Tesla Got Hit With $170m Impairment Charge On BTC Holdings

Tesla got hit with $170 million impairment charge on its BTC holdings and the accounting rules mean the company has to face these charges on any decrease in the value of BTC no matter how short-lived so let’s have a closer look at our latest Bitcoin news.

Elon Musk’s car producer Tesla recorded a $170 million impairment charge for BTC on the balance sheets during the first half of 2022. it netted $64 million in gains from certain sales of the asset and the information came attached to a 10-Q SEC filing with Tesla saying that it might make no upward revisions for subsequent BTC price increases until it sells the asset.

When accounting, digital assets are defined as indefinite-lived intangible assets, and as such, Tesla has to recognize any decreases to the value of BTC during the reference period below the carrying value even if the price rebounds in the short term. Because of the high volatility of crypto, the rule creates difficulty for companies that seek to hold these assets on their balance sheets. The financial Accounting Services Board agreed to review the rules that pertain to digital assets in May but is yet to hold a formal discussion on the issue:

“These charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase.”

Tesla got hit with a $170 million impairment charge and the looming costs were a part of the reason Tesla chose to cash out its BTC in Q2, leaving about 25% of the original position remaining. CEO Elon Musk clarified that the selloff was related to the company’s need for cash and not to his overall thesis on BTC or crypto investing. Musk also said that he owns Bitcoin with smaller allocations put towards ETH and DOGE. Microstrategy recorded $170 million impairment losses on the larger BTC position and the Q2 loss figures are yet to be revealed.

As recently reported, In the latest earnings call, Musk said that the move was to maximize Tesla’s cash position and explained that Tesla sold its BTC stash right after China imposed its strict covid policies and the stash was worth about $936 million.