The ultimate goal of SoDA is to provide a lasting and transparent bridge between accurate GAAP reporting of digital assets and the details from multiple wallets, centralized exchanges, and other cryptographically-based ownership and/or custody arrangements. The first use case was delivering a full liquidity picture for managers of and investors in growth stage businesses with digital assets on their balance sheet. Additional beneficiaries now include auditors, tax planners, regulators, analysts, and many more direct and indirect stakeholders.
SoDA is designed to be readily understood by financial professionals, given that it builds upon familiar GAAP rules and guidelines. Furthermore, it is also tailored to be intuitive for those operating digital asset-based businesses, as it flexibly integrates the diverse and dynamic characteristics of digital assets, along with their typical storage and operational uses.
At the heart of SoDA lies the distinction between book value and fair market value applied to each Wallet/Asset Pair. Book value, indicates the lower of either the original cost of the asset or its fair market value (per Lower Cost or Market “LOCOM”), often diverging significantly from the fair market value. Though the balance sheet ‘build’ offers a reliable proof, it falls short in guiding strategic decision-making, risk management, and investor communication. Book value limits the visibility to a firm’s liquidity, while fair market value may not tell the whole story, subject to market liquidity, asset risk, and latent tax liability. Therefore, users of financial statements might find seeing both BV and FV to easily understand unrealized gains or losses at a given moment for a particular asset or asset pair.