Aaron Jacob’s Post

Staking and Crypto Accounting: An Example Staking, where crypto holders lock their assets to earn rewards, introduces unique challenges in accounting for earnings and value fluctuations. Here’s how to handle staking with crypto accounting: Scenario: Staking and Accounting 1. Initial Investment Asset: 10 ETH Value on Purchase: $2,000 per ETH Total Investment: $20,000 2. Staking Period Staked Amount: 10 ETH Rewards Earned: 0.5 ETH/month Value of ETH During Staking: $2,200 per ETH (average market price). Accounting Entries At the Time of Staking Staked assets are not "spent" but locked in a smart contract, remaining the company's asset. Entry: Move ETH to Staking Asset Account Debit: Staking Assets (10 ETH x $2,000) = $20,000 Credit: Crypto Wallet (10 ETH) = $20,000 Monthly Rewards Earned Staking rewards are income, recognized at the fair market value (FMV) at the time of receipt. Example: Rewards Earned Rewards: 0.5 ETH FMV: $2,200 per ETH Total Income: $1,100 Entry: Record Staking Rewards as Income Debit: Crypto Wallet (0.5 ETH x $2,200) = $1,100 Credit: Staking Income = $1,100 Market Value Adjustment at Period Close At the end of the reporting period, adjust the value of staked ETH and rewards to reflect the current market price. Example: Market Price at Period Close ETH Value: $2,500 per ETH Total ETH: 10.5 ETH Total Value: 10.5 ETH x $2,500 = $26,250 Adjustment for Unrealized Gains Gain: $26,250 - ($20,000 + $1,100) = $5,150 Entry: Record Unrealized Gains Debit: Staking Assets (Unrealized Gain) = $5,150 Credit: Unrealized Gain on Crypto = $5,150 Realized Gains/Losses Upon Unstaking

FASB's recent updates to digital asset accounting are a large step forward, but the journey is far from over. Well, we're in the process of taking another leap forward with SoDA. SoDA (Statement of Digital Assets) aims to bridge the GAAP and crypto reality. Here's why it matters and how it could reshape crypto finance... While much improved, accounting standards still fall short for digital assets. This is because the updates are limited in their scope and balance sheets are still opaque for many digital assets and lead to misleading liquidity pictures. Consider this: A company holds Bitcoin, NFTs, and stablecoins. Each requires different valuation methods under GAAP. It's like comparing cars, motorcycles, and boats on the same balance sheet. This mismatch creates real problems: - Unclear operating runway - Inaccurate tax liability estimates - Difficulty assessing true liquidity SoDA solves these issues by providing: 1) Standardized Reporting. SoDA offers a consistent format for reporting digital asset holdings. This allows for easy comparison across companies and time periods. 2) Fair Value Insights. While GAAP may require lower of cost or market (LOCOM) for some assets, SoDA reports fair market value. This gives a clearer picture of true liquidity. 3) Detailed Breakdowns. SoDA provides wallet-level and asset-level details. This granularity supports both high-level analysis and deep dives into a company's crypto treasury. 4) Compatibility with GAAP. SoDA doesn't replace GAAP reporting. It complements it, providing the backup data for balance sheet entries while offering additional insights. 5) Investor-Friendly Format. For crypto startups, SoDA aligns with investor expectations for regular financial reporting. It makes it easier to evaluate liquidity and runway. What's another beautiful thing about SoDA? It's a grassroots effort, embracing the collaborative spirit of crypto. As crypto adoption grows, clear financial reporting becomes crucial. SoDA is a step towards maturity and transparency in the industry.

Crypto Accounting Services at 27 As the crypto landscape evolves, managing cryptocurrency transactions and investments requires precision, compliance, and strategic insight. 27's Crypto Accounting Services are designed to provide elite clients with unparalleled expertise and tools to navigate the complexities of digital asset management. Our Key Services Transaction Tracking and Reporting Comprehensive tracking of crypto transactions across wallets and exchanges. Detailed categorization of transactions (trades, transfers, staking rewards, NFTs). Automated reports tailored for tax and compliance requirements. Tax Optimization and Compliance Expertise in navigating complex tax laws for cryptocurrencies. Strategies to minimize taxable events, such as loss harvesting or portfolio restructuring. Accurate reporting for international and local regulatory frameworks. Portfolio Valuation and Analytics Real-time valuation of crypto holdings, including volatile and illiquid assets. Advanced analytics on portfolio performance and diversification. Insights into market trends and opportunities for reinvestment. DeFi and Staking Accounting Specialized services for decentralized finance (DeFi) earnings, such as liquidity pools and yield farming. Precise accounting for staking rewards and on-chain activities. Security and Confidentiality Secure handling of sensitive data with top-tier encryption. Dedicated client support for confidentiality in high-value transactions. Why Choose 27? Tailored Expertise: Personalized strategies for elite crypto investors. Regulatory Knowledge: Stay ahead of changing compliance standards. Holistic Approach: Seamless integration of crypto assets with traditional portfolios. At 27, we help you manage, optimize, and secure your crypto investments with the precision of a tiger. Whether you're navigating Bitcoin, altcoins, or DeFi, our accounting services ensure you're always in control. Contact us today to unlock the future of financial management. Activate to view larger image,

