Cleanspark (CLSK), a bitcoin mining services provider, is acknowledging previously undisclosed regulatory scrutiny of its accounting policies, including revenue recognition. The company inserted new language in its latest annual report detailing multiple comment letters received from the Securities and Exchange Commission (SEC) in fiscal 2023.

Cleanspark revealed its response to certain comments the company considers material remain unresolved and under review by SEC staff. In briefly describing the SEC’s scrutiny of its revenue recognition, Cleanspark acknowledged the potential for discrepancies between its treatment and others:

“The Staff commented on the Company’s accounting convention to recognize its noncash (bitcoin) revenue using fair value that is not at contract inception. The Company has evaluated the difference between its current accounting policy and fair value at contract inception and has determined that any differences in revenue are not material for all periods stated.”

In all, Cleanspark listed nine material unresolved matters currently under the scrutiny of SEC staff including the company’s classification of proceeds from sale of bitcoin as an operating activity and not an investing activity:

“The Staff commented on the Company’s recording of the proceeds from bitcoin sales and why the Company classifies its proceeds as operating cash flows rather than investing cash flows. The Company records its proceeds from sales of bitcoin as operating activities since the bitcoin that is sold is typically held for 7 days or less.”

Cleanspark did not disclose the scrutiny in its three prior quarterly reports.

Separately, Cleanspark disclosed multiple control deficiencies related to third-party information technology (IT) systems and applications.

Specifically, Cleanspark acknowledged problems related to vendor audit reports and spreadsheets necessary to produce accurate company financial statements.