Due to the high volatility of cryptocurrencies, this rule creates difficulties for companies that want to keep these assets on their balance sheets. The Financial Accounting Services Council agreed to review the accounting standards relating to digital assets in May, but nothing has yet been agreed on the matter.
“These charges may adversely affect our profitability in periods in which such impairments occur.even if the overall market values of these assets rise,” Tesla said.
The Impairment costs looming were part of the reason Tesla chose to cash in his bitcoin in the second quarter, leaving only 25% of its original position.
Last week, the Tesla CEO Elon Musksaid the company he sold $936 million worth of bitcoin in the second quarter to maximize his cash position while dealing with closure of its Shanghai factory due to local lockdowns due to Covid-19. The company has offloaded around 75% of its initial $1.5 billion position in the cryptocurrency, leaving it with around $218 million worth of digital assets as of the end of June. Then, he had to clarify that the sale was related to his company’s need for cash, and not his general thesis on bitcoin.
“We are certainly open to increasing our Bitcoin holdings in the future, so this should not be taken as a verdict on bitcoin,” Musk noted in Tesla’s quarterly earnings presentation. “It’s just that we were concerned about the overall liquidity of the company given the closures in China, and we haven’t sold any of our Dogecoin.”
Source: Ambito
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