Issuing Crypto Tokens as Compensation
When a company creates its own tokens and issues them as compensation, along with a salary to an employee, the accounting entries would reflect the transaction’s impact on the company’s financial statements. Here’s a general guidance based on the information available:
Expense Recognition: The company would recognize an expense for the fair value of the services received in exchange for the tokens. This would be recorded as a debit to an expense account, such as “Compensation Expense” or “Salary Expense”.
Income Recognition: If the tokens are considered income for financial statement (FS) purposes, the company would record a credit to a revenue account, such as “Other Income”. This reflects the creation of economic benefits that increase equity through increases in assets or decreases in liabilities.
Token Issuance: The issuance of the token itself would not be capitalized but would be recognized at fair value. If the tokens do not represent a liability, the credit entry would not be to a liability account but rather to equity or income, depending on the company’s policy and the nature of the tokens.
Here’s an example of what the journal entries might look like:
At the time of service completion:
Debit “Compensation Expense” for the fair value of services.
Credit “Other Income” for the fair value of the tokens issued as compensation.
At the time of token issuance:
Debit “Equity” or a specific “Token Issuance” account for the fair value of the tokens.
Credit “Other Income” for the fair value of the tokens, reflecting the income recognition on the P&L.
