Executive Summary | April 2022

 

Insight

Accounting for crypto assets by investment companies

Executive summary of the accounting for acquired crypto assets by investment companies subject to ASC 946.

Scott Muir

Scott Muir

Partner, Dept. of Professional Practice, KPMG US

+1 212-909-5073

Chase Stobbe

Chase Stobbe

Managing Director, Dept. of Professional Practice, KPMG US

1-571-695-5868


As intangible assets, most crypto assets are accounted for as ‘other investments’ under ASC 946-325. Staking those assets brings incremental considerations. Our executive summary explains.

Applicability

  • Investment companies subject to ASC 946 that invest in crypto assets.

Key impacts

  • There is no specific US GAAP on crypto assets, for investment companies or otherwise.
  • Most crypto assets meet the definition of an intangible asset, and are therefore accounted for as ‘other investments’ and measured at fair value on a recurring basis under ASC 946-325.
  • Investment companies need to consider the impact that mining or staking activities could have on their classification as an investment company under ASC 946.
  • Staking income generally meets the definition of ‘revenue’ and is accounted for under ASC 606 as a component of investment income.
  • Staked crypto assets are generally not derecognized while staked.
  • Sales of crypto assets generally follow ASC 610-20 (for crypto intangible assets) or ASC 860-20 (for crypto assets that meet the definition of a financial asset).
  • Determining the cost of sold crypto assets should follow the investment company’s specific identification or average cost method policy election for sales of securities under ASC 946-320. If an investment company does not have an accounting policy under ASC 946-320, it can elect either method by analogy to ASC 946-320.

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