SEC Accountant to ICOs: Don't Skimp on Reporting

Another official at the SEC is speaking out on initial coin offerings, this time seeking to caution the market on financial reporting expectations.

AccessTimeIconSep 13, 2017 at 8:00 a.m. UTC
Updated Sep 13, 2021 at 6:55 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The SEC's chief accountant is cautioning businesses involved with initial coin offerings (ICOs) to be mindful of their financial reporting obligations.

Wesley Bricker, who has served as the regulator's top accountant since last year, spoke on September 11 before the AICPA National Conference on Banks & Savings Institutions, held in Washington, DC. His speech, published by the SEC, covers a range of areas but notably concluded with an aside on ICOs.

After touching on some of the elements of the SEC's statement on the subject in July – during which time the agency said federal securities laws may apply to some ICOs – Bricker raised a series of questions both issuers and holders of ICOs should consider for financial reporting.

For issuers, questions included:

  • Are there liabilities requiring recognition or disclosure?
  • Are there implications for the provision for income taxes?
  • Are there previously recognized assets that require de-recognition?
  • Are there revenues or expenses requiring recognition or deferral?
  • Is there a transaction with owners, resulting in debt or equity classification and possibly compensation expense?
  • What are the necessary financial statement filing requirements?

Likewise, he advised investors and token owners to ask:

  • Does specialized accounting guidance (such as for investment companies) apply to the holder’s financial statement presentation?
  • What are the characteristics of the coin or token in considering whether, how, and at what value, the transaction should affect the holder's financial statements?
  • What is the nature of the holder's involvement in considering whether the issuer's activities should be consolidated or accounted for under the equity method?

Bricker ultimately cautioned that these are only "illustrative questions" and that, in a refrain from the previous SEC statement, the specifics of the ICO itself would determine what reporting requirements must be met.

"An entity involved in initial coin or token offering activities will need to consider the necessary accounting, disclosure and reporting guidance based on the nature of its involvement," he told attendees.

Wes Bricker image via PwC

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.