MicroStrategy Backs FASB Proposed Changes for Crypto Holdings Reporting jpg

MicroStrategy Backs FASB Proposed Changes for Crypto Holdings Reporting

Altcoin news, News

MicroStrategy, the largest public holder of bitcoin, has expressed its support for Financial Accounting Standards Board (FASB) proposed rule changes. These changes aim to remove impairment charges for firms holding cryptocurrencies. Currently, accounting principles classify crypto assets as “indefinite-lived intangible assets” and subject them to impairment testing. The proposed changes by FASB would require periodic measurement of specific crypto assets at fair value and disclosure of any fair value changes in net income.

In a letter addressed to the FASB, MicroStrategy reported that even though they had bought approximately $4.2 billion worth of bitcoin, the company had to express these assets on their balance sheet at $2 billion due to nearly $2.2 billion worth of cumulative impairment charges. On March 31, the market value of MicroStrategy’s bitcoin holdings was close to $4 billion, which is two times higher than the amount of these holdings’ value under the current accounting model.

MicroStrategy believes that reporting crypto asset holdings under the fair value model proposed by FASB would offer investors a more accurate view of the firm’s financial position, along with the economic value of its bitcoin holdings. This would enable investors to make informed investment and capital allocation decisions. Other industry participants share these sentiments and have also expressed support for accounting standards specific to crypto. Specific accounting rules for crypto could facilitate more companies holding such assets without concerns about impairment charges, resulting from short-term market volatility.

TaxBit has also sent a letter to the FASB in support of the proposed changes. According to TaxBit, these changes better reflect the economic realities of crypto assets. They would offer investors more accurate and useful information to aid in making better capital allocation decisions. The FASB is collecting commentary on these proposed changes until June 6. In Q1 2022, MicroStrategy recorded a significant reduction in impairment losses on its digital assets. The firm reported losses of $18.9 million compared to $198 million in the previous quarter of 2022. During Q2, the company incurred losses of $918 million when terraUSD and its associated coin, LUNA, crashed, resulting in a significant drop in Bitcoin’s price.

Compiled by Coinbold


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