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MicroStrategy CEO reiterates ‘long term’ Bitcoin play in Q3 earnings

November 2, 2022 Coin Telegraph

Analyst

The world’s largest corporate holder of Bitcoin has reduced its losses compared to previous earnings as its CEO says it will continue to buy and hold Bitcoin long term.

The third quarter earnings for business intelligence firm MicroStrategy revealed a narrowed net loss of $27.1 million for the quarter, while it continues to grow its Bitcoin (BTC) portfolio despite poor crypto market conditions.

The world's largest publicly traded corporate Bitcoin owner confirmed it still owns 130,000 BTC at the end of Q3 2022. That amount represents 0.62% of all Bitcoin that will ever be owned, which it says was acquired for a total cost of around $4 billion, or $30,639 per BTC.

The company reported on Nov. 1 impairment charges for the quarter of $727,000, far less than the $917.8 million it recorded in the second quarter of 2022 or the $65 million for the same period last year, thanks to stable Bitcoin prices throughout the last quarter.

An impairment charge is an accounting term used by businesses to describe a reduction in the value of held assets, and according to MicroStrategy, it had cumulative impairment losses of approximately $2 billion as of Sept. 30.

In an earnings call MicroStrategy president and CEO, Phong Le reiterated the firm's long-term hodling strategy, saying:

“We have not sold any Bitcoin to date. To reiterate our strategy, we seek to acquire and hold Bitcoin for the long term. And we do not currently plan to engage in sales of Bitcoin. We have a long-term time horizon and the core business is not impacted by the near-term Bitcoin price fluctuations.”

Michael Saylor, who stepped down from his position as CEO on Aug. 8 but remains with the company as an executive chairman, mentioned in the call that since embarking on its Bitcoin strategy on Aug. 11, 2020, the company's share price was up 116% compared to Bitcoin’s 72% increase for the same period.

In the accompanying earnings report, chief financial officer Andrew Yang gave a nod to the recent announcement from the United States Financial Accounting Standards Board’s decision to support “fair value accounting” for Bitcoin, noting:

“If finally adopted and implemented, we believe fair value accounting will improve upon the current, unfavorable intangible accounting treatment applicable to Bitcoin holdings and will promote additional institutional adoption of Bitcoin as an asset class”

MicroStrategy reported adjusted earnings per share losses of $0.96, compared to analyst estimates of a loss of $0.94, and its revenues of $125.4 million surpassed estimates by just 0.05%.

The firm's revenues over the past year have reached $119.3 and $122.1 million respectively for Q1 and Q2. $16.4 million of its Q3 revenue came from its subscription services, which represents a 51% increase compared to the year prior in what is the fastest-growing source of revenue for MicroStrategy.

New crypto accounting guidelines could ‘smooth the way’ for adoption

October 14, 2022 Coin Telegraph

CalCPA

Another step has been taken on the path to use fair-value accounting for the reporting of crypto assets in the United States.

The United States Financial Accounting Standards Board (FASB)’s decision to allow companies to use “fair value” to account for their crypto holdings could be seen as another step toward the wider institutional adoption of cryptocurrency.

During a meeting on Oct. 12, the FASB board made the decision to require entities to measure crypto assets at “fair value.”

The board’s decision is “tentative” at this stage, and could be changed at future board meetings when they continue to weigh their options.

The decision, if approved, will allow companies to update their balance sheets regularly with the fair value of crypto assets rather than referring to digital assets such as Bitcoin (BTC) as “intangible assets,” where companies were required to measure assets at their lowest price during a reporting period.

The previous treatment of digital assets resulted in large impairment losses on balance sheets even if their positions were currently in the green, with firms being unable to regularly update the value of their holdings if the value were to increase.

Anthony Tuths, principal of KPMG's Alternative Investment Tax practice said the guidance could be bullish for broader mainstream crypto adoption, adding it is likely to go into effect in 2023.

“FASB has just cleared the way for new accounting guidance which will allow most cryptocurrencies to be accounted for at fair value. When this guidance goes into effect (likely in 2023) it will greatly help smooth the way for broader mainstream adoption.”

