SAB 121: Questions & Answers
Hot Topic | May 2024
Latest edition: We answer key questions about the SEC’s guidance on digital asset safeguarding obligations.
With new and updated Q&As, this Hot Topic addresses how to apply SAB 121 on digital asset safeguarding obligations.
Applicability
SAB 121 applies to financial statements prepared under either US GAAP or IFRS® Accounting Standards for:
- Existing registrants
- Entities that have submitted or filed a not-yet-effective registration statement
- Other entities as specified by the SAB
Key Impacts:
An entity in the scope of the SAB may control, and therefore own for accounting purposes, digital assets legally owned by another entity or individual. In that case, the entity recognizes the digital assets and a liability to return those assets if it controls them Such liability is evaluated under ASC 815 to determine if it is or includes a derivative.
If the entity does not control the safeguarded digital assets, it recognizes the following under SAB 121:
- a liability for its obligation to safeguard the digital assets held, reflective of unique risks and uncertainties the SEC staff believes are present in these arrangements; and
- a corresponding safeguarding asset.
The safeguarding obligation liability is measured initially and subsequently at the ASC 820 fair value of the safeguarded digital assets. The safeguarding asset is measured in the same manner but adjusted for any loss (or potential loss) events.
Report contents
- Introduction
- Applicability
- In a snapshot
- Effective date and transition
- Questions and answers
Download the document:
SEC staff guidance on digital asset safeguarding obligations
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