After the Financial Accounting Standards Board (FASB) voted to change how businesses report their finances, MicroStrategy (MSTR) will soon be able to report its holdings of bitcoin (BTC) each quarter without having to recognize impairment losses if the cryptocurrency’s price drops during the period in question, investment bank Berenberg said in a report Wednesday.According to the report, MicroStrategy has declared $2.23 billion in cumulative impairment losses since adopting its bitcoin acquisition approach in August 2020.
MicroStrategy’s largest impairment loss of $917.8 million was recorded in the second quarter of 2022, and the loss featured heavily in news coverage of the earnings, “giving the impression that the company’s inherent value had been negatively impacted when this was not the case,” the bank said.
“The change should help MSTR and other companies that hold digital assets to eliminate the poor optics that have been created by impairment losses under the rules that FASB has had in place,” analysts led by Mark Palmer wrote.
The FASB approved fair-value accounting on Wednesday, enabling businesses to report gains and losses right away on their income statements.Later this year, the FASB is anticipated to formally approve the final text, at which point businesses will be able to implement the new standards.According to a tweet from MicroStrategy’s executive chairman, Michael Saylor, the regulatory change “eliminates a major impediment to corporate adoption of bitcoin as a treasury asset.”
The new regulations may become effective as early as 2025, according to the FASB, although businesses will have the option of implementing them earlier.According to the statement, MicroStrategy will use that option.The German bank has a buy rating and a $510 price objective on MicroStrategy shares.The stock’s Thursday closing price was $353.07.American businesses may be more open to keeping digital assets on their books, especially when the market is booming, according to U.S. investment bank Stifel, given the positive effects on their bottom line.