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Jan 1 FASB Bitcoin Accounting Rule: Implications for MSTR, etc going forward...
394 sats \ 8 comments \ @freetx 17 Dec bitcoin
The summary of this account rule change is this:
Companies holding BTC must:
  1. Measure crypto assets at fair value each reporting period
  2. Recognize both gains and losses in net income
  3. Report crypto assets separately from other intangible assets on the balance sheet
Items #1 and 2 are the most crucial. This is in contrast to the current method, in which companies only report their BTC "value" which is the value they bought it, until this sell it then its newly valued as income.
Perhaps #2 is the most important of these changes.
What this means is that if you hold 100 BTC on your books and the price of BTC moves from 100K to 200K, this means you need to report "Income of $10,000,000" for that reporting period. Such a report will then automatically mean a higher stock valuation since now "earnings per share" is increasing.
This creates a fortuitous feedback loop for companies that hold BTC.
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71 sats \ 1 reply \ @siggy47 17 Dec
It's a huge improvement. Under the old intangible asset rule, companies could not reflect appreciation, but had to reflect losses after date of purchase as an impairment charge.
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104 sats \ 0 replies \ @freetx OP 17 Dec
yes, it was really crazy.
Imagine going in for a loan at the bank and their approach is to say: ".....ok for collateral assets we show you bought a Manhattan apartment in 1952 for $35,000....so we can only loan you based on that....."
I understand the "theory" of intangible assets rule is because of very non-liquid assets like "rights to a logo we purchased". But unironically BTC is more liquid then nearly any other stock that FASB accounting covers.....
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31 sats \ 3 replies \ @SwapMarket 17 Dec
Will #2 mean the company must pay income tax on unrealized gain? That would be awful!
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50 sats \ 0 replies \ @alt 17 Dec
This might not be too bad, if they can offset their income during a bear market to reduce the income taxes they pay, and also if it means they don't have to pay taxes when they eventually dispose of the bitcoin.
If you buy 1BTC at $100k, and price doubles so you pay taxes on $100k of income, if you then sell you shouldn't have to pay taxes on the gains, since they have already been taxed as income.
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50 sats \ 1 reply \ @freetx OP 17 Dec
No taxes owed.
Yeah its a bit confusing but this is typical "book" change vs "tax" change. This happen currently with other "mark to market" accounting entries, so its not unique.
What you do is also create a "deferred tax liability" entry for that gain. So if you show $1,000,000 "income gain", you create a $220,000 "deferred tax payment" as a liability.
Then when you finally sell, those amounts become realized (at whatever real price).
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5 sats \ 0 replies \ @SwapMarket 17 Dec
Nice. So more fuel for the rocket from Jan 1.
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21 sats \ 1 reply \ @anon 17 Dec
I recently came across this video by Andreas
What US Taxpayers With Crypto NEED to do before Dec 31, 2024 - Get into the Safeharbor! https://www.youtube.com/watch?v=M1XPOFgjNPk&t=3
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0 sats \ 0 replies \ @freetx OP 17 Dec
I saw the same vid the other day....not related to FASB, rather a tax procedural changes.
long and short of vid was: (a) document your positions and declare basis in documentation, (b) move forward with previous mentioned documentation
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