One of the biggest issues in daily routine accounting operations is the way accounting teams approach cash receipts and payments. We are using the dreadful clearing accounts because we are trying to make the processing of cash transactions during the month easier and avoid any variances with bank account balances. Technical Accounting is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. To do this we sacrifice so much insightful and useful data. We cannot directly observe the payment for each customer invoice. Therefore, wh ..read more

Managing liquidity is an even more difficult task if you work in crypto. Because even though you believe that your cash stays at the same level before and after you buy USDC for USD… Your accountant will prepare a cash flow statement that says otherwise. Let’s take a look at the impact of this difference between perceived and reported changes in liquidity. Technical Accounting is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. Consider a hypothetical crypto business that has engaged in the following transactions during a ..read more

Protocol as an Enforcement Mechanism One crucial moment in the understanding of blockchain accounting is the understanding that public blockchains have an enforcement mechanism enabled by its protocol. The protocol ensures the execution of blockchain algorithms internally. Although it lacks legal status, the protocol ensures adherence to the network’s rules with a level of certainty unattainable by the enforcement mechanisms of any single legal jurisdiction. An essential part of any protocol is its consensus mechanism. I’ve always seen consensus mechanisms as falling under the category of 'cus ..read more

Chat with a Sr. Audit Manager from Withum, July 2023: Recollection of the chat with a Sr. Audit Manager from Withum, July 2023 I never heard back from Withum after this. This time, I decided to adopt an empirical approach to the question. Here are the most well-known listed U.S. companies primarily engaged in the cryptocurrency business, segregated based on how management presents general digital assets on their balance sheet: Classification of digital assets on the balance sheets under US GAAP First, I wanted to note that in our sample, there are two mixed cases - Coinbase Global Inc. and ..read more

AICPA just published an exposure draft document that discusses how we should be thinking of the sufficiency of assets for the redemption of stablecoins. The organization is asking for feedback on this document. Photo by CoinWire Japan on Unsplash This reminded me of the very brief analysis of stablecoins I’ve been working on in the past, and now wanted to share with my readers. Please note that the effective date is based on the latest audit report available on the website of the issuer. The latest audited data for Tether, for example, is two months old, for other stablecoins below the lag b ..read more

Let's compare two hypothetical scenarios to understand how debt loading can affect the profits of a private equity (PE) firm upon exiting an investment. For simplicity, we'll assume the PE firm is buying and then selling a company, and we'll ignore factors like operational improvements, tax impacts, and market fluctuations. Scenario 1: Without Debt Loading Purchase Price of Company: $100 million PE Firm's Equity Investment: $100 million (100% equity, no debt) Selling Price of Company after 5 Years: $150 million Profit: Selling Price - Purchase Price = $150 million - $100 million ..read more

Typical Transaction Flow for a Web3 Vendor Subscribe now Guidance Under ASC 606 we apply the 5-step revenue recognition model: Steps 1-3. Identify: • the contract with a customer • performance obligations (promises given to the customer), • the total transaction price, Step 4. Allocate: the transaction price among performance obligations, Step 5. Recognize: revenue for each performance obligation as it is being satisfied. Consideration receivable Crypto assets received or receivable from customers in exchange for satisfied performance obligations are treated as non-cash consideration u ..read more

On proof of stake blockchains, the network's security is ensured by users who stake their scarce resources (crypto assets) on chosen validators. This is how it happens: Validators deploy blockchain software binary files (files that contain the compiled protocol code) on servers, whether owned or rented, that function as nodes on the blockchain network. This software enables validators to verify transaction accuracy and sequence and group validated transactions into blocks. Technical Accounting is a reader-supported publication. To receive new posts and support my work, consider becoming a fre ..read more

Subscribe now The market capitalization of stablecoins at the end of Q4 2023 rebound. The growth of $6.8B with $8.6B increase in USDT capitalization slightly offset by $1.3B reduction in the capitalization of discontinued by Binance/Paxos BUSD. Asset Reserves During Q4 2023, we saw the increase of cash (by $1.3B) and cash equivalents (by $0.8B) backing USD coin. Two other biggest stablecoin assets (Tether and Paxos) did not show significant changes in the structure of the underlying assets. Who Are the Auditors? In Q4 2023 we see continuing growth in the market share of stablecoins with re ..read more

Subscribe now Technical Accounting is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber ..read more