Does SAB 121 require a crypto asset safeguarding liability?

The SEC staff has released interpretive guidance in SAB 121 requiring reporting entities that perform custodial activities related to crypto assets to include a crypto asset safeguarding liability and a corresponding asset on their balance sheets at fair value. This In depth addresses the accounting and disclosure-related impacts of SAB 121.

What are SAB 121 disclosures?

SAB 121 provides the SEC staff’s views on disclosures to include in the notes to the financial statements due to the significant risks and uncertainties associated with safeguarding crypto assets, including risk of loss. At a minimum, the disclosures should include:

Why did the SEC Release SAB 121?

Accordingly, the SEC staff released SAB 121 because the staff believes that it will “enhance the information received by investors and other users of financial statements about these risks, thereby assisting them in making investment and other capital allocation decisions.”

What is SAB 121?

SAB 121 requires a reporting entity that performs custodial activities, whether directly or through an agent acting on its behalf, to record a safeguarding liability and a corresponding asset at fair value. Before applying SAB 121, we believe a reporting entity must first determine whether it has control of the crypto assets (see CA 3.7 ).