FASB Accounting Rule Changes Benefit MicroStrategy and Other Companies Holding Digital Assets

Learn about the recent FASB accounting rule changes that benefit companies like MicroStrategy, allowing them to report bitcoin holdings without recognizing impairment losses. This news could encourage corporate adoption of digital assets.

Posted 8 months ago in Bitcoin

An image depicting a graph showing the value of bitcoin alongside a balance sheet.

MicroStrategy (MSTR) will soon be able to report its bitcoin (BTC) holdings each quarter without having to recognize impairment losses if the cryptocurrency’s price drops during the period in question, after the Financial Accounting Standards Board (FASB) voted to change how companies report their finances, according to a report by investment bank Berenberg.

MicroStrategy, a company that adopted a bitcoin acquisition strategy in August 2020, has faced significant cumulative impairment losses of $2.23 billion. The largest loss of $917.8 million in the second quarter of 2022 led to negative news coverage, giving a false impression of the company’s value decline. However, the FASB's rule change aims to address this issue by allowing companies to use fair-value accounting, enabling them to show gains and losses immediately on their income statements.

Mark Palmer, an analyst at Berenberg, mentioned that the FASB's decision is expected to benefit MSTR and other companies holding digital assets, eliminating the negative perception caused by impairment losses. The new rules are set to go into effect by 2025, but companies have the option to apply them sooner. According to Michael Saylor, executive chairman of MicroStrategy, this rule update will remove a major hurdle in the corporate adoption of bitcoin as a treasury asset.

German bank, Berenberg, advises that the new accounting rules could encourage more corporate investment in cryptocurrencies. Stifel, a US investment bank, supports this notion and suggests that American companies might be more inclined to hold digital assets on their books, especially during bullish market periods, as it will have positive impacts on their bottom line.

Last updated 9/10/2023, 11:15:33 AM


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