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When a reporting entity is an intermediary between a seller and buyer of crypto assets, the reporting entity will need to assess whether it is an agent facilitating the sale or the principal to the buyer for the sale of crypto assets. A reporting entity that is a principal will recognize revenue (assuming sale of crypto assets is part of the reporting entity’s ordinary business activities) for the gross amount paid by the buyer for the crypto assets and cost of sales for the cost of the crypto assets. A reporting entity that is an agent will only recognize as revenue the net amount it retains (i.e., its commission) after remitting amounts to the seller for the crypto assets provided by that party and will not present the crypto assets on its balance sheet.
To determine whether it is the principal or agent in a revenue contract, ASC 606, Revenue from Contracts with Customers, requires a reporting entity (intermediary) to identify the specified goods or services to be provided to the customer (end consumer) and assess whether it controls each specified good or service.

Excerpt from ASC 606-10-55-36A

To determine the nature of its promise (as described in paragraph 606-10-55-36), the entity should:
(a) Identify the specified goods or services to be provided to the customer (which, for example, could be a right to a good or service to be provided by another party [see paragraph 606-10-25-18])
(b) Assess whether it controls (as described in paragraph 606-10-25-25) each specified good or service before that good or service is transferred to the customer.

In most transactions, the crypto asset is the specified good to be provided to the customer. The reporting entity must then consider whether it controls the crypto asset before it is transferred to the customer. Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control also includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset. ASC 606-10-55-39 includes indicators that an entity controls a good or service:
  • Which entity is primarily responsible for fulfilling the promise to provide the crypto asset to the customer?
  • Does the reporting entity have inventory risk before or after the crypto asset has been transferred to a customer?
  • Which entity has discretion in establishing the price paid by the customer for the crypto asset?
Refer to RR 10 for further discussion of principal vs. agent assessments. Due to the nature of crypto assets, the assessment of whether a reporting entity takes control of the asset may require significant judgment. If a reporting entity fulfills purchase requests from customers using both crypto assets it holds directly and crypto assets held by third-party suppliers, this may indicate that the reporting entity is primarily responsible for fulfilling the promise and therefore, the principal for the sale of crypto assets. If a reporting entity is solely matching buyers and sellers of crypto assets and does not take ownership of the crypto assets at any time, it is likely an agent facilitating the transfer of crypto assets.
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