The Fortune 500 firm MicroStrategy having a strong BTC treasury of 125,051, announced on Tuesday its financial results for Q4 2021. The result shows $146.6 million net loss due to impairment losses on bitcoin assets. The operating expenses increased due to extensive impairment losses. Compared to the last year in the same quarter, the loss has increased to 125% at $248 million.
The Impairment Loss
It is a known reduction factor when calculating an asset’s acquisition costs triggered by the declining value. When an asset’s fair value goes down the purchase amount, the operator writes off the difference. In the last 6 quarters, the company lost up to $901 million in these impairment costs on the BTC holdings.
Impairment Charges Added after Rejection of Its Accounting Method
The company added bitcoin impairment charges when its non-GAAP BTC accounting methods were rejected by SEC. The regulator asked the company to include share-inked compensation expenses and impairment loss and sales gains.
Its $146.6 million impairment losses became the third-largest for it when it accounted for 25% of BTC purchases during the same period. The maximum impairment losses were seen in Q2 2021, when 80% of the total purchased BTC value was lost. A $90 million net loss that comes to $8.43 for each share on a diluted basis was accounted for by MicroStrategy in Q4.
The company presently has 125,051 BTC that it acquired, paying $3.78 billion, which on average comes to $30,200 for each bitcoin. The company had started buying BTC in August 2020. The goal was to use this asset as a hedge and avoid the use of the US dollar. The company has worked hard to bring bitcoin to public companies and institutional firms, including some top names like SpaceX and Tesla.
