The FASB’s new rules for accounting for cryptocurrencies will remove the “bad optics” plaguing companies holding digital assets, according to analysts at Berenberg Capital.
On Sept. 6, the U.S. Financial Accounting Standards Board (FASB) approved new rules for cryptocurrencies that address how companies report the fair value of their holdings on their balance sheets.
In a follow-up analyst note to Berenberg senior equity research analyst Mark Palmer, the analyst sees the changes as being particularly beneficial for companies such as Microstrategy, which will soon be able to report their digital asset holdings quarterly without the need for a reduction. value loss.
“This change should help MicroStrategy and other companies that hold digital assets eliminate adverse consequences of impairment losses under the rules established by the FASB,” it wrote.
MicroStrategy has accumulated $2.23 billion in impairment losses since it began accumulating bitcoin in August 2020.
Additionally, some of the company’s quarterly reports over the past three years have included large impairment losses on its Bitcoin holdings, reflecting the asset’s decline in price.
That led to negative press coverage of the company and its reports, “giving the impression that the intrinsic value of the company had been negatively impacted, which was not the case,” Palmer said.
Under new rules set to take effect in 2025, companies holding cryptocurrencies will be able to report those assets at fair value. Therefore, their quarterly reports will reflect the current value of the asset, including any price rebounds.
Currently, asset impairment losses must be recorded and cannot be adjusted even if the asset price recovers.
MicroStrategy is the world’s largest corporate holder of BTC, with 152,800 bitcoins currently worth approximately $3.9 billion as of July 31. The new rules could be applied earlier, which Berenberg believes MicroStrategy will do, with its BTC holdings valued at $8.8 billion by April 2024.
related: MicroStrategy Returns to Profit, Now Owns $4.4B Worth of Bitcoin
According to Berenberg’s notes, MicroStrategy CEO Michael Saylor has stated that the main reason more companies are not adopting BTC investment strategies is the FASB’s “hostile” and “punitive” treatment of cryptocurrencies. He went on to say that the change was a positive outcome:
“A change in accounting treatment will be an important positive catalyst for the price of bitcoin as it stimulates adoption by technology companies.”
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