In an unexpected twist in the cryptocurrency saga, MicroStrategy (MSTR) is poised to report its quarterly bitcoin holdings with no need to disclose impairment losses in case the digital currency’s value plummets in the corresponding period. This substantial shift comes courtesy of the Financial Accounting Standards Board (FASB), who voted for a significant amendment in corporate financial reporting. According to an investment bank, Berenberg, this could potentially erase the $2.23 billion in cumulative impairment losses reported by MicroStrategy since the inception of its bitcoin acquisition strategy in 2020.
Impressively, the heaviest impairment loss, a whopping $917.8 million, was recorded in the second quarter of 2022, which was amplified in the news, causing people to mistakenly believe that the company’s inherent value was negatively impacted. Berenberg’s analysts, including Mark Palmer, hold the view that this change might bring relief to MicroStrategy and other firms owning digital assets, dismissing the negative perception generated by impairment losses under previous FASB rules.
The regulatory body opted to adopt fair-value accounting which would enable companies to instantly show gains and losses in their income statements. The complete draft of this rule is expected to receive formal approval from FASB later this year, allowing companies to adopt the new norms.
MicroStrategy executive chairman, Michael Saylor, views the rule update as a vital step that “eliminates a major impediment to corporate adoption of bitcoin as a treasury asset”. Despite the FASB announcing the new rules would start as late as 2025, companies have the choice to implement them beforehand. Berenberg forecasts that MicroStrategy will jump on board and exercise this option.
The influential transformation in the way corporations report their financial holdings may encourage further adoption of digital assets by U.S. companies. The German bank retains a buy rating on MicroStrategy shares, with a price target of $510, a significant jump compared to the closing price of $353.07 on Thursday. Meanwhile, Stifel, an American investment bank, suggested that given the improved impacts on the bottom line, companies might consider increasing their digital assets holdings, especially during hot market periods.
Source: Coindesk
