gives companies a clearer framework for determining when those balances may qualify as cash equivalents under existing U.S. GAAP.
What Would Qualify as a Cash Equivalent?
The proposal identifies several characteristics that support presentation as a cash equivalent:
- A qualifying digital asset would provide a holder with a contractual right to redeem for cash on demand.
- The holder would have the ability to redeem directly with the issuer for a known amount of cash.
- The issuer must hold enough reserves to match the outstanding digital assets in circulation, with those reserves consisting of short-term, highly liquid assets.
One illustrative example from the exposure draft features a stablecoin that is redeemable directly with the issuer at $1 per token. The issuer maintains sufficient reserves in cash and Treasury bills with original maturities of three months or less. Under those facts, the example concludes that the asset meets the definition of cash equivalents.
Insight From Forvis Mazars: Companies evaluating a stablecoin as a cash equivalent should understand the terms behind the asset. The analysis will depend heavily on the holder’s contractual redemption rights and the issuer’s ability to meet those redemption requests. This may require companies to obtain information about the stablecoin and its issuer that extends beyond the token’s market price.
Why Redemption Rights Matter
The proposal highlights direct redemption rights as a key consideration. In one example, the holder can redeem directly with the issuer. In another, the holder relies on active secondary markets and expects to obtain approximately one dollar per token through a secondary sale. The proposed guidance reaches different conclusions under those two fact patterns.
A direct contractual redemption right supports the conclusion that the asset is readily convertible into a known amount of cash. In the second example, the holder instead relies on secondary market liquidity rather than direct redemption with the issuer. The Board noted that intermediary relationships introduce additional counterparty credit risk and make conversion into a known amount of cash less direct and less certain.
Insight From Forvis Mazars: The outcome changes when the holder loses the ability to redeem directly with the issuer. That detail drives the conclusion in the second example and highlights the Board’s focus on contractual redemption rights when evaluating whether a digital asset qualifies as a cash equivalent.
Reserve Assets Could Drive the Analysis
Reserve composition plays a significant role in the proposal’s analysis. One example examines a stablecoin backed by reserves consisting of crypto assets and gold. The example concludes that the stablecoin does not meet the definition of a cash equivalent. FASB explains that the value of those reserve assets may change for reasons other than changes in interest rates and, therefore, presents more than an insignificant risk of changes in value. The proposal identifies reserves maintained on at least a one-to-one basis in short-term, highly liquid assets as a key attribute of a stablecoin that qualifies as a cash equivalent.
Insight From Forvis Mazars: Reserve composition could become an important part of the accounting analysis. FASB indicates that entities will need sufficient information about the amount and composition of reserve assets held by the issuer when evaluating whether a stablecoin qualifies as a cash equivalent. Companies may need access to information about those reserves to support their accounting conclusions.
New Disclosure Requirements
The proposal’s disclosure requirements reach beyond digital assets. Any entity that presents assets as cash equivalents would disclose the significant components of those balances in annual reporting periods. Examples in the proposal include Treasury bills, commercial paper, money market funds, and stablecoins. Related amounts for each significant component also would be disclosed.
The Board believes this information would improve transparency and help investors assess the types of assets included within cash equivalent balances. The proposed disclosure applies regardless of whether the components include digital assets.
Insight From Forvis Mazars: Many companies with no exposure to digital assets may still feel the impact of this proposal. The disclosure provisions apply broadly. Finance teams may want to consider whether existing reporting processes capture the level of detail needed to identify significant components of cash equivalents.
What Happens Next?
Comments on the exposure draft are due by November 19, 2026. The Board will determine an effective date after reviewing stakeholder feedback. Early adoption would be permitted if a final standard is issued and financial statements have not yet been issued or made available for issuance. The proposal includes transition provisions and requires disclosures explaining the change in accounting principle upon adoption.
How Forvis Mazars Can Help
Entities holding stablecoins may need to evaluate redemption rights, reserve arrangements, and presentation under Topic 230. The proposed disclosure requirements also could affect information included in annual financial statements. Professionals at Forvis Mazars advise companies on digital asset accounting, financial statement presentation, accounting policy considerations, and disclosure requirements under U.S. GAAP.