The Chief Executive Officer of MicroStrategy and Bitcoin maximalist Michael Saylor has expressed pleasure concerning the U.S. Financial Accounting Standards Board (FASB) determination to assessment guidelines for crypto.
Congratulations to the #Bitcoin neighborhood. This morning, by unanimous vote of 7-0, the Financial Accounting Standards Board (FASB) agreed so as to add a mission to assessment Accounting for Exchange-Traded Digital Assets and Commodities.
— Michael Saylor⚡️ (@saylor) May 11, 2022
FASB to assessment crypto accounting frameworkThe present FASB tips present that firms ought to report digital belongings and commodities as “intangible belongings” on their steadiness sheets. This is as a result of cryptocurrencies don’t meet the usual definition of “money and money equivalents, monetary devices, monetary belongings, and stock.”
The rule signifies that firms like MicroStrategy, which has most of its belongings in Bitcoin, can’t report crypto as a tangible asset on its steadiness sheet. Companies holding intangible belongings should measure them utilizing the bottom worth inside the reporting interval.
This reporting commonplace normally leads to impairment losses for firms holding crypto even when the agency maintains its place. MicroStrategy recorded over $800 million in impairment losses as a result of rule. In the primary quarter alone, the agency reported an impairment lack of over $170 million.
Given that the FASB is but to announce the choice formally, the assessment date is unclear. There’s additionally no assurance of the result.
But adopting a unique algorithm that applies explicitly to cryptocurrency as an alternative of conventional finance requirements will make it simpler for firms holding crypto to report extra precisely.
Crypto crash results in impairment losses for institutional holdersThe efficiency of the crypto market prior to now couple of months signifies that most Bitcoin holding firms have reported impairment losses on their belongings.
However, these firms, together with Tesla, haven’t made any losses via gross sales and are normally nonetheless at a revenue.
An excellent instance is Townsquare Media. The New York-based firm reported an impairment lack of $400,000 on its BTC within the first quarter; nevertheless, it offered its place for a $1.2 million revenue on March 31.
For MicroStrategy, Bitcoin’s fast drop in worth to $28,000 means the corporate now has precise impairment losses. In its Q1 report, it acknowledged that the common buy worth of its BTC holding is $30,700.
Oluwapelumi Adejumo Journalist at CryptonomieOluwapelumi is a believer within the transformative energy Bitcoin and the blockchain trade holds.
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