In its Q4 last year, MicroStrategy, the institutional software provider lost a total of $146.6 million to BTC impairment charges.
An impairment loss is a recognized reduction in the acquisition cost of an asset that is triggered by a decline in its fair value. When the fair value of an asset decline below its purchase amount, the difference is written off and is obligated to be reported.
Considering the elastic movement of the BTC price, it has become imperative for the business intelligence firm to account for its impairment charges in its balance sheet, a practice that is in conformity with the US SEC policy.
After the US Securities and Exchange Commission rejected MicroStrategy’s existing “non-GAAP” Bitcoin accounting techniques, the company opted to incorporate BTC impairment costs. The Securities and Exchange Commission (SEC) requested that the business intelligence firm include share-based compensation expenses, as well as impairment losses and gains on sale.
The company’s impairment losses of $146.6 million were the third greatest in its history as a public traded company, accounting for 25% of its BTC acquisition in the same period. The most significant impairment loss occurred in the second quarter of 2021 when it lost about 80% of the total BTC value purchased in that quarter. MicroStrategy lost $90 million in the fourth quarter or $8.43 per diluted share.
In August 2020, MicroStrategy began purchasing BTC in order to utilize it as a treasury hedge instead of the US Dollar. Over the last six quarters, the company has lost $901 million in impairment charges on its BTC holdings.
Earlier this week, Saylor purchased 660 bitcoins, with payments made in cash totaling $25 million, this purchase puts the firm’s BTC holdings at 0.5% total of bitcoin with circulation worth $4.6 billion, an investment that expands the crypto bank of the firm to 125,051 BTC units. These bitcoins were acquired at an average price of $30,200.
Despite the huge loss to impairment charges last year, Saylor said the company is not ready to quit its investments in BTC.