Thank you for your interest in Silicon Valley Community Foundation’s audited consolidated financial statements.
You’ll note on the attached 2018 audited consolidated financial statements that our assets have been reduced from our previously reported results for 2017. For 2017, the value of our total assets was reduced by $4.4 billion in our current statement of financial position. The reduction is entirely due to a change in accounting for our digital assets. That change and the reasons for it are described below.
In basic terms: SVCF formerly accounted for digital assets according to their market value as of the end of our fiscal year. We are now accounting for them as of their value on the day they were gifted to SVCF.
Below is some additional background on how SVCF has historically accounted for the digital assets – or cryptocurrency – it holds in a small number of our donors’ charitable funds, and how we decided to change our accounting policy.
Prior to 2018, in its consolidated statements of financial position, SVCF recognized digital assets as “investments held at fair value.” That treatment was based on our review of how other entities accounted for similar assets, internal discussions and our assessment of the asset. The unrealized gains or losses on those investments were recorded in the consolidated statements of activities.
During 2018, SVCF conducted an in-depth analysis of the nature of the evolving cryptocurrency asset class. While no authoritative guidance has been issued by the Financial Accounting Standards Board (FASB), a growing body of analysis and literature led SVCF to conclude that this asset should be classified as an “indefinite lived intangible asset.”
We retrospectively applied this accounting policy to our previously issued consolidated financial statements for 2017. When unrealized gains were removed, the effect was an approximately $4.4 billion decrease in our undesignated net assets for 2017, as mentioned above.
It is also important to note that – independent of the change of accounting – the FMV (fair market value) of these assets dropped from $4.459 billion to $815 million between 2017 and 2018. As widely reported, the market values of digital assets decreased significantly in 2018. SVCF’s holdings of digital assets actually grew during this period in terms of units – from 2.58 million to 2.62 million units during the years ending Dec. 31, 2017 and 2018, respectively.
Again, thank you for your interest in SVCF’s financial statements. We hope this note has provided useful context for understanding our approach to accounting for digital assets.
Nicole Taylor Mark Lazar
President and CEO Interim EVP, Finance and Operations