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MicroStrategy reported a $146 million impairment cost associated to its bitcoin holdings within the 4th quarter

Michael Saylor, co-founder of MicroStrategyBitcoin; Joe Raedle/Getty Pictures; Skye Gould/Insider

  • MicroStrategy posted a $146.6 million impairment cost for its bitcoin holdings for the fourth quarter of 2021.

  • This resulted in a internet loss for the enterprise software program firm.

  • An impairment cost represents a drastic depreciation within the worth of a particular asset on the stability sheet.

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MicroStrategy posted a $146.6 million impairment cost associated to its bitcoin holdings for the fourth quarter of 2021, rising six-fold in comparison with the identical interval final yr and leading to a internet loss for the enterprise software program firm.

This loss contributed to the corporate’s working bills, which jumped by 125% to $248 million within the fourth quarter in comparison with the identical interval final yr, primarily based on the corporate’s newest earnings assertion Tuesday.

An impairment cost represents a drop within the carrying worth of a particular asset on a agency’s stability sheet.

In MicroStrategy’s case, the non-cash digital asset impairment cost mirrored the slide in bitcoin’s present worth in comparison with its worth when it was bought. Beneath relevant accounting rules, if an asset’s worth falls beneath its buy worth, the distinction might be written off. This apply is usually confined to high-cost property.

For the yr, the Tysons Nook, Virginia-based agency noticed its digital asset impairment losses quantity to $831 million in comparison with $71 million in 2020.

Cumulatively, the agency has seen round $901 million in impairment prices on its bitcoin holdings because it started buying the asset in August 2020.

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As of December 31, MicroStrategy reported holding 124,391 bitcoin at an combination price of $3.8 billion, carrying a worth of $2.9 billion.

This doesn’t embrace the 660 bitcoins the agency purchased on Tuesday for roughly $25 million in money at a mean worth of $37,865 per coin. In complete, MicroStrategy holds 125,051 bitcoins.

In keeping with Bloomberg knowledge, MicroStrategy has taken impairment prices in every of the six quarters because it started buying bitcoin. In 5 of these quarters, the agency was unprofitable. Earlier than the agency added bitcoin to its stability sheet, it was worthwhile eight out of the 9 quarters.

Bitcoin in January had its worst month to begin the yr since its 2018 crypto winter. The asset misplaced 18% for the month to commerce round $38,000, nicely beneath its practically $69,000 all-time excessive in November 2021.

Just lately, the Securities and Change Fee has requested the corporate to revise its crypto accounting practices, which implies MicroStrategy cannot strip out bitcoin’s worth swings from its unofficial non-GAAP accounting measures it presents to buyers.

MicroStrategy’s CFO Phong Le in the course of the Tuesday earnings name stated he agrees with the company “that on a going-forward foundation, any non-GAAP monetary measures we might current in future filings ought to retain the influence from bitcoin impairment losses.”

He added that the change within the presentation of MicroStrategy’s non-GAAP monetary measures doesn’t influence its technique, operations or GAAP monetary statements, or earlier SEC filings.

“Our noncash bitcoin impairment prices will stay topic to market volatility of bitcoin costs,” Le stated. “Given the numerous drop available in the market worth of bitcoin in January 2022, we are going to acknowledge vital impairment prices once more within the first quarter of 2022.”

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