Berenberg Analyst FASB’s New Regulations Will Benefit Microstrategy Company

Berenberg Analyst FASB Rules Benefit Microstrategy

Author: Martin Young, Cointelegraph; Translation: Song Xue, LianGuai

Analysts from Berenberg Capital believe that the new accounting rules for cryptocurrencies issued by the Financial Accounting Standards Board (FASB) in the United States will eliminate the “negative stigma” surrounding companies holding digital assets.

On September 6th, the FASB approved new rules regarding cryptocurrencies, specifically addressing how companies should report the fair value of their assets on their balance sheets.

In a subsequent analyst report by Mark LianGuailmer, Senior Equity Research Analyst at Berenberg, he states that “these changes should benefit companies like MicroStrategy, as they will be able to report their digital asset holdings each quarter without impairment losses.”

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The report further states, “This change should help MicroStrategy and other digital asset holders avoid negative consequences resulting from impairment losses under the rules set by the FASB.”

Since August 2020, MicroStrategy has accumulated losses of $2.23 billion due to impairments.

Additionally, the company has reported significant impairment losses on its Bitcoin holdings in some of its quarterly reports over the past three years, reflecting the decline in the asset’s price.

MicroStrategy impairment losses. Source: Berenberg Capital

This has resulted in negative news coverage of the company and its reports, giving the impression that the company’s intrinsic value has been negatively affected, which is not the case,” said Mark LianGuailmer.

According to the new rules, which will take effect in 2025, companies holding cryptocurrencies will be able to report these assets at fair value. Therefore, their quarterly reports will reflect the current value of the assets, including any price rebounds.

Currently, impairment losses must be recorded and cannot be adjusted even if the asset price recovers.

MicroStrategy is the largest holder of BTC among global enterprises, with 152,800 bitcoins valued at approximately $3.9 billion as of July 31st. Berenberg believes that MicroStrategy will apply the new rules in advance and by April 2024, its BTC holdings will be valued at $8.8 billion.

According to Berenberg’s notes, MicroStrategy CEO Michael Saylor has stated that the main reason more companies have not adopted a BTC investment strategy is due to the “hostility” and “punitive” treatment of cryptocurrencies by the FASB. He continues to state that this change is a positive outcome:

“The rule change will be a significant positive catalyst for the price of Bitcoin, as it will encourage the adoption by tech companies.”

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