MSTR’s New Bitcoin Accounting Standard To Drive ‘Financial Swings,’ Make Earnings ‘Volatile,’ Says Expert After Lawsuit Hits Strategy
Michael Saylor‘s Strategy Inc. (NASDAQ:MSTR), formerly MicroStrategy, was hit with a lawsuit, specifically after adopting the new accounting rules of reporting cryptocurrency assets on its financial statements. This move could make the Bitcoin (CRYPTO: BTC) treasury company’s earnings more volatile, highlights an expert.
What Happened: Before the implementation of the new accounting rule, crypto assets like Bitcoin were reported on the financial statements under the existing intangible asset guidance.
According to Arthur Azizov, the founder and investor at B2 Ventures, after the implementation of the new accounting rules, Strategy may face both “operational and financial downstream risks,” in case of falling Bitcoin prices.
Under the old rules, if the intangible asset’s price fell below its acquisition price, an impairment loss was recorded in the statements, and even if the price went back up in other quarters, the write-down could not be reversed.
However, the new ‘Accounting Standards Update (ASU) No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets’ requires companies to measure crypto assets at fair value each reporting period.
Reporting the assets based on their fair value will reflect the fluctuation in the price of the asset in the financial statements of the company in …
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