[Wayne 962]

Originally Posted by ShopCat

Thats not how PL works... if they hold it as an asset they dont have to declare "a huge loss," its on their BS. The person you quoted does not know basic accounting, which misleads readers. They suggest that somehow Tesla giving the money away is a better option than holding an asset they obviously think will appreciate, even if there is a risk it depreciates. 100% loss vs ???. Im sorry, I can't take these arguments seriously as its too obvious to me, as an accountant, they have no idea what they are commenting on.

Sorry, but you are mistaken. I suggest that you Google this topic to learn more about it. The IFRIC indicates that cryptocurrencies are generally intangible assets under IAS 38 Intangible Assets. These assets need to be tested on an annual basis for "impairment." A discussion of this can be found in this article as well as other articles by the "big four" accounting firms:

https://www.accountingtoday.com/news/companies-investing-in-crypto-may-be-in-for-a-rude-accounting-surprise

The most commonly accepted accounting treatment for cryptocurrencies in the U.S. requires writedowns of losses, which can be common given the volatility of many digital currencies, but the rules don’t permit “writeups” of gains. That could potentially mislead investors when they’re reviewing financial statements, so companies may need a stronger non-GAAP financial disclosure system to keep investors informed about digital assets that are gaining in value.

“For most companies in the U.S., U.S. GAAP accounting rules really require you to account for those investments like an intangible asset,” said Amy Park, an audit partner in Deloitte’s national office for accounting and reporting services who specializes in consolidation, financial instruments and digital assets, who co-wrote the report. “If you think about how some of these companies are using this, they’re looking at this as a form of investment. That may be a little counterintuitive, but in the accounting rules, you have to look at the specific definitions. When you look at the definition of a cash equivalent, or inventory, or financial instruments per se, the accounting definitions don’t really line up with what Bitcoin is. It really falls into this intangible model.”

Companies typically have to account for an intangible asset initially at cost, which is probably the fair value of what they’ve paid for it on day one. “You have to assess that asset for potential impairment, but not like other financial instruments,” said Park. “You don’t get to really mark-to-market, or account for the appreciation in value related to that asset.”

Unlike a traditional company stock investment, companies need to treat cryptocurrency differently. “I usually will think of the value I can sell it to somebody else in the marketplace as what it’s worth to me today,” said Park. “The accounting for that financial asset or financial instrument is mark-to-market, so if the value goes up or the price goes up, I can mark it up on my balance sheet. As the price goes down, I can mark it down on my balance sheet. But with the intangible asset, you’re not in that model, so as the price goes up, you don’t get to recognize any of that appreciation on your books. As the price goes down, if it’s impaired, you do have to reflect that on your books, so you sometimes end up with the downward adjustments, but no potential upward adjustments, which can be challenging because I think some companies are viewing this as very similar to an investment or a financial asset but the accounting doesn’t allow that.”

More links that pretty much say the same thing:

https://www.cpajournal.com/2019/06/21/cryptoassets-accounting-for-an-emerging-asset-class/
https://assets.kpmg/content/dam/kpmg/xx/pdf/2019/04/cryptoassets-accounting-tax.pdf
https://www.bdo.com/insights/assurance/financial-reporting/cryptocurrency-the-top-things-you-need-to-know

-Wayne