🚀 Crypto and digital assets are now facts! 📊 Companies are gearing up for FASB’s new accounting rules on crypto assets, effective 2025. From Tesla to Coinbase, understanding these changes is crucial for financial transparency. Learn more about what this means for your company’s future in crypto accounting. #FASBcrypto #CryptoAccounting #DigitalAssets

The FASB's new crypto asset accounting rules represent a significant shift in how companies will account for and disclose their crypto holdings. Are companies ready? 2024 is crucial before the start of 2025! As these changes take effect, the landscape of crypto asset accounting will evolve, providing investors with clearer insights into the financial health and performance of companies involved in the digital asset space. Financial Accounting Standards Board #FASBNewCryptoAssetRules #Crypto #accounting #disclosure #compliance #reporting #financialStatement #Earning #DigitalAssets https://lnkd.in/eE_YTk2u

FASB's New Fair Value Accounting Rule on Crypto Asset Reporting Is Now Effective i.e. 15 December 2024…! Financial Accounting Standards Board (FASB) regarding the fair value accounting for crypto assets is set to significantly impact how corporations report and treat these assets, particularly Bitcoin as adoption gains significant momentum. However, it will create some divergence from the current requirements of IFRS Accounting Standards and UK GAAP. Perhaps some catching up is in order? I have summarised some key points and their implications for the TradFi: #Crypto #Cryptocurrency #FASB #IASB #IFRS #TradFi. #DeFI Fair Value Accounting Under ASU 2023-08, crypto assets must now be valued at fair market value on the balance sheet, with changes in fair value recorded in net income for each reporting period. This approach replaces the previous impairment model, providing a more accurate reflection of the assets' real-time market value. Enhanced Transparency and Investor Confidence The new rule enhances transparency in financial statements, allowing companies to reflect the current market value of their Bitcoin holdings. This increased transparency is expected to boost investor confidence and drive institutional adoption of Bitcoin. Corporate Treasury Reserve Asset Bitcoin is now positioned as a more viable corporate treasury reserve asset, as companies can hold it without the reporting complexities associated with the impairment model. This could lead to greater institutional investment in Bitcoin. Detailed Reporting Requirements Companies must provide detailed disclosures about their crypto asset holdings, including the name, cost basis, fair value, and number of units for each significant holding, as well as information on contractual sale restrictions and changes during the reporting period. Market Impact The adoption of this rule has coincided with an increase in Bitcoin's price, aligning its valuations with market conditions and enhancing its appeal to larger corporations and institutional investors. Increased Adoption: The new rule could lead to increased TradFi investment in Bitcoin, further legitimizing it as a financial asset. Enhanced disclosures will provide investors with better insights into a company's crypto asset holdings, reducing uncertainty and risk. Aligning crypto asset valuations (particularly Bitcoin as a store of value) with market conditions will make financial reporting more reflective of the true economic situation. How do you think this new rule will impact the broader adoption of crypto assets in TradFi and corporate treasuries? What are the potential risks and benefits of valuing crypto assets at fair market value?

Crypto Accounting Services at 27 As the crypto landscape evolves, managing cryptocurrency transactions and investments requires precision, compliance, and strategic insight. 27's Crypto Accounting Services are designed to provide elite clients with unparalleled expertise and tools to navigate the complexities of digital asset management. Our Key Services Transaction Tracking and Reporting Comprehensive tracking of crypto transactions across wallets and exchanges. Detailed categorization of transactions (trades, transfers, staking rewards, NFTs). Automated reports tailored for tax and compliance requirements. Tax Optimization and Compliance Expertise in navigating complex tax laws for cryptocurrencies. Strategies to minimize taxable events, such as loss harvesting or portfolio restructuring. Accurate reporting for international and local regulatory frameworks. Portfolio Valuation and Analytics Real-time valuation of crypto holdings, including volatile and illiquid assets. Advanced analytics on portfolio performance and diversification. Insights into market trends and opportunities for reinvestment. DeFi and Staking Accounting Specialized services for decentralized finance (DeFi) earnings, such as liquidity pools and yield farming. Precise accounting for staking rewards and on-chain activities. Security and Confidentiality Secure handling of sensitive data with top-tier encryption. Dedicated client support for confidentiality in high-value transactions. Why Choose 27? Tailored Expertise: Personalized strategies for elite crypto investors. Regulatory Knowledge: Stay ahead of changing compliance standards. Holistic Approach: Seamless integration of crypto assets with traditional portfolios. At 27, we help you manage, optimize, and secure your crypto investments with the precision of a tiger. Whether you're navigating Bitcoin, altcoins, or DeFi, our accounting services ensure you're always in control. Contact us today to unlock the future of financial management.

