FASB’s Proposed Accounting Standards Update- Statement of Cash Flows (Topic 230)

Executive Summary

On 18 August 2026, the FASB issued a proposed Accounting Standards Update (ASU) on cash equivalents and certain digital assets. It has been widely described as a stablecoin standard. On that reading, its direct effect is limited to a relatively narrow group of entities.

The FASB’s proposed amendment is not a new stablecoin accounting model. It keeps the existing definition of cash equivalents unchanged and adds illustrative examples for applying that definition to certain digital assets. It also introduces a new annual disclosure of the significant components and related amounts of cash equivalents.

• The definition of cash equivalents does not change.
• For certain stable-value digital assets, the examples highlight three attributes: (1) an on-demand contractual cash redemption right, (2) direct redemption with the issuer for a known amount of cash, and (3) at least 1:1 segregated reserves in short-term, highly liquid assets.
• The examples are not a requirement to classify qualifying digital assets as cash equivalents; entities continue to make an accounting policy election.
• The disclosure requirement is broader: it applies to entities that present assets as cash equivalents, whether or not those assets are digital.
• The proposed amendment does not resolve the accounting model for digital assets that fail the cash-equivalent analysis.
• No effective date has been proposed. Early adoption would be permitted when financial statements have not been issued or made available for issuance.

This Early Impressions highlights the key proposed changes to the accounting for cash equivalents, including certain digital assets and stablecoins, and the proposed new disclosure requirements. It also discusses why these changes matter and the key implementation considerations for CFOs, CAOs, controllers, and accounting and financial reporting professionals.

We hope you find this publication valuable and welcome further discussion.

Two Amendments, One Proposal

One clarifies classification. The other introduces a new disclosure.

The proposed amendment addresses two separate issues: classification of certain digital assets and transparency about the composition of cash equivalents.

The FASB issued the proposed amendment in response to diversity in practice over whether certain digital assets, including stablecoins, meet the existing definition of cash equivalents.

Summary of What Has Changed — and What Has Not

The Three Characteristics That Could Make a Stablecoin a Cash Equivalent

Understanding what the FASB’s examples mean in practice.

To qualify as a cash equivalent, a digital asset must meet the existing definition in ASC 230. The FASB’s examples illustrate three characteristics that may support this conclusion for certain stablecoins and similar digital assets.

What the FASB is emphasizing

The proposed amendment highlights that secondary market liquidity alone is not sufficient. Even if a digital asset can be sold easily in an active market, that does not replace a direct contractual right to receive cash from the issuer.

Similarly, digital assets backed by assets that carry significant valuation risk—such as cryptocurrencies or precious metals—are less likely to meet the characteristics illustrated in the proposed amendment.

Key takeaway

The FASB’s examples focus primarily on whether a holder can obtain a known amount of cash on demand and whether the issuer has sufficient liquid reserves to support that redemption.

Digital Assets That Do Not Meet the Illustrative Characteristics

What the proposed amendment addresses — and what it does not

Some early commentary suggests that a stablecoin either meets the three illustrative characteristics and is treated as a cash equivalent, or fails them and is automatically measured at fair value under ASC 350-60. That is not how ASC 350-60 works.

• ASC 350-60 applies only to crypto assets that meet specific scope requirements, including that they do not give the holder enforceable rights to, or claims on, underlying goods, services or other assets.
• A fiat-backed stablecoin with a contractual right to redeem the token for cash generally does not meet this condition.
• As a result, such a stablecoin would be outside the scope of ASC 350-60, regardless of whether it qualifies as a cash equivalent under ASC 230.
• Therefore, failing the cash-equivalent assessment does not automatically mean the stablecoin is measured under ASC 350-60. The entity would need to determine which other US GAAP guidance applies.

How a reserve-backed digital asset is classified under US GAAP

The proposed amendment addresses the first step of this assessment. The steps that follow are unchanged.

Holding of a reserve-backed digital asset

Assessed against the Master Glossary definition of cash equivalents, using the proposed Topic 230 examples as guidance

In most cases, a digital asset that does not meet the illustrative characteristics would be assessed under financial instruments guidance if the holder has a contractual right to receive cash. The specific accounting model would depend on the terms of the asset, which is an area where practice has varied.

