ENS Financial Position

Believe I am offering to help with this effort. This could be a good focus of Alishas post on working groups and will bring it up there.

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Seems like @nick.eth missed spent money for bug bounty :sweat_smile:

@nick.eth

I have a degree from Wharton (UPENN) in Accounting. What little I remember, before I went to the darkside to become a lawyer, is that you need to set up a proper accounting system with yearly auditing. While the United States Securities and Exchange Commission expects adherence to GAAP (Generally Accepted Accounting Principles), I do not believe ENS is subject to U.S. regulators, and you pay taxes to Singapore, so I do not know what effect that has on complying with GAAP. Nevertheless, ENS could be overpaying its tax obligation to Singapore.

The rudimentary P&L Statement setup (I like the mountain range) is incorrect, but you do show a basic understanding of the concept of unearned income (i.e., cash vs accrual methods of accounting). There are four main financial statements. (1) balance sheet; (2) income statement; (3) cash flow statement; and (4) statement of shareholdersā€™ equity. A balance sheet discloses the assets and liabilities at a fixed point in time, usually reported quarterly and yearly. Income statement shows the revenue and expenses, usually on a quarterly and yearly basis. Cash flow statement shows the inflows and outflows of money, again, usually on a quarterly and yearly basis. The fourth financial statement, Statement of Shareholder Equity, depends on the form of the corporate structure of ENS.

As to who you choose to do the accounting and legal (yes, legal), as they are two very different consulting objectives, depends on the country that ENS has chosen to be domiciled. I think I can make the safe presumption that it is Singapore; and thus, the separate and distinct law and accounting firms should have an expertise in Singapore corporate and tax law. You can research in places like Legal 500 and Chambers. In the past, I used and contributed to both resources with respect to employee benefits law litigation (ERISA in the USA). You should probably choose the law firm first, to ensure ENSā€™s corporate structure is in compliance with Singaporean law. You can then ask them to make a short list of accounting firm recommendations from which ENS can consider and choose.

Think of it this way, ā€œENS is going to have a very Happy New Year!ā€, so nowā€™s the time to get its house in order as it grows.

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Iā€™M NOT A LAWYER. Iā€™M A CRYPTO CARTOONIST/NFT-ILLUSTRATOR & PROFESSIONAL MEME CONSULTANT/GIFOLOGIST, HOWEVER I LOVE YOUR POST. I HONESTLY DIDNā€™T KNOW THAT ENS HAD ITā€™S TAX OBLIGATIONS IN SINGAPORE. THANK YOU FOR LEARNING ME TODAY, SER. :slight_smile:

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True Names Limited (the company ENS team belongs to) is based in Singapore, but the ENS DAO is based in Cayman island which has different tax obligations The ENS Foundation - ENS Documentation

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Good information, because it helps to determine the proper jurisdictionā€™s law that pertains to the legal, accounting, and tax structure.

True Names (the nonprofit that develops ENS, and previously identified itself as the beneficial owner of ENS income) has accountants and auditors who complete our accounts for us. The DAO has neither, so far - and as you observe, Iā€™m not an accountant, just attempting to provide some transparency into the state of ENSā€™s financials.

For clarity, the DAO is incorporated as a foundation in the Cayman Islands. The Foundation has lawyers, but not (yet) accountants. It would be ideal if someone steps up to do accounts for the DAO, and the Foundation can leverage that- though as I understand it, Cayman Island foundations are not required to submit annual accounts.

If youā€™re interested in helping, the meta-governance working group will definitely need stewards and participants who know their way around a ledger!

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At the moment things are in a fairly formative state with DAOs and whether they should be classed as corporations, foundations, or some other type of entity. A few countries (and individual States in the US) have tried to get ā€œfirst moverā€ advantage - Wyoming was quite public about this when it did it. However, it doesnā€™t necessarily mean every territory will accept it - many still donā€™t, even if Wyoming think itā€™s ok. Itā€™s only a matter of time before itā€™s more widely accepted - hopefully weā€™ll be one of the projects that moves it forward.

Cayman is similar to a lot of the ā€œoffshoreā€ jurisdictions (Iā€™m not using that term negatively, I live in one) in that the requirements are light - most (I believe this is also true in Cayman) just require ā€œaccounting recordsā€ to be kept but often you donā€™t actually need to prepare full financial statements, whether audited or not.

Iā€™d be more than happy to do this or to contribute significantly towards doing it - I have done it in past work for several listed companies and I prepare/review 15-20 sets a year across a number of crypto and related businesses in my day job.

On the US SEC point raised above by @berrios.eth the DAO is very unlikely to need to follow US accounting conventions. In the interests of transparency I believe the accounts should be public but they donā€™t need to be filed with EDGAR / CEDAR etc unless something changes. I would strongly recommend that the DAO adopts IFRS, because theyā€™re accepted and understood nearly everywhere in the world.

I was not suggesting that we do anything to be regulated by the SEC. Whether itā€™s compliance with the standards set by Financial Accounting Standards Board (FASB) or the International Accounting Standards Board (IASB), the goal is financial transparency and credibility to our community and market.

It seems that you have a skill set better suited to assisting the DAO in this endeavor than I, which is good and I hope you consider being active.

My education and experience has been focused more on issue spotting and big picture strategy to achieve results and not on the implementation of a plan specifics.

