Financial Supervisory Service Publishes Best Practices for Virtual Asset Note Disclosures Including Key Information on Reservations and Holdings

The Financial Supervisory Service (FSS) announced on the 24th that it will disclose model cases for virtual asset note disclosures and hold explanatory sessions and expert meetings regarding related audit guidelines.

Image source=Reuters·Yonhap News

The model cases for virtual asset note disclosures are presented as reference materials including standard wording and templates, which can be modified and used according to the company's circumstances and conditions. The FSS explained, "The model cases include as much important information as possible for financial statement users, such as reserved quantities of virtual assets by issuing companies, entrusted asset information and protection levels of virtual asset operators, while also considering ease of preparation." They added, "Since the model cases are drafts, they may be revised during the opinion collection process." The FSS plans to finalize the model cases for virtual asset note disclosures by reflecting the actual status of individual companies identified during the opinion collection process through explanatory sessions and expert meetings.

Key contents of the model cases for virtual asset note disclosures indicate that issuers must disclose general information such as the characteristics of the developed virtual assets and business models utilizing them, accounting policies, obligations of developers, and the degree of fulfillment. Obligations related to revenue recognition from virtual asset sales, progress and methods of fulfillment, and changes in obligations must be disclosed in the notes. Information on quantities reserved after issuance and future utilization plans must also be disclosed.

For virtual asset holders, accounting policies, scale (holding quantity, market value), acquisition and holding purposes, and related gains and losses of held virtual assets must be disclosed. The FSS also requires disclosure of virtual asset holding risks to provide information users with insights into the impact on companies holding virtual assets.

Virtual asset exchanges must disclose information related to their own virtual assets as well as accounting policies, scale, related risks, and whether third-party custody applies to virtual assets entrusted by customers. In particular, whether customer-entrusted virtual assets are recognized as the operator’s assets or liabilities and the basis for such judgments must be disclosed in the notes.

The FSS, together with the Korea Accounting Standards Board and the Korean Institute of Certified Public Accountants, plans to hold three explanatory sessions targeting operators, listed companies, and accounting firms between the 26th of this month and the 11th of next month. After explaining the audit supervision guidelines, draft revisions of standards, model cases for note disclosures, and audit guidelines, Q&A and opinion collection will be conducted.

Additionally, an expert meeting on virtual assets will be held. Composed of 14 members including related institutions such as the FSS, Korea Accounting Standards Board, and Korean Institute of Certified Public Accountants, as well as academic experts, two meetings are planned. The first meeting, scheduled for early September, will feature presentations of proposals collected from each industry by related institutions and discussions on key issues by experts. The second meeting, to be held in October, will present review results of proposals and discussions from the first meeting by the FSS and others, and reach consensus on the incorporation of supervisory guidelines.

An FSS official stated, "Based on the results of the explanatory sessions and meetings, we plan to coordinate with the Financial Services Commission and others to prepare the final supervisory guidelines." They added, "The audit supervision guidelines and revised standards will be finalized and implemented after deliberation and resolution by the Accounting System Deliberation Committee and the Securities and Futures Commission." Furthermore, they said, "The model cases for note disclosures will be announced immediately upon finalization of the Korean International Financial Reporting Standards (K-IFRS) standards."

This content was produced with the assistance of AI translation services.