CONTENTS
- 1. The Client Who Requested Virtual Asset Advisory
- - The Detailed Circumstances of the Case
- 2. The Process of Providing Virtual Asset Advisory
- - Review of Disclosure Wording and Analysis of Legal Risks
- - Improvement of Internal Approval and Procedural Systems
- - Advisory on Investor Communication and Guidance Strategy
- 3. Result of the Virtual Asset Advisory
- 4. Virtual Asset Advisory: Strengthening of Accounting and Disclosure Rules and Response Measures
- - Supervisory Guidelines on the Accounting Treatment of Virtual Assets
- - Mandatory Footnote Disclosure of Virtual Assets
- - A Company's Response Measures
- 5. If You Require Advice on Virtual Assets
1. The Client Who Requested Virtual Asset Advisory
The client who came to Daeryun for virtual asset advisory requested the assistance of a corporate specialist attorney out of concern over investor confusion and legal risks during the disclosure process for a new project.
The Detailed Circumstances of the Case
The client in this case was a company that operates virtual assets and was preparing a disclosure related to a new project.
However, because some of the information differed from the internal accounting records, the client was concerned about the possibility of investor confusion and legal problems.
In particular, because of the differences between the materials submitted to the exchange and the actual token operation plan, there was a risk that investors might misunderstand.
Accordingly, the client requested virtual asset advisory assistance from a corporate specialist attorney in order to examine in advance the potential legal risks that could arise at the disclosure stage and to establish safe disclosure procedures.
2. The Process of Providing Virtual Asset Advisory
The key issues in this case were as follows.
▷ The lack of internal approval procedures and a review system made it uncertain whether the legality of the disclosure could be secured
▷ The possibility of misunderstanding arising during investor question-and-answer and communication
To resolve these issues, the corporate specialist attorney provided assistance focusing on three aspects, namely the legal adequacy of the disclosure wording, the internal approval procedures, and the investor guidance system.
Review of Disclosure Wording and Analysis of Legal Risks
The corporate specialist attorney reviewed the disclosure wording closely to align it with the exchange's rules and the relevant laws and regulations.
During the review, the attorney identified expressions that could cause investor confusion and phrases that could become legal issues, and presented specific revisions.
Through this work, the attorney prevented in advance the possibility of disputes that could arise at the disclosure stage.
Improvement of Internal Approval and Procedural Systems
The attorney analyzed the disclosure approval process as a whole and redesigned the internal review procedures.
The attorney strengthened the collaboration system between the legal team and the business division to prevent procedural omissions and to ensure that legality reviews were carried out systematically at each stage.
The attorney also provided assistance in introducing an internal checklist and establishing a system that allows for continuous management, so that the same issue would not recur in future disclosures.
Advisory on Investor Communication and Guidance Strategy
The corporate specialist attorney reviewed and designed the disclosure wording and investor guidance materials to help convey the contents clearly.
The attorney established an investor question-and-answer procedure and a post-disclosure monitoring system to manage in advance the possibility of misunderstandings and disputes.
Through this, the communication risks that could arise at the disclosure stage were efficiently reduced.
3. Result of the Virtual Asset Advisory
Through the virtual asset legal advisory, the client was able to minimize investor confusion and proceed with a disclosure that reflected the exchange's standards and compliance with the relevant laws and regulations.
Thanks to the advance review and the improvement of internal processes, the possibility of potential legal problems was also blocked, and the client obtained the positive effect of increasing investor trust.
4. Virtual Asset Advisory: Strengthening of Accounting and Disclosure Rules and Response Measures
As the accounting and disclosure rules related to virtual assets are strengthened, companies need to proactively manage investor confusion and legal and accounting risks.
The standards for disclosure and accounting transparency apply to virtual assets, as defined under the Act on the Protection of Virtual Asset Users, that are digitized economic value or rights and that satisfy all of the following conditions.
ㆍSecurity secured through encryption
ㆍA fungible asset that can be exchanged among the same kind
Supervisory Guidelines on the Accounting Treatment of Virtual Assets
The supervisory guidelines on the accounting treatment of virtual assets provide detailed guidance, based on the Act on the Protection of Virtual Asset Users and the Financial Investment Services and Capital Markets Act, on the transaction stages and accounting treatment standards applicable to issuers, holders, and business operators.
▷ Virtual Asset Issuers
Costs incurred during the development process are expensed when the requirements for an intangible asset are not met, and internally retained virtual assets, except in exceptional cases, are not recorded as assets.
▷ Virtual Asset Holders
▷ Virtual Asset Business Operators
In addition, the requirements for an active market and the measurement standards are specified with respect to fair value measurement, so that companies and auditors may refer to them when preparing financial statements and performing audit procedures.
Mandatory Footnote Disclosure of Virtual Assets
Footnote disclosure has been made mandatory so that users of accounting information can sufficiently verify a company's information on virtual asset transactions and holdings.
▷ Issuers
Detailed disclosure of matters such as the quantity, characteristics, and business model of virtual assets, the recognition of revenue from sale consideration and the progress of obligation fulfillment, and records of internal retention and use
▷ Holders
Disclosure of accounting policies, carrying amounts, market value information, and similar matters, enabling investors to accurately understand the impact of holdings and the financial position
▷ Business Operators
Disclosure, by asset, of the volume, market value, physical risk, and level of protection of customer-entrusted virtual assets
A Company's Response Measures
Companies may take the following measures in order to respond to the strengthening of the rules on the accounting and disclosure of virtual assets.
1. Strengthening the Internal Review System
2. Establishing an Investor Communication System
3. Continuous Management of Accounting Policies and Disclosure Content
Through these measures, companies can proactively manage the legal and accounting risks that may arise in the course of virtual asset accounting and disclosure, and can strengthen investor trust.
In addition, the strengthening of footnote disclosure improves comparability among companies and the reliability of information, and minimizes uncertainty related to the interpretation of accounting standards.
5. If You Require Advice on Virtual Assets
The issues that companies face in the course of virtual asset disclosure and accounting treatment are complex and varied, going beyond the level of mere document preparation or accounting treatment.
Even a small difference in judgment, such as investor confusion, the determination of revenue recognition, the treatment of customer-entrusted assets, or an omission in disclosure approval procedures, can give rise to a legal dispute or a finding in an accounting audit, so the assistance of a specialized attorney is essential.
Our firm proactively reviews the legal and accounting risks that may arise in disclosure language, revenue recognition, and the treatment of customer-entrusted assets, and establishes a response strategy.
In addition, our firm forms a task force of corporate attorneys with extensive practical experience to carry out legal review and accounting advisory simultaneously, and provides substantive assistance with external audits and investor responses.
If you require legal advice on virtual assets in a situation similar to the case above, please feel free to request assistance at any time from Daeryun through 🔗Legal Consultation Booking.
This content is based on actual case studies of Daeryun Law LLC with some adaptations, and the copyright belongs to our firm.
Unauthorized reproduction, duplication, or distribution and other copyright infringements may result in legal action under applicable laws.
