Accounting regulations require the corporation to incur impairment costs for any decline in Bitcoin’s value, regardless of its duration.
During the first half of 2022, Elon Musk’s automaker Tesla took a $170 million impairment charge for Bitcoin on its balance sheet. Additionally, it realised profits of $64 million from selling certain assets.
The material is appended to a Monday 10-Q SEC filing. Tesla said it might make “no upward modifications” for future Bitcoin price rises until the asset is sold.
Due to the extreme volatility of cryptocurrencies, this restriction complicates the ability of businesses to keep these assets on their balance sheets. In May, the Financial Accounting Services Board committed to evaluating the accounting standards relevant to digital assets, although no official debate has yet occurred.
Ahead-of-scheduled impairment expenses were a factor in Tesla’s decision to cash out its Bitcoin holdings in Q2, leaving just 25% of its initial stake intact.
Elon Musk, the CEO, subsequently explained that the selloff was motivated by the company’s need for cash and not by his broader stance on Bitcoin or cryptocurrency investment.
Musk said in July 2021 that he owned Bitcoin, Ethereum, and Dogecoin in lesser quantities. Microstrategy posted a $170 million impairment loss on its far more considerable Bitcoin holdings in the first quarter. Its Q2 loss data have not yet been disclosed.
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