In a recent news published by investment bank Berenberg, it was stated that MicroStrategy, following the Financial Accounting Standards Board’s (FASB) rule change regarding companies’ reporting of their financial conditions, can report its Bitcoin (BTC) assets every quarter without having to define impairment losses due to a decrease in the price of Bitcoin during that period.
FASB’s Rule Change for Cryptocurrencies and MicroStrategy
Berenberg stated in its latest report that MicroStrategy has reported a cumulative impairment loss of $2.23 billion since adopting its Bitcoin acquisition strategy in August 2020. The investment bank also noted that the largest impairment loss of $917.8 million was recorded in the second quarter of 2022, and despite the negative impact on the company’s intrinsic value being reported extensively in earnings news, this was not the case.
Berenberg analysts led by Mark Palmer wrote, “The change will help MSTR (MicroStrategy’s shares) and other companies holding cryptocurrencies eliminate the weak transparency created by impairment losses under FASB’s rules.”
On September 6th, FASB announced a move that will allow companies to immediately show their earnings and losses on income statements, enabling companies to use fair value accounting. FASB is expected to officially approve the final change later this year, and companies are expected to adopt the new rules.
Berenberg stated that FASB’s new rules will take effect in 2025, but companies will have the option to implement the new rules before that. In this context, it is expected that MicroStrategy will choose to implement the new rules. Furthermore, the investment bank has a buy rating on MicroStrategy shares with a price target of $510. The stock closed the trading session on September 7th at $353.07.
Michael Saylor: A Major Obstacle for Bitcoin Has Been Removed
MicroStrategy’s CEO, Michael Saylor, said in a tweet that the change “eliminates a major obstacle to the institutional adoption of Bitcoin as a reserve asset.”
Stifel, a US investment bank, expressed the opinion that American companies may be more inclined to hold cryptocurrencies on their balance sheets, especially during periods of market enthusiasm, considering the improved effects on the profit side.
