In Brief:
- MicroStrategy reported a net loss of 146.6 million incurred in impairment charges on its Bitcoin holdings.
- The huge impairment losses increased the company’s operating expenses which rose by 125%.
MicroStrategy, a bitcoin-hoarding software company that now owns 125,051 Bitcoin strong treasury, announced its Fourth Quarter financial results today.
The institutional software solution provider reported a net loss of $146.6 million incurred in impairment charges on its Bitcoin holdings. The impairment charge is up from $65.2 million in the prior quarter.
The huge impairment losses increased the company’s operating expenses, which rose by 125 percent to $248 million in the same quarter last year.
Last month, SEC’s Division of Corporation Finance objected to the company’s adjustment for bitcoin impairment charges in its non-GAAP measures. Consequently, asked the business intelligence firm to remove this adjustment in future filings. Thus, the firm decided to remove the adjustment for impairment losses and gains on sale, as requested.
An impairment loss reflects the decline in the price of bitcoin versus the price at which the bitcoin was purchased. Under standard accounting rules, the value of such assets must be recorded at their cost and then only adjusted if their value goes down, or is impaired. However, if the price rises, it does not get reflected until an asset is sold.
Over the last six quarters, the firm has lost nearly a billion dollars ($901 million) in impairment charges for its Bitcoin holdings. MicroStrategy’s CFO Phong Le said the company expects an additional significant impairment charge during the first quarter of 2022 given bitcoin’s volatility.
Today, MicroStrategy bought 660 more bitcoins for $25 million, boosting its stake to 3.78 billion. MicroStrategy is working with other companies and various agencies to determine a more appropriate accounting method for digital assets.
