Digital Assets & Bitcoin Mining

In-scope crypto assets (bitcoin qualifies) are measured at fair value each reporting period with changes recognized in net income, presented separately from other intangibles on the balance sheet, with remeasurement shown separately in the income statement. Adoption is a cumulative-effect adjustment to opening retained earnings. Disclosure now carries the weight: significant holdings by asset, cost basis, fair value, units held, restrictions, and an annual rollforward of additions, dispositions, and gains and losses. Miners that sell rewards immediately still apply the model to any assets held at period end, and the cost-basis disclosure requires lot-level tracking that most sub-ledgers were never built for.

What we do: We build the lot-level cost basis and rollforward the disclosures require, and write the adoption memo, before year-end.

The pool operator is the customer. The performance obligation is providing computing power over the contract term, satisfied over time. Because the arrangement is cancellable at will, contract inception effectively resets continuously, and noncash consideration (bitcoin) is measured at fair value at contract inception, which in practice means the fair value of rewards on the date earned. Under payout models like FPPS the miner recognizes the payout earned for hashrate delivered, including the transaction fee component, daily. Document the payout methodology, the pricing source, and the time-of-day convention, and apply them consistently. Immediate conversion to dollars does not change revenue measurement; it just eliminates subsequent remeasurement exposure.

What we do: We write the revenue recognition memo, document the payout methodology and pricing source, and give your auditors a position they can sign off without weeks of questions.

Hosting is a stand-ready obligation satisfied over time, generally a series of distinct daily services. For power, the principal-versus-agent conclusion drives gross versus net presentation: a host that controls procurement, bears price and volume risk, and commits capacity is usually principal, presenting power revenue gross; a pure pass-through biller with no risk is an agent. Profit-share arrangements are variable consideration, estimated and constrained, though the series guidance usually lets you allocate each period’s share to the period it relates to. Customer deposits and prepaid hosting sit in contract liabilities, and uptime credits are variable consideration, not marketing expense.

What we do: We document the principal-versus-agent conclusion stream by stream, so your gross-versus-net presentation holds up in review.

Depreciate machines over a realistic useful life, in current practice usually three to five years, and revisit the estimate when network economics shift. Impairment testing runs at the asset group level, typically the site or lowest level of independent cash flows, not the individual machine. On a trigger (sustained bitcoin price decline, hashprice compression, halving, loss of a power contract), test recoverability on undiscounted cash flows; if it fails, write down to fair value. Document the asset-group definition before the trigger arrives, because defining it during a downturn looks results-driven.

What we do: We define the asset groups and build the triggering-event and recoverability analysis before a downturn forces it, and keep it as a standing quarterly schedule.

Management evaluates conditions over twelve months from the financial statement issuance date. The two-step structure matters: first, do conditions raise substantial doubt; second, do management’s plans both qualify as probable of implementation and probable of mitigating the conditions. Unexecuted capital raises rarely clear that bar. If plans alleviate the doubt, disclose the conditions and the plans; if not, add the substantial-doubt statement. Build the forecast on committed arrangements, run downside bitcoin price cases, and reconcile the story to the MD&A liquidity discussion, because reviewers read them together.

What we do: We build the forecast, the downside cases, and the plan-by-plan assessment, and reconcile it to your MD&A, so the memo survives auditor review.

Identify the CODM, then follow the information the CODM actually uses to allocate resources and assess performance. Site-level or stream-level profitability packages usually make self-mining and hosting separate operating segments; demand response often attaches to the site that generates it. Apply the quantitative thresholds, aggregate only where the aggregation criteria are genuinely met, and under ASU 2023-07 disclose significant segment expenses regularly provided to the CODM, plus the required disclosures even if you conclude you have a single segment. The internal reporting deck is the audit evidence; align it with the conclusion before year-end.

What we do: We align your internal reporting to the segment conclusion and draft the disclosures, including the expanded ones ASU 2023-07 now requires.

Run the waterfall in order: ASC 480 first, then the ASC 815-40 indexation and equity-classification tests. Most SAFE and Crowd SAFE terms we see, with variable share settlement, cash-out events, and investor protections, fail equity classification and are liabilities remeasured at fair value through earnings. Convertible notes after ASU 2020-06 mostly stay whole-instrument liabilities, with embedded features assessed for bifurcation. The EPS consequences follow: liability-classified instruments and their remeasurement affect the numerator, and if-converted mechanics affect the diluted denominator. Write the position memo when the instrument is issued, not when the auditor asks.

What we do: We write the classification memo when each instrument is issued, covering the ASC 480, 815, and EPS consequences together in one document.

Screen every power arrangement for an embedded lease: a contract tied to an identified asset (a dedicated interconnection, substation, or generation unit) where the company obtains substantially all the output can convey a right of use under ASC 842. Next screen for a derivative: fixed-price physical power deals often meet the definition but qualify for the normal purchases, normal sales scope exception, which must be documented at inception, not retroactively. Demand response and curtailment payments are generally recognized as the performance occurs; present them as revenue when curtailment participation is an ordinary activity, and disclose the policy either way.

What we do: We screen every power contract for embedded leases and derivatives, document the scope exceptions at inception, and set the accounting policy.