Square: Murky Crypto Accounting Rules Pose Risk
Square Inc. has identified another business risk for publicly traded companies that deal in cryptocurrencies: unclear accounting rules.
In its most recent annual filing with the U.S. Securities and Exchange Commission (SEC), the digital payments company wrote that Generally Accepted Accounting Principles (GAAP), the U.S. accounting standard for public companies, offers no specific guidance for cryptocurrencies. This makes it difficult for Square to know how to report its profits or losses from cryptocurrency transactions.
Moreover, the document suggested that auditors or regulators could disagree with how Square accounted for cryptocurrencies. The filing continued:
"The accounting can be complex and subject to challenge or scrutiny. The final conclusions on the accounting treatment for our cryptocurrency transactions could affect the presentation of our results of operations."
In other words, if Square gets it wrong, then the company may have to restate its financials, which could hurt its stock price or operations.
Last month, the payment platform introduced bitcoin buying and selling to most states through the Cash App, allowing users to send payments in the cryptocurrency to friends and family, as previously reported.