The Elon Musk-owned Tesla reported a $600 million Bitcoin profit on its earning lists on Wednesday, a massive jump from the last four quarters, hitting $1.08 billion in December. Since Donald Trump’s win in the US election, the value of Tesla and Bitcoin soared, and it even ignited with the recent policy change on corporate digital assets.
Tesla, the American automotive and energy company recorded $589 million in profits from its Bitcoin holdings, a jump from $184 million to a tremendous $1.08 billion compared to the previous 4 quarters. The huge increase in net profit is contributed by the change in Financial Accounting Standards Board (FASB) regulations for crypto holdings, which necessitate the mark-to-market rule for corporate digital asset holdings, including Bitcoin. According to this rule, crypto holdings have to be measured at a fair value, allowing corporate companies to give the value of their crypto holdings in real-time. Tesla adopted the rule early, which will be mandatory for all corporate companies before the 2025 deadline.
Before the rule change, the companies with Bitcoin holdings had to report the lowest value of the assets since it was purchased and not the fair market value, which prevented Tesla from reporting gains unless the holdings were sold. The new standard mandatorizes companies to evaluate the price of their crypto holdings every quarter, similar to other financial assets including stocks.
Vaibav Taneja, Tesla’s CFO, said that the rule change has benefited Tesla, resulting in a huge increase in earnings per share, with a net income increase of $600 million. At the end of the third quarter, the Bitcoin holding of the electric vehicle company, Tesla was $184 million, though their fair market value was more than $729 million, making the real increase in value $347 million.
The Donald Trump victory in the US election is considered a boost to the crypto industry, the Bitcoin price soared more than 50% since then. Tesla’s Bitcoin holdings were $729 million at the end of September, and it increased by 320 million in the fourth quarter, all credit to the new government and its friendly approach to crypto.
What the New Rule has in Store for the Bitcoin-Owning Companies?
The Finacial Account Standard Board (FASB)’s recent policy change has created an impact on both the crypto industry and corporate companies owning crypto assets. The rule demands a mark-to-market policy, where companies have to report their digital asset holdings in real-time in each quarter. This necessitates companies to report the value of the assets at a fair market value and not the lowest value recorded after the purchase, which they used to.
The rule change is considered an advantage for Bitcoin-holding companies, as they will get an opportunity to provide the real-time value of the asset. The previous FASB rule considered Bitcoin as an indefinite-lived intangible asset, forcing companies to record the price drops and not the price gains until the assets get sold. With the change in the rule, companies can record both their gains and losses, without any predetermined conditions. Though Tesla stands at the forefront of the rally, other crypto-holding companies like Microstrategy and Coinbase are also in line to increase their asset values under the new rule this year.