Iā€™m aligned with you, the main objectives are indeed transparency, credibility, and Iā€™m not sure itā€™s even a real word, but understandability is also critical. I hope we can move toward the financial performance being easily understood no matter oneā€™s skill set or background. Itā€™s possible, but difficult in the current environment because of the strong dislike most standard-setters have of ā€œalternative performance measuresā€ (non-GAAP figures).

We will need a number of people with familiarity of the topic, but thereā€™s no sense in having a requirement to be actively practicing in a technical accounting role for everyone who wants to contribute. There will also be a lot of critical judgments and accounting policy decisions which need debate, discussion, and throwing ideas around - something I enjoy and Iā€™m positive you would find it interesting too as part of the working group. I would be more than happy to share my knowledge and experiences in this space with anyone else who wants to be involved and I fully plan to get involved in this aspect of the DAO, for my own learning and because itā€™s an interesting project :grinning:

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Just as an update to this, Iā€™ve modified the queries used to build the Dashboardā€™s income and revenue figures and balances to treat income from name premiums as being earned at the time of registration, rather than progressively over the period of registration of the name. This makes the most sense, but when premiums were low ($2000) it made relatively little difference to the end result.

As a result of this, the accounts now show us as having ~1285 ETH (~$3.25mm) more available as ā€˜earnedā€™ income in the treasury. The change is also particularly evident in income figures for recent months; Februaryā€™s income is now reported as ~$2.2M USD, compared to ~$1M before.

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This function will be carried out by the Treasury Management subgroup in the Meta-Governance working group. This particular subgroup is still to kick into motion, but hopefully when the budgets come through in the next few weeks, and there is funding assigned to the subgroup, there will be more interest in moving treasury management forward.

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Iā€™ve been inactive for a while but just to check something on this - someone purchasing a domain canā€™t cancel it in any way, I assume? Iā€™m pretty sure they canā€™t, but Iā€™m not technical.

I can follow your reasoning as treating it as earnt - because it canā€™t be revoked if there is no refund/cancellation - but Iā€™m still not sure this makes sense when looking at trends and forecasts. Even assuming you canā€™t cancel after the purchase is validated, I want to use an extreme example to illustrate:

If all new registrations for the next 3 months were for 10years, weā€™d have (a) masses of income now, and (b) nothing to show for the next 10years.

That doesnā€™t really make sense to me, especially as the costs of maintaining the service that purchasers have paid for (the domain) are required over that 10 year period.

When I have a bit more time available Iā€™ll think about if there is an alternative method (for example, we could use a weighted average number, or use that method for <1 year domain leases, and the ā€œover timeā€ method for longer ones).

We are still accounting for income on a registration over the period of that registration. So, if someone registers a name, paying 1 ETH for 10 years registration and another 1 ETH in premium, we register the 1 ETH premium as income immediately, and the 1 ETH registration fee progressively over the 10 years.

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Ah, I missed the rather critical ā€œpremiumā€ part :blush:. That makes sense then! Thanks for clarifying. Businesses with similar products with different ā€œcomponentsā€ have in most cases Iā€™ve seen opt for this method also - happy days.

@nick.eth if this is still available and you want a volunteer accountant to help ,I am an excellent accountant and have excellent knowledge in crypto world
I also have other experiences and skills that can help
For example, I am also a programmer specializing in accounting and management software
It is possible for us to cooperate together in accounting, building a financial system and automating financial operations
Examples of my work in programming
My youtube channel

I have very good experience and also a member of the forum
I am a volunteer to help and cooperation with you in this
I have a set of skills that will really help and I am a volunteer and I do not want to be paid at first
I mentioned it before in one of my threads

From this Google Drive link, you can find more information about me
https://drive.google.com/file/d/1JIO598naxy0Jkcd2xes_B7K_G2Q-hbtT/view

I also hope that you will read my topics on the this forum to know more about me
I hope we can communicate to cooperate together

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Hi @mixmore, youā€™re welcome to present and introduce yourself on our weekly Meta-governance calls if you are interested to participate in this regard. More information below:

Meta-Governance WG Call - Every Monday at 3pm EST (7:00pm GMT)

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@estmcmxci Thank you very much for your interest , for sure I will attend the weekly Meta-governance calls and introducing myself

But I think there is a schedule and plan for the weekly Meta-governance calls , it certainly contains multiple topics for discussion

and the organizer of the weekly Meta-governance calls maybe needs information about me and about what I will say to arrange his thoughts

If there is a specific form that I should fill or I should write a summary about myself and what I want to say or anything else and deliver it to the organizer before the weekly Meta-governance calls, please tell me what is required from me to prepare it

If nothing is needed please tell me too

and thank you again for your help

I think a submission form to prepare for presentations could be a good idea. @Coltron.eth what do you think? @mixmore if youā€™d like you can reply with your idea and more in the #meta-governance weekly agenda post.

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@estmcmxci The problem is that I can not post any topics except in the general section.
the button to publish topics is not available for me in any other department.

I request to join the ENS DAO as an active contributor and it was accepted,
but what changed is that I can reply to topics in other sections, but I still cannot publish any topics

I tried now to post in #meta-governance section and I couldnā€™t, I still canā€™t do it Although my request was accepted