Technical Accounting Process

How should one approach technical accounting issues without explicit guidance?

Below is the framework that can help to answer technical accounting questions without explicit guidance such as the ones we often see in the crypto accounting space.

1. Assess the materiality of the matter at hand. If it is clearly immaterial and trivial, identify a shortcut approach that answers the question with minimal effort without compromising the quality of financial reporting.

2. Gather internal business context:

   1. Read the documentation:

      1. agreements

      2. emails

      3. internal policies

      4. previous memorandums

   2. Discuss the issue with the relevant stakeholders via appropriate channels

      (in-person meetings, calls, slack, chat, emails).

3. Identify whether similar transactions occurred in the past and how they were accounted for.

4. Consider the economics of the transactions and what accounting would make the most sense to both:

   1. achieve the objectives of general-purpose financial statements, and 

   2. stay aligned with the company's view on the nature of the issue

5. Evaluate the relevant accounting guidance including the guidance that may be applied by analogy:

   1. Identify whether partial guidance must be applied based on facts and circumstances surrounding the issue

   2. Identify the guidance that may be applied by analogy

   3. Verify that there is no explicit prohibition on the use of the specific guidance by analogy

6. Read through existing non-authoritative publications and opinions on the same topic:

   1. Review non-authoritative accounting guides of professional accounting firms

   2. Search EDGAR filings and comment letters using keywords to find how our peers solved similar questions in the past

7. Document the conclusion:

   1. First, prepare a summary of the preliminary position.

   2. Discuss it with key stakeholders and anyone affected by the conclusion and gather feedback.

   3. Reflect on feedback received and revise the documentation if necessary. Consider whether revisions require to be discussed with stakeholders again.

   4. Prepare the formal documentation of the final position.

   5. Distribute the formal documentation to required recipients and save it in the company’s files.