Tuths added that not all digital assets would qualify for the new accounting treatment however, with NFTs, asset backed tokens, and similar tokens still subject to the previous guidelines.

Crypto tax firm CoinLedger’s director of strategy Miles Brooks said the new FASB decision is “long overdue.”

The U.S. standard-setter had declined to consider new accounting rules for crypto until May. 11, when board members decided to add the project to its technical agenda after an increase in market capitalization of crypto assets made the matter more urgent.

Brooks continued to say the new FASB standards will allow companies to more accurately report their current crypto holdings within their financial statements.

Companies and investors have been seeking clarity on the accounting standards for crypto for years, for example the California Society of Certified Public Accountants (CalCPA) urged the FASB to treat crypto more like foreign currency all the way back in 2019.

Michael Saylor welcomes FASB vote to review crypto accounting standards

May 12, 2022 Coin Telegraph

Coin Telegraph

The FASB is set to review its accounting rules for digital assets, which could see firms no longer be required to report crypto such as BTC as “intangible assets” on their balance sheets.

Bitcoin proponent and MicroStrategy CEO Michael Saylor has welcomed the U.S. Financial Accounting Standards Board (FASB) vote to review accounting rules for digital assets and commodities.

As it stands under current FASB guidelines — which is the source of authoritative Generally Accepted Accounting Principles (GAAP) — companies must report digital assets such as BTC as “intangible assets” on their balance sheets.

This is due to crypto not meeting the agreed definition of “cash and cash equivalents, financial instruments, financial assets, and inventory” amongst the agency.

As crypto is deemed as an intangible asset, companies are required to measure the assets at their lowest price during a given reporting period, which often results in “impairment losses” on balance sheets even if the firm hasn’t closed its position.

The FASB held a meeting to vote on the crypto accounting review earlier today, and while it is yet to publish the results via its website, it appears that Saylor was watching the live stream as he reported the vote went through 7-0 and stated “congratulations to the Bitcoin community.”

Congratulations to the #Bitcoin community. This morning, by unanimous vote of 7-0, the Financial Accounting Standards Board (FASB) agreed to add a project to review Accounting for Exchange-Traded Digital Assets and Commodities.
— Michael Saylor⚡️ (@saylor) May 11, 2022

“This is amazing. One step closer to making it easier for corporates to own Bitcoin on their balance sheet and account for it in a cogent manner,” responded Kraken’s Director of Growth Marketing Dan Held.

While it is unclear when the review will take place, or what the outcome could be, a shift to a definition resembling anything in the ballpark of “traditional financial assets” would make it a lot easier for firms to accurately report their holdings instead of reporting them at their lowest prices under intangible assets.

For example, both Tesla and MicroStrategy have reported impairment losses on their BTC stashes at various quarterly reports over the past 12 months. This is despite not realizing a loss through a sale and the price of BTC often indicating that their positions are in the green.

Cointelegraph also reported yesterday that New York-based digital marketing and radio station company Townsquare Media posted a Q1 impairment loss of $400,000 on its BTC holdings. This is despite being able to sell its position for $1.2 million profit on the last day of Q1 on March 31.

BTC and MSTR tanking

If MicroStrategy was reporting today however the impairment loss would be actual. MicroStrategy reported the average purchase price of its mammoth 129,218 BTC holdings at $30,700 in its Q1 report released last week, suggesting the firm would post a loss if it were to sell today.

According to Forbes estimates, Saylor’s net worth — which is largely comprised of BTC and MicroStrategy stock (MSTR) – has dropped from $1.6 billion in March to just shy of $1 billion this week.

Data from Coingecko shows that BTC has dropped 27.9% since March.1 to sit at $29,741 at the time of writing, while MSTR has dropped 63.7% to $168.20 within that same time frame according to TradingView.

Although Saylor has outlined on numerous occasions that irrespective of price, the company will continue to buy and hodl.

FASB

BTC and MSTR tanking

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