• ASC 350-60 would not apply if the asset gives the holder an enforceable claim to cash or other underlying assets. 
• ASC 350-30 would apply only when no other specific US GAAP guidance applies. 
• The proposed amendment therefore clarifies the first step of the analysis—whether an asset may qualify as a cash equivalent—but does not change what happens next. 
• If an entity concludes that a digital asset is not a cash equivalent, it will still need to determine the appropriate accounting model. 
• The proposed amendment does not provide additional examples to help with that next step.

A New Disclosure Requirement for All Entities

The new annual disclosure applies whether or not an entity holds digital assets.

• Entities that present cash equivalents would need to disclose, each year, the significant classes of cash equivalents and the related amounts.
• The requirement would apply regardless of whether the cash equivalents include digital assets.
• The proposed change brings US GAAP closer to IFRS, where disclosure of the components of cash and cash equivalents is already required.
• For companies that already report under IFRS, much of this information may already be available.
• The significant classes could include familiar items such as Treasury bills, commercial paper, money market funds and, where applicable, stablecoins.

Key Challenge: The challenge for many US GAAP preparers is that they have not previously needed to break down the cash equivalents balance at this level. As a result, companies may need to enhance their general ledger mapping, data collection, reporting processes and controls to support the new disclosure.

Practical implications of the new disclosure

• “Significant” is not defined in the proposed amendment. It is not the same as materiality, and entities will need a documented and consistently applied threshold, determined at the class level for each period presented.
• The comparative period is within scope. A class that was not significant in the prior year but is significant in the current year must be presented accordingly, which requires a prior-period analysis that many entities have not previously performed.
• The underlying general ledger mapping may not exist. Cash equivalents are commonly recorded in a small number of accounts that combine money market funds, time deposits, sweep balances, commercial paper and repurchase agreements. Disaggregating these balances is a data exercise rather than a drafting exercise.
• A new tagging requirement arises. The new disclosure will require new XBRL elements, which introduces an additional area of “Operational complexity or filing risk
• The disclosure falls within disclosure controls and procedures, and therefore within management certification. Ownership of the completeness and accuracy of the class breakdown will need to be assigned.
• The work may be manageable, but it will require planning. Entities considering early adoption should start assessing the data, systems and controls needed for the new disclosure well before the reporting date.

The Role of Regulation in Cash-Equivalent Classification

The role of regulation in the accounting assessment

• The proposed amendment would require entities to consider relevant laws and regulations when establishing their policy for determining which qualifying assets are treated as cash equivalents.
• The FASB has not prescribed a specific legal assessment and does not intend to require companies to obtain legal opinions. However, the proposed amendment makes clear that the regulatory status of a digital asset and its issuer may be relevant to the accounting analysis.
• In the US, one relevant framework is the GENIUS Act, enacted on July 18, 2025. The Act generally becomes effective on January 18, 2027, subject to its statutory provisions.
• The US Treasury issued a notice of proposed rulemaking on August 17, 2026, addressing who may issue, offer, or sell payment stablecoins. The OCC and FDIC have also issued related implementing proposals.
• For preparers, this means the accounting assessment may need to consider not only the contractual terms and reserve arrangements of a stablecoin, but also the applicable regulatory requirements.

Regulatory developments and the accounting assessment

When Regulation and Accounting Overlap

• The GENIUS Act’s reserve requirements are broadly similar to the FASB’s third characteristic for certain digital assets.
• Both focus on having sufficient, identifiable reserves made up of highly liquid assets to support redemptions.
• The GENIUS Act also includes requirements related to pledging and rehypothecation of reserves, reserve disclosures, independent examinations and management certification.
• This creates an important timing issue for preparers.
• For example, a stablecoin could meet the FASB’s illustrative characteristics on December 31, 2026, but its issuer could be subject to different licensing requirements once the GENIUS Act takes effect.
• Companies may therefore need to consider both the stablecoin’s characteristics and the regulatory status of its issuer when assessing whether it qualifies as a cash equivalent.
• Implementation matters: Companies should monitor regulatory developments and changes in the issuer’s licensing status, particularly around reporting dates.

The same requirement across three regulatory frameworks

For groups operating across the following geographies, the requirement to consider “relevant laws and regulations” may lead to different conclusions depending on where the entity operates.

Beyond the Balance Sheet: Cash Flows, Covenants and Controls

Why the classification decision can have broader reporting and business implications.

