The latest in our series, this Hot Topic addresses how to apply the new SEC Staff Accounting Bulletin on obligations to safeguard digital assets for others.
SAB 121 applies to financial statements prepared under either US GAAP or IFRS® Standards for:
Existing registrants apply SAB 121 to financial statements for interim and annual periods ending after June 15, 2022, with retrospective application to the beginning of the fiscal year, at a minimum.
Other entities subject to SAB 121 apply it in their next submission or filing. Retrospective application is required to either:
An entity that holds digital assets for others recognizes (1) the custodied digital assets and (2) a liability to return those assets if it ‘controls’ them.
If the entity does not control the custodied digital assets, it recognizes the following under SAB 121:
The safeguarding obligation liability is measured initially and subsequently at the fair value of the digital assets held in custody. The safeguarding asset is measured in the same manner, but adjusted for any loss (or potential loss) events.