Crypto asset risks might lead to balance sheet gross-up. Crowe professionals discuss how entities can determine if SAB 121 applies.
In a minute
- On March 31, 2022, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin No. 121 (SAB 121) to provide accounting and disclosure guidance for entities involved with safeguarding crypto assets on behalf of other parties.
- A reporting entity within the scope of SAB 121 must record a liability for its obligation to safeguard crypto assets (safeguarding liability), which is both initially and subsequently measured at the fair value of the safeguarded crypto assets. The entity also would record a corresponding asset (safeguarding asset), measured on the same basis as the safeguarding liability.
- SAB 121 also requires disclosure of the nature and amount of crypto assets being safeguarded, an entity’s accounting policy for safeguarding activities, how the fair value of safeguarded crypto assets is determined, and potentially other information about risks and uncertainties arising from the entity’s safeguarding activities.
- SAB 121 is effective for financial statements covering the first interim or annual reporting period ending after June 15, 2022.