The FASB’s revolutionary new crypto accounting rules will have far-reaching effects on companies like MicroStrategy
Berenberg’s senior stock research analyst Mark Palmer lauded the improvements, noting how they will assist MicroStrategy in particular.
According to Berenberg Capital, a new age of crypto accounting has begun, with the United States Financial Accounting Standards Board (FASB) trying to dispel the “poor optics” that have determined corporations holding digital assets.
New rules for the accurate reporting and valuation of crypto on company balance sheets were approved by FASB on September 6.
Senior equities research analyst at Berenberg, Mark Palmer, noted the positive effects of these changes, especially for MicroStrategy and similar businesses.
They will no longer have to worry about recording quarterly impairment losses for their digital asset holdings.
Palmer said, “The change should help MicroStrategy and other companies with digital assets get rid of the bad look that impairment losses have given them under the rules that the FASB has had in place.”
Since MicroStrategy began its Bitcoin hoarding in August 2020, it has sustained cumulative impairment losses of $2.23 billion.
Significant impairment losses on its BTC assets have been reported in many of the company’s quarterly reports over the previous three years owing to market volatility, leading to unfavorable press coverage that exaggerated a drop in the company’s intrinsic worth.
Firms with cryptocurrency holdings will be able to declare their holdings at fair value under the newly authorized guidelines beginning in 2025.
As a result, their quarterly reports will represent the true worth of these assets, including any necessary adjustments for price increases.
As things stand now, impairment losses must be recorded regardless of whether or not prices eventually recover, thus this is a change.
As of July 31st, MicroStrategy has 152,800 BTC, worth around $3.9 billion, making it the biggest corporate Bitcoin holder in the world.
According to Berenberg, MicroStrategy may put a $8.8 billion value on its BTC holdings by April 2024 if it takes advantage of the new laws, which may be implemented proactively.
MicroStrategy’s CEO Michael Saylor was quoted by Berenberg as saying that the FASB’s “hostile” and “punitive” attitude toward cryptocurrency was a deterrent to more businesses adopting Bitcoin as an investment. Saylor now views these adjustments to the books as a catalyst for good:
“A change in how accounting is done would be a big boost to the price of Bitcoin because it would make tech companies more likely to start using it.”
Finally, the new FASB standards offer a brighter and more accurate accounting environment for corporations holding cryptocurrencies, which may encourage broader usage within the technology industry.