MicroStrategy is eagerly awaiting the results of its bid to join the NASDAQ 100 index, with investors showing strong interest in its potential approval. Following this announcement, there are several other upcoming events that could impact MicroStrategy, including year-end tax loss harvesting, the presidential inauguration, and quarterly earnings reports. However, one unique catalyst set to affect the company is a rule change by the Financial Accounting Standards Board (FASB) related to bitcoin (BTC) assets.
The FASB, which sets accounting principles for US public companies, currently requires BTC assets to be classified as “indefinite-lived intangible assets.” This designation forces companies like MicroStrategy to mark down the value of BTC on their balance sheets and income statements when its USD price declines. CEO Michael Saylor has been advocating for a change in these rules, which is set to take effect on January 1, 2025, under rule change ASU 2023-08. This change will allow MicroStrategy to list its bitcoin holdings at their current USD value on its balance sheet, including any increases in value.
With this rule change, MicroStrategy will no longer have to make permanent mark-downs for its bitcoin holdings and will be able to show both positive and negative price changes on its income statement each quarter. This increased transparency will not only benefit the company’s financial reporting but also improve its standing for inclusion in other indices such as the S&P 500, which use GAAP reporting standards. This change will provide quantitative traders with a standardized number to compare across multiple stocks, enhancing MicroStrategy’s appeal to investors.
Overall, the FASB rule change will have a significant impact on MicroStrategy’s financial reporting and its potential inclusion in prestigious indices. By allowing the company to recognize its USD gains from bitcoin appreciation, it will present a more accurate picture of its financial health to investors. This shift in accounting standards will bring greater transparency to MicroStrategy’s balance sheet and income statements, enabling investors to make more informed decisions about the company’s performance. With these changes on the horizon, MicroStrategy is poised to see increased interest from investors and potential growth in its stock value.
