Unrealized Gains and FASB Fair Value: Crypto Accounting After ASU 2023-08
Quick answer: An unrealized gain or loss is the change in a crypto asset's value while you still hold it. A realized gain locks in when you sell or exchange it. Since FASB ASU 2023-08 took effect in 2025, US companies measure in-scope crypto at fair value and run both through net income. Tax still applies only when a gain is realized.
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Unrealized vs. realized gains and losses
These two terms are the foundation of crypto accounting, and mixing them up is where most errors start.
An unrealized gain or loss is a paper figure: the difference between what a crypto asset is worth right now and what you paid for it, while you still hold it. If your company bought 10 ETH at $2,000 each and ETH now trades at $3,000, you've got a $10,000 unrealized gain. You haven't sold anything, and the number moves with the market every day.
A realized gain or loss locks in the moment you dispose of the asset, whether you sell it for cash, swap it for another token, or use it to pay for something. Sell those 10 ETH at $3,000 and the $10,000 becomes a realized gain: concrete, recorded, and, for tax, a taxable event.
The formula is the same for both. Only the trigger differs.
- Unrealized gain/loss = current market value − cost basis (while held)
- Realized gain/loss = proceeds − cost basis (at disposal)
The arithmetic isn't the hard part. The timing is: the question of when an unrealized gain is allowed to show up in your financial statements. That's exactly what changed.
Book and tax would soon tell different stories.
How crypto gains hit the books: the old way vs. the new way
Until recently, US GAAP lacked a dedicated crypto standard, so companies defaulted to treating crypto as an indefinite-lived intangible asset. That model had a punishing quirk. You measured crypto at cost, tested it for impairment, and could only ever write it down. If Bitcoin fell below your cost, you booked an impairment loss. If it then recovered, or soared past your cost, you couldn't write it back up. The gain stayed invisible until you sold.
The result was financial statements that showed a company's crypto at its lowest historical value, not what it was actually worth. A treasury of Bitcoin bought at $20,000 and trading at $60,000 still sat on the books near $20,000, less any impairments. FASB fixed this with ASU 2023-08.
| Before ASU 2023-08 | Under ASU 2023-08 | |
|---|---|---|
| Model | Indefinite-lived intangible, cost less impairment | Fair value under ASC 820 |
| Price rises | Nothing changes on the books; the gain is hidden until sale | Unrealized gain recognized in net income |
| Price falls | Impairment loss, written down | Unrealized loss in net income |
| Recovery after a drop | Can't be written back up | Recognized as the price recovers |
| Balance sheet shows | Lowest historical value | Current fair value |
FASB ASU 2023-08, explained
ASU 2023-08, "Accounting for and Disclosure of Crypto Assets", issued by the FASB on December 13, 2023, replaces the impairment-only model with fair value measurement. Under the new rules, an entity measures in-scope crypto at fair value (under ASC 820) at each reporting date and recognizes every change in value, up or down, in net income for the period. Unrealized gains finally count, and so do recoveries.
Effective date: the standard applies to all entities, public companies, private companies, and not-for-profits, for fiscal years beginning after December 15, 2024, including interim periods within them. Early adoption was permitted. For most calendar-year companies, 2025 is the first year on the new basis.
If that's your company, it already applies.
What's in scope, and what isn't
ASU 2023-08 is deliberately narrow. An asset qualifies only if it meets all of these criteria: it meets the definition of an intangible asset, doesn't give the holder enforceable rights to or claims on underlying goods, services, or other assets, resides on a blockchain or similar distributed ledger, is secured through cryptography, is fungible, and wasn't created or issued by the reporting entity or a related party.
| In scope | Out of scope |
|---|---|
| Bitcoin, Ether, and similar fungible tokens | NFTs, because they aren't fungible |
| Held as an asset you didn't issue | Tokens you issued yourself |
| On a blockchain, secured by cryptography | Wrapped tokens and assets that confer a claim |
| Carries no enforceable claim on something else | Some fiat-backed stablecoins with a redemption right |
That last row is the one to watch if you run a stablecoin treasury. A fiat-backed stablecoin that gives the holder an enforceable right to redeem for underlying assets may fail the "no enforceable rights" test and fall outside 350-60. It's a genuinely gray area, and the right answer depends on the specific token's terms, so confirm the treatment with your accountant rather than assuming.