Let’s talk about the big shakeup in crypto accounting last week. The SEC quietly rescinded its infamous Staff Accounting Bulletin 121 (SAB 121) and introduced SAB 122. This change might sound dry on paper, but make no mistake. It’s a game-changer for how financial institutions approach digital assets. To understand why this matters so much, let’s rewind. SAB 121 wasn’t just a regulatory guideline; it was a strategic roadblock. It was specifically designed to make life difficult for banks to hold digital assets. Here’s how it worked: SAB 121 required institutions to list custodied digital assets both as an asset and as a liability on their balance sheets. For most businesses, the liability offsets the asset, making this more of an annoyance than anything. But for banks, that accounting quirk became a capital nightmare. Why? Because banks operate under strict capital requirements that dictate how much cash or capital they need to have on hand to cover liabilities. By forcing digital assets onto balance sheets as liabilities, SAB 121 created a major disincentive for banks to touch crypto at all. It was a clever (frustrating) way to slow down adoption of digital assets in traditional finance. SAB 122 wipes all that out. With SAB 122, the SEC essentially says, “Forget it. Treat digital assets like any other custodied asset.” This is a big step forward, but it’s not the end of the road. While SAB 121 is gone, we’re now left with the old rules, which weren’t exactly designed for digital assets either. The accounting guidance for crypto still feels like trying to fit a square peg into a round hole. Stablecoins, wrapped assets, and distributed networks behave uniquely, and traditional accounting methods just don’t capture that complexity. What we really need is a set of modern guidelines that actually reflect the nuances of digital assets. We need clear frameworks for stablecoins, wrapped tokens, and decentralized networks. SAB 122 gets us closer to progress, but there’s still work to do. 🌊

The SEC rescinded the infamous SAB 121 (Staff Accounting Bulletin 121 ) and introduced SAB 122! This change might sound dry on paper, but it’s a game-changer for how financial institutions approach digital assets. Check out my co-founder Patrick White explain why this matters!

Does Cryptocurrency Accounting Standard FRS 102 Go Far Enough? The accounting for Crypto and Tokenization has re-emerged as a critical and complex issue. Unfortunately, FRS 102 does not include any specific requirements on how to account for digital assets issuers, including exchange-based tokens. This guidance for ICAEW members explains how to consider the potential accounting treatment for holders of exchange-based tokens within financial statements and through a ‘TradFi lense…. Does the standard go far enough to address all the pressing requirements and potential issues? The answer is ‘No’. What about Web3, Tokenomics and Smart Contracts? We may need to move from a 2 to a 3 dimensional stakeholder accounting system? Perhaps we should look at Crypto from a different perspective? Is it time for a change in traditional accounting when it comes to Web3? #ICAEW #Crypto #CryptoAccounting #Tokenization #Tokenomics #SmartContracts #DigitalAssets #FRS102. #TradFi #DeFi #CryptoAccounting Here is a High Level Summary for Traditional Accountants: Classification: Intangible Assets: Cryptocurrencies are not considered as ‘cash’ and generally classified as intangible assets due to their lack of physical substance and ability to be separated and sold. Inventories: For entities trading cryptocurrencies, they can be treated as inventories, measured at the lower of cost and estimated selling price less costs to complete and sell. Measurement: Cost Model & Revaluation Model: Cryptocurrencies can be measured at cost or revalued if an active market exists. The revaluation model requires homogeneous items, willing buyers and sellers, and publicly available prices. Amortisation and Impairment Amortisation: Cryptocurrencies must be amortised over their useful economic lives, with a maximum period of 10 years if a reliable estimate cannot be made. Impairment: Regular impairment testing is necessary due to the volatile nature of cryptocurrencies. Disclosures: Clear and detailed disclosures are essential to ensure transparency in financial statements regarding the recognition, measurement, and presentation of cryptocurrencies. Notable Implications: The volatility of cryptocurrencies necessitates careful consideration in accounting practices, impacting financial reporting and tax obligations. The distinction between trading and non-trading activities can significantly affect tax treatment, with trading activities subject to income tax and non-trading activities to capital gains tax. What is Cash (vs Crypto Assets)? Do you believe current standards adequately address the unique challenges of crypto assets and its definitions?