THE CASH FLOW STATEMENT IMPACT

• Cash equivalents are included within the cash and cash equivalents balance.
• Therefore, purchases and redemptions of assets classified as cash equivalents are generally treated as movements within cash, rather than investing cash flows.
• If a stablecoin is classified as a cash equivalent, related purchases and redemptions would not appear as investing cash flows.
• If the stablecoin is not classified as a cash equivalent, those transactions could instead be presented as investing activities, depending on the applicable guidance.
• The underlying economics may be the same, but the presentation of the cash flow statement can change significantly.
• Companies should therefore assess how the classification conclusion could affect their cash flow statement and related disclosures.

COVENANTS AND LIQUIDITY METRICS

• The definition of “Cash and Cash Equivalents” in a debt agreement may not always be the same as the GAAP definition.
• Some agreements refer directly to GAAP, while others specifically list the types of investments that qualify.
• As a result, a stablecoin could qualify as a cash equivalent under US GAAP but still not qualify as cash for a debt covenant.
• The opposite could also occur, depending on the wording of the agreement.
• This could affect minimum liquidity requirements, leverage ratios and other financial measures.
• Companies should therefore review their debt agreements and other contractual definitions alongside the accounting assessment.

THE CONTROLS IMPACT

The proposed amendment could create new control requirements, particularly because the classification assessment may need to be reviewed periodically and relies on information from the digital-asset issuer.

Key controls could include:

• Initial classification: Document the accounting assessment for each relevant digital asset, including its redemption terms, reserve arrangements and applicable laws and regulations. The assessment should be reviewed and approved at the appropriate level.
• Periodic reassessment: Monitor changes in redemption terms and reserve composition. Establish a periodic review, with a process for reassessment when significant changes occur.
• Issuer information: Assess the reliability and completeness of information provided by the issuer, including reserve reports or attestations. Consider the date, scope and coverage of the external information.
• Existence and custody: Maintain appropriate controls over digital wallets, private keys and transfers, and reconcile digital-asset balances to the accounting records.
• Disclosure controls: Establish separate controls to support the new disclosure of significant classes of cash equivalents and related amounts. These controls would apply even to companies that do not hold digital assets.

Ten questions for management to consider

1. Does the group hold any digital assets, in any entity or jurisdiction, and is that information readily available from treasury?
2. For each holding, is there a contractual redemption right against the issuer, or only the ability to sell in a secondary market?
3. Have the issuer’s current terms of service been reviewed, including any right to restrict, suspend or condition redemptions?
4. What do the reserves comprise, who attests to them, how frequently, and what is the scope of that attestation?
5. If a holding is not a cash equivalent, what is the appropriate classification, and can that conclusion be supported under the financial instruments guidance?
6. Would early adoption in the 2026 financial statements change reported cash, liquidity metrics or the presentation of investing cash flows?
7. Does the group’s credit agreement define cash equivalents by reference to GAAP or by a specified list of instruments, and has this been confirmed?
8. Can the significant-class breakdown of cash equivalents be produced from the ledger for both periods presented, without manual reconstruction?
9. Who owns the new disclosure control, and has that ownership been formally assigned?
10. Does the group intend to submit a comment letter by 19 November, and if not, how will it monitor the development of the final standard?

Effective Date and Transition

The effective date has not yet been determined, but preparation can begin now.

Implementation Timeline

How would the transition work?

The proposed amendment uses two different transition approaches:

New cash-equivalent disclosure: Applied prospectively beginning in the first annual reporting period in which the entity adopts the guidance.

Digital-asset illustrative examples (Classification guidance):

• Modified prospective approach: Applied on a modified prospective basis from the beginning of the annual reporting period in which the entity adopts the amendments. The guidance would apply to affected digital assets held at the date of initial application.
• Transition reconciliation: During the year of adoption, entities would need to reconcile the opening balances of cash, cash equivalents, restricted cash and restricted cash equivalents before and after adoption to show the effect of applying the digital-asset guidance.

Transition disclosure: Entities would disclose the nature of and reason for the change in accounting principle in the interim period, if applicable, and in the annual period of adoption.

Early adoption

Early adoption is permitted in an interim or annual reporting period, provided the financial statements have not been issued or made available for issuance.

If adopted in an interim period:

• The new disclosure would apply as of the end of that interim period.
• The digital-asset examples would apply from the beginning of the annual reporting period that includes that interim period.

For more information on the proposed Accounting Standards Update, see the press release on the FASB’s website.