FASB’s Crypto Accounting Shakeup Could Lure More Corporate Investment, Michael Saylor and Others Argue
The U.S. accounting standards board yesterday unanimously voted in favor of “fair value” accounting for crypto assets held on corporate balance sheets.
New accounting rules on the way for digital assets (Unsplash, modified by CoinDesk using Photomosh)
Read more: FASB Says Crypto Assets Should Be Marked at Current Values
“We could see increased receptiveness towards holding digital assets on the books for U.S.-based companies, especially during periods when the market is hot given the improved impacts to the bottom line,” the Stifel team said.
MicroStrategy (MSTR) Executive Chairman Michael Saylor, who began loading his company’s balance sheet with bitcoin about three years ago, was less circumspect, saying the rule update “eliminates a major impediment to corporate adoption of bitcoin as a treasury asset.”
Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.https://t.co/MjVzUJRVjX
— Michael Saylor⚡️ (@saylor) September 6, 2023
The Stifel team noted MicroStrategy’s roughly 152,300 bitcoin at the end of the second quarter were carried on the company’s books at a value of $2.3 billion, a whopping 50% (or $2.3 billion) less than their fair market value at the time.
One caveat about the potential for adoption of crypto by companies is the level of risk aversion among CEOs and other senior executives, who are paid to run their businesses, invest reserves conservatively and deliver at least somewhat predictable earnings.
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“Most companies are widely held and not controlled by one majority holder (unlike Michael Saylor and MSTR), ex-hedge fund manager James Lavish wrote in November, when the momentum towards a switch to fair-value accounting was building. “The career risk for those in charge is just too great for them to dive in and allocate their treasury cash to bitcoin in lieu of straight cash or U.S. [Treasuries].”