The Financial Accounting Standards Board received hundreds of letters inspired by MicroStrategy urging reconsideration of US accounting standards to accommodate companies that hold Bitcoin.
The Financial Accounting Standards Board received hundreds of letters inspired by MicroStrategy urging that US accounting standards be reconsidered to accommodate companies that hold Bitcoin.
“This disconnect between an entity’s financial statements and the economic reality of its financial condition and results of operations creates confusion and fails to provide investors, analysts, and the general public with the information they need to make an informed assessment of an entity’s current and future pros and cons,” MicroStrategy recently wrote to the Financial Accounting Standards Board (FASB).
Companies that are not investment firms currently report Bitcoin as intangible assets. This means that Bitcoin is recorded on balance sheets at its historical cost and then impaired if its value falls. However, if the price of Bitcoin rises, the value cannot be revised upward.
Notably, FASB does not change rules based on the volume of letters received, but the volume indicates a clear consensus among businesses holding Bitcoin in reserve and other interested parties: Current regulations fail to provide investors with clear information about a company’s financial prospects, particularly when it comes to Bitcoin.
The big four accounting firms, an American Institute of CPAs panel, some investor groups, and individual businesses were among those who wrote to FASB urging them to act. The requests were made in response to the FASB’s request for feedback on its long-term agenda. Comments were due on September 22nd.
“We recommend that the FASB begin a project on accounting for digital assets immediately; waiting until they become pervasive in financial reporting may put the FASB so far behind, they may never catch up,” wrote the Alliance of Concerned Investors.
The FASB has previously rejected calls to revise accounting standards for Bitcoin, claiming that most companies do not have significant holdings and that if they accept the currency as payment, they immediately convert it to cash. However, some major corporations, such as MicroStrategy and Square, have increased their Bitcoin investments and are not planning to sell.
MicroStrategy CEO Michael Saylor announced in early September that the company had purchased an additional 5,050 Bitcoin for approximately $242.9 million in cash during the third quarter period.
MicroStrategy has purchased and held approximately 114,042 Bitcoin since August 2020, for a total purchase price of $3.16 billion and an average price of $27,713 per bitcoin, inclusive of fees and expenses. The company owns more Bitcoin than any other publicly traded company on the planet.