MicroStrategy’s BTC Accounting Practices Denied By The SEC
MicroStrategy is alleged to have violated the Securities and Exchange Commission’s (SEC) accounting standards for cryptocurrency acquisitions.
Bloomberg reported that the SEC had questioned MicroStrategy’s BTC purchase records because they use non-GAAP accounting principles (Generally Accepted Accounting Principles).
Company representatives informed the Commission that they used these calculation methods, excluding “the impact of stock-based wages and impairment losses on the sale of intangible assets” – in other words, ignoring some of the effects of cryptocurrency market volatility.
GAAP regulations appear to be unsuitable for reporting the value of cryptocurrencies. Nonetheless, as of December 30, MicroStrategy has 124,391 BTC in its hands. This number of coins is currently worth $4.7 billion, but the company spent significantly less for them – approximately $3.8 billion.
To remove “accumulated impairment losses” from costs and revalue its shares on the last day of each month based on the market price of one bitcoin, the company uses non-GAAP procedures.
Following the acquisition of BTC in July 2021. MicroStrategy claimed that it “believes that non-GAAP financial measurements enable investors and analysts to assess a company’s performance consistently across reporting periods.” According to reports, the SEC directed MicroStrategy to “delete this modification in future papers.”
MicroStrategy’s stock has dropped more than 17.8% in the last 24 hours due to the news. MSTR fell to $375, its lowest level in six months. BTC, which has also dropped to a six-month low, may have influenced the fall. The value of the original cryptocurrency has fallen to less than $38,000.