The new US Financial Accounting Standards Board standards for cryptocurrency accounting will remove the “bad optics” that plagued digital asset holding companies, according to Berenberg Cash analysts.
On Sept. 6, the US Financial Accounting Standards Board (FASB) approved new cryptocurrency standards regarding how companies report the fair value of their holdings on their balance sheets.
In a follow-up note, Berenberg senior equity research analyst Mark Palmer argued that the changes would be particularly beneficial to companies like MicroStrategy, which will soon be able to report their digital asset holdings quarterly without having to make losses from deterioration.
“The change should help MicroStrategy and other companies that own digital assets to remove the bad optics that impairment losses have created with the rules the FASB has had in place,” Palmer wrote.
Since it began accumulating bitcoin in August 2020, MicroStrategy has racked up $2.23 billion in cumulative impairment losses.
Additionally, some of the quarterly reports the company has published over the past three years have included sizeable impairment losses on its BTC holdings that reflected downward movements in the asset’s price.
This led to negative media coverage of the company and its reporting, “giving the impression that the inherent value of the company had been negatively affected when it had not,” Palmer said.
Holders will Be Able to Declare their Holdings at their Fair Value
Under the new rules, which will take effect in 2025, companies holding cryptocurrencies will be able to declare their holdings at their fair value. Therefore, your quarterly reports will reflect current asset values, including any price spikes.
Currently, impairment losses must be included and cannot be adjusted even if the asset price recovers.
MicroStrategy is the world’s largest corporate bitcoin holder, holding 152,800 BTC as of July 31, currently valued at about $3.9 billion. The new rules can be applied in advance, and Berenberg believes that MicroStrategy will do so, valuing its BTC holdings at $8.8 billion in April 2024.
According to Berenberg’s note, MicroStrategy CEO Michael Saylor once said that the main reason more companies have not adopted a BTC investment strategy is because of the FASB’s “hostile” and “punitive” treatment of companies. cryptocurrencies. He went on to state that the change is a positive result:
“A change in accounting treatment would be a significant positive catalyst for the bitcoin price, as it would spur adoption by tech companies.”
By Leonardo Perez
