The biggest bitcoin holder in the open market, MicroStrategy, has joined an increasing number of those who support the suggested rule changes by the Financial Accounting Standards Board (FASB), which aims to do away with impairment costs for businesses that own cryptocurrencies.
MicroStrategy controlled over 140,000 BTC as of March 31, giving it a sizable presence in the cryptocurrency market.
The classification of cryptocurrency assets as “indefinite-lived intangible assets” under the current generally accepted accounting principles (GAAP) requires them to undergo an impairment test to determine if their value has permanently decreased.
Companies must recognize an impairment loss and modify the carrying amount when an asset’s carrying value exceeds its fair value.
The FASB recommends that organizations periodically evaluate specific crypto assets at fair value and report any changes in fair value in their net income, according to a draught of the proposed revisions that were published in March.
The FASB recommends that organizations periodically evaluate specific crypto assets at fair value and report any changes in fair value in their net income, according to a draught of the suggested amendments that were published in March.
Entities would offer a more transparent and timely picture of the market value of the crypto asset by immediately recognizing fair value changes in net income.
Players in the industry have begun to pay attention to and support the suggested changes, with MicroStrategy being the most recent to do so for the “Fair Value Model” proposal for crypto holdings reporting. the 22nd of May 2023 in a letter.
Stakeholders may now comment on the proposed changes to accounting standards for crypto assets through the FASB’s open comment period. From now until June 6, interested parties will have the chance to comment on the suggested adjustments.
In comparison to an impairment of $198 million during the fourth quarter of the latter three months of 2022, MicroStrategy had impairment losses on its digital assets of $18.9 million during the first quarter of this year.
The business recorded impairment charges of $918 million during the second quarter of 2022. During this time, the algorithmic stablecoin TerraUSD (UST) and its companion coin LUNA crashed, which led to a sharp decline in the price of Bitcoin.