U.S. public companies such as BTCS are required to prepare and report their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Under U.S. GAAP, non-security digital assets such as bitcoin and ethereum are indefinite life intangible assets and carried at their lowest value since date of acquisition by BTCS. A more detailed description of our digital asset accounting policies can be found on page 15 of our most recent annual report. Additionally, PWC’s March 2018 point of view position publication provides an excellent digital asset accounting analysis.
U.S. GAAP is a rule-based accounting regime and while it is possible to fit digital assets into the existing accounting model for intangible assets, this model does not best reflect the economics of these unique assets. As such, the reported value of our digital assets on our balance sheet is significantly less than their fair market value (“FMV”) and cannot be increased under U.S. GAAP despite increasing digital asset prices.
Given the material discrepancy in value, we have disclosed, and will continue to disclose, the FMV of our digital assets in the MD&A section of our financial reports. Further, on August 28, 2018 in, response to a SEC registration statement comment letter we urged the SEC to coordinate with the Financial Accounting Standards Board to further revise the accounting guidelines to provide for an updated accounting framework for digital assets.