The business intelligence company MicroStrategy would have acted contrary to the accounting practices of the Securities and Exchange Commission (SEC) in its purchases of cryptocurrencies.
According to a Bloomberg report, An SEC comment letter published Thursday showed that the regulator objected to MicroStrategy reporting its Bitcoin (BTC) purchases based on non-GAAP, or generally accepted, accounting principles. The business intelligence firm has reported that it used these methods to calculate the figures for its BTC purchases excluding the “impact of stock-based compensation expenses and impairment losses and gains on sale of intangible assets” – essentially, nullifying some of the effects of cryptocurrency market volatility.
Apparently, GAAP standards are not designed to report the value of cryptocurrencies. However, MicroStrategy has purchased 124,391 BTC as of December 30, representing more than $4.7 billion in value through various purchases totaling approximately $3.8 billion since August 2020. The company reported that it used non-GAAP practices to exclude “accumulated impairment losses” from cost and based the value of its holdings on the market price of 1 BTC as of 4:00 EST on the last day of each period.
MicroStrategy said after a July 2021 BTC purchase that it “believes these non-GAAP financial measures are also useful to investors and analysts in comparing their performance across reporting periods on a consistent basis.” The SEC reportedly said that MicroStrategy should “remove this setting in future filings.”
The report came as MicroStrategy shares fell more than 17.8% in the past 24 hours to hit a six-month low of $375. The drop may have been affected by BTC also falling to a six-month low, as the crypto asset dipped below $38,000.
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