Reports on Friday evening indicate that the Securities and Exchange Commission is pushing back on MicroStrategy's approach to bitcoin accounting.
Bloomberg and CNBC both reported on the SEC's rebuffing, which was included in a December 3 filing that appears to show a months-long back-and-forth between the publicly traded company and the US securities regulator on this issue.
“We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures,” the filing reportedly states. “Please revise to remove this adjustment in future filings.”
Impairment charges, in accounting, show the decline in the carrying value of an asset on a balance sheet, with the carrying value referring to the cost of that asset minus any fall in the value of it. MicroStrategy has long pushed for American accounting standards to be updated to account for assets such as bitcoin, penning a letter last fall to the Financial Accounting Standards Board (FASB) on the matter. Specifically, the company has cited the ever-shifting value of cryptocurrencies as a flaw in the existing accounting approach.
"Impairment charges, including intra-reporting period impairment charges, cannot be reversed once recorded under ASC 350," the company wrote at the time. "As a result, subsequent increases in the market price of a digital asset are not reflected in the digital asset’s reported carrying value on an entity’s balance sheet. Entities with significant digital asset holdings, such as MicroStrategy, are therefore required to report digital asset carrying values on their balance sheets that diverge significantly from their fair market value."
By using its non-GAAP disclosure approach, MicroStrategy went on to write, "provides investors with the type of 'return-on-investment' viewpoint that investors have indicated is valuable to their analysis of the financial health of our company.
The developments come as MicroStrategy's stock price has fallen by more than 20 percent this week.
This is a developing story and will be updated with additional information.
As cryptocurrencies become increasingly mainstream, regulators, the media and policymakers are paying more attention to the financial crime risks associated with them. But what are the biggest compliance challenges crypto firms face, and what does a best practice AML program look like?
Ethereum had a breakout year in 2021. It’s native asset, ETH’s, market capitalization surpassed $500 billion for the first time. Its network facilitated upwards of $7 trillion value transfer. Non-fungible tokens (NFTs) emerged as another “killer application” that have put its technology on the global stage and caught the attention of the masses.
TRON DAO has announced the launch of a $10 million incentive fund in light of recent events to support Terra developers migrating to the TRON ecosystem, including TRON’s EVM compatible cross-chain solution BitTorrent Chain (BTTC), which helps facilitate the seamless transfer of assets across mainstream public chains, including TRON, Ethereum, and BNB Chain.