The standard also requires new disclosures: significant crypto holdings, any restrictions on them, and a reconciliation of changes over the period. Fair value isn't optional reporting any more. It's the measurement basis plus a disclosure obligation.
Book vs. tax: the distinction that trips businesses up
Here's the trap. ASU 2023-08 changes how crypto appears in your financial statements (GAAP, or book accounting). It does not change how crypto is taxed. Those are two different systems, and they now diverge sharply for crypto.
For US tax, digital assets are treated as property, and the IRS taxes gains only when they're realized, when you sell, exchange, or otherwise dispose of the asset. Holding an appreciating token doesn't create taxable income, however high it climbs.
So after ASU 2023-08 you can have a year where your income statement shows a large unrealized gain that lifts net income, while your tax return reports nothing on that position, because you didn't sell. The reverse is true for unrealized losses. That gap is a book-tax difference your accountant tracks and reconciles, typically as a deferred tax item.
The lesson is short. A fair-value gain on your books isn't a tax bill, and a fair-value loss isn't a deduction, until you realize it. When you do sell or convert, the realized side is where tax reporting and forms like the new Form 1099-DA come in.
What this means for your business
Three practical consequences follow from the switch to fair value.
- Your reported earnings will move with the market. Crypto on the balance sheet now injects its volatility straight into net income each period. A good quarter for Bitcoin flatters your P&L; a bad one drags it down, on paper, before you've sold a thing.
- Period-end valuation becomes a real task. You need a defensible fair value for every in-scope asset at each reporting date, sourced consistently, plus the data to produce the new disclosures. That's a step up from occasional impairment testing.
- Your bookkeeping has to carry cost basis and fair value in parallel. Cost basis for the realized gain or loss and tax reporting, fair value for the books. Clean crypto bookkeeping is what makes both possible, and the broader setup is covered in our guide to crypto accounting for business.
Most of the exposure lives in the wallets themselves.
If your company holds crypto mainly as an operating treasury, stablecoins you receive (often against a proforma or invoice), hold, and pay out rather than a Bitcoin investment position, keeping those organized is what turns the new fair-value and disclosure requirements from a scramble into a routine. The payments side runs through a gateway or processor; the accounting side needs the wallet balances and history in one place, from business wallets through reconciliation. That's the record VaultNow builds for a finance team.
Fair value made the books honest. It also made them volatile.
Running a stablecoin treasury and want the fair-value numbers and disclosures to come off one source of truth? That's what VaultNow is for.
Frequently asked questions
What is an unrealized gain or loss in crypto?
An unrealized gain or loss is the change in a crypto asset's value while you still hold it, the difference between its current market value and your cost basis. It's a paper figure that moves with the market and isn't locked in until you sell or exchange the asset. Buying 10 ETH at $2,000 when ETH later trades at $3,000 gives you a $10,000 unrealized gain.
What is the difference between realized and unrealized gains?
An unrealized gain exists on paper while you hold an asset. A realized gain locks in when you sell, exchange, or dispose of it. Realized gains are concrete, recorded, and, for US tax, taxable events. Unrealized gains fluctuate with the market and, under US tax rules, generally aren't taxed until realized.
What is FASB ASU 2023-08?
ASU 2023-08, "Accounting for and Disclosure of Crypto Assets," is the FASB standard that requires companies to measure in-scope crypto at fair value and recognize changes in value in net income each reporting period, with enhanced disclosures. It replaces the old cost-less-impairment model and is effective for fiscal years beginning after December 15, 2024.
When does the FASB crypto fair value rule take effect?
ASU 2023-08 is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption was permitted. For most calendar-year companies, the first reporting year on the new fair-value basis is 2025.
Are stablecoins covered by ASU 2023-08?
Not necessarily. The standard excludes assets that give the holder enforceable rights to or claims on underlying goods, services, or other assets. A fiat-backed stablecoin that can be redeemed for underlying assets may fail that test and fall outside the standard's scope. The treatment depends on the specific token's terms, so confirm it with your accountant.
Are unrealized crypto gains taxed?
Generally no. US tax treats digital assets as property and taxes gains only when they're realized through a sale, exchange, or disposal. ASU 2023-08 changes how unrealized gains appear in your financial statements, not how they're taxed, which creates a book-tax difference your accountant tracks until the gain or loss is realized.
This is general information, not accounting or tax advice. Whether a token is in scope for ASU 2023-08, and the book and tax treatment of a given position, turn on the facts; confirm yours with a qualified accountant. Positions stated are as of 2026.
