Not every digital asset on a company's books gets fair value treatment. FASB Accounting Standards Update 2023-08, which created Subtopic 350-60, applies a precise, six-part scope test, and an asset must satisfy all six conditions to be measured at fair value through net income under the new rule. An asset that fails even one criterion stays outside the subtopic and continues under whatever accounting applied before-frequently the indefinite-lived intangible, cost-less-impairment model. Knowing the test is what separates a defensible read of a crypto balance sheet from a guess.

The Update lists the criteria directly. An asset is within scope only if it meets all of the following.

"1. Meet the definition of intangible assets as defined in the Codification 2. Do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets 3. Are created or reside on a distributed ledger based on blockchain or similar technology 4. Are secured through cryptography 5. Are fungible 6. Are not created or issued by the reporting entity or its related parties."- FASB, ASU 2023-08, source

Walking the six criteria

Each condition does work. The intangible-asset requirement keeps the subtopic within the intangibles part of GAAP and excludes assets that are financial instruments. The no enforceable claims condition is the one that excludes many tokens that function as a claim on something else: a stablecoin redeemable for fiat, a wrapped token representing a claim on an underlying asset, or a tokenized security generally conveys a right to or claim on other assets, which places it outside this subtopic. The distributed-ledger and cryptography conditions describe the technical form of the asset-it must live on a blockchain or similar ledger and be secured cryptographically.

The fungibility criterion is decisive for one widely discussed category: non-fungible tokens (NFTs). Because each NFT is, by design, distinct and not interchangeable with another unit, NFTs fail criterion five and do not receive the Subtopic 350-60 fair value treatment. The final condition-not created or issued by the reporting entity or its related parties-keeps a company from marking its own self-issued token to fair value through income. A protocol or issuer that mints its own coin accounts for that coin under other guidance, not under 350-60, which is reserved for crypto an entity holds but did not create.

What passes and what does not

The clearest in-scope examples are the large, freely traded, non-claim tokens. Bitcoin is the canonical case: it is intangible, conveys no claim on other assets, resides on a blockchain, is cryptographically secured, is fungible, and is not issued by the holder. Filers that hold bitcoin as a treasury asset have adopted the subtopic and now carry it at fair value. Other major fungible network tokens that confer no enforceable claim on underlying assets follow the same analysis.

The out-of-scope set is larger than newcomers expect. It includes NFTs (fail fungibility); tokens that carry a redemption right or represent a claim on fiat, commodities, or securities (fail the no-claims condition); tokens an entity issues itself (fail the self-issuance condition); and any wrapped or receipt-style token whose value derives from a claim on an underlying asset. Each of those continues under its applicable accounting rather than the new fair value model, which is why two companies that both "hold crypto" can report it very differently depending on what, precisely, they hold.

One practical caveat: scope is determined asset by asset, and the same company can hold both in-scope and out-of-scope digital assets, accounting for each under its respective model. Because the consequences-fair value through net income versus cost-less-impairment-are materially different, the scope determination is not a footnote technicality; it is the gate that decides how a digital-asset position moves through the income statement. The six criteria in ASU 2023-08 are the controlling text for that determination.

Why each criterion was drawn where it was

The boundaries are deliberate, and the Board's basis for conclusions explains the logic. The fair value model rests on the premise that the predominant way an entity realizes value from a scoped crypto asset is through exchange in an active market, and that such assets are not combined with other assets to produce value. That premise holds best for fungible, freely tradable tokens with observable market prices-which is why fungibility and the absence of enforceable claims on other assets are load-bearing conditions. A non-fungible token has no interchangeable market unit to price against; a claim-bearing token derives value from the underlying asset it represents rather than from its own exchange, so its economics are better captured by the accounting for that underlying claim. Excluding self-issued tokens prevents an entity from recognizing gains by marking up a coin it created, where there may be no arm's-length market discipline.

The asset-by-asset nature of the test has real consequences for how diversified crypto holders present their books. A company might hold bitcoin (in scope, fair value through net income), a stablecoin it treats as a claim on fiat reserves (likely out of scope as a claim-bearing asset), an NFT collection (out of scope as non-fungible), and a token it issued itself (out of scope as self-issued)-and account for each under different guidance within the same financial statements. That is why "how does the company account for its crypto?" rarely has a one-line answer; the answer depends on running the six-criteria test against each holding. Readers checking a filing's significant-accounting-policies note will often find the company stating explicitly which of its digital assets fall within Subtopic 350-60 and which do not, precisely because the scope line drives such different outcomes.

Finally, the scope test is a status question that can change. A token's characteristics-its fungibility, whether it conveys a claim, who issued it-are generally stable, but the population of assets a company holds shifts as it transacts, so the mix of in-scope and out-of-scope holdings can move period to period. The criteria themselves, however, are fixed text in the Update, and they are the reference every preparer and reader applies to decide whether a given crypto asset receives fair value treatment.