Tesla still holds $1.99 billion in Bitcoin after its book was devalued by hundreds of millions of dollars due to sharp fluctuations in Bitcoin prices

On the evening of February 7, Beijing time, Tesla submitted a 10-K annual report to the U.S. Securities and Exchange Commission (SEC), disclosing the company’s revenue data in major global markets.

According to the document, Tesla’s revenue in the Chinese market in 2021 will reach $13.844 billion, a year-on-year increase of 107.8%. Tesla’s revenue in the Chinese market in the first three quarters of last year was US$9.015 billion. Based on this calculation, Tesla’s revenue in China in the fourth quarter of last year was US$4.829 billion.

At the beginning of last year, Tesla announced the purchase of Bitcoin as an investment project. The annual report shows that in the year ended December 31, 2021, Tesla has provided an impairment of about $101 million due to changes in the book value of Bitcoin. loss.

However, Tesla realized a gain of $128 million for selling some bitcoin in March 2021.

According to the annual report, as of December 31, 2021, the fair market value of Bitcoin still held by Tesla was $1.99 billion.

Data shows that Tesla’s cost of buying bitcoin is less than $35,000 per piece , while bitcoin reached its all-time high in November last year, with the price exceeding $69,000 per piece, until January 24 this year. , Bitcoin fell to more than 32,000 US dollars per piece, the lowest point in two years. At present, the market price of Bitcoin is close to 45,000 US dollars per piece.

In the sources and conditions of liquidity section, the annual report shows that Tesla will continue to adjust its investment strategy to meet its liquidity and risk objectives, such as investing in U.S. government and other securities, digital assets, and providing product-related financing. In the first quarter of 2021, Tesla’s investment in Bitcoin totaled $1.5 billion.

Tesla believes in the long-term potential of digital assets as a liquid alternative to investments and cash. As with other investments, Tesla’s approach to managing digital assets is consistent with those based on fiat cash and cash equivalents accounts, and may increase or decrease digital assets held at any time based on business needs and judgments of market and environmental conditions.

Tester Bitcoin impairment due to accounting rules

At the beginning of last year, Tesla announced a high-profile purchase of $1.5 billion in bitcoin as an investment project, triggering the market’s pursuit of bitcoin. Last year, bitcoin rose to a maximum of $69,000 per piece, but now the price has dropped to $45,000. / piece.

According to estimates, Tesla’s cost of buying Bitcoin is less than $35,000 per piece. In February 2021, relevant data disclosed that Tesla’s floating profit exceeded 71%, and the floating profit amount exceeded 1.069 billion US dollars, which was about 7 billion yuan at the exchange rate at that time, which exceeded Tesla’s annual car manufacturing in that year. profit of $721 million.

The annual report mentions that digital assets can be subject to market price fluctuations, which can lead to a disadvantage for Tesla when it wants or needs to liquidate them. Last year, Tesla briefly accepted bitcoin as payment for Tesla’s sales of certain products in certain regions, in accordance with applicable law.

Tesla reiterated in its annual report filing that accounting for such non-cash consideration is based on the current market for contract digital assets in accordance with the guidance for non-cash consideration contained in Accounting Standards Codification (“ASC”) 606 when transacting with customers Quote, not the current quote of the contract digital asset.

Therefore, it is important to note that the reason why Tesla’s Bitcoin was devalued was due to accounting rules.

Tesla treats all digital assets from these transactions as indefinite intangible assets, has ownership and control over the digital assets, and Tesla may use a third-party escrow service to protect it. Digital assets are initially recorded at cost and subsequently remeasured at cost on the consolidated balance sheet, net of any impairment losses incurred since the acquisition.

Tesla conducts a quarterly fair value analysis of digital assets to determine market changes (mainly based on quotes from active exchanges) that illustrate the potential losses of digital assets.

In determining whether an impairment has occurred, Tesla will consider the lowest market price quoted on an active exchange for digital assets it already owns. If the book value of the digital asset at that time exceeds the determined fair value, the digital asset suffers an impairment loss equal to the difference between its book value and the determined price.

In its annual report, Tesla said that for an asset like bitcoin, any decline would recognize an impairment charge, and prior to a sale, there may not be an upward revision to any market price increase.

Therefore, for any digital currency assets held now or in the future, these fees may negatively affect the profitability of the company even if the overall market value of those assets increases.

Global calls for stronger Bitcoin regulation

Musk is an avid fan of digital currencies, and Tesla has also invested in Bitcoin under his leadership. On February 7, he personally shouted a single Dogecoin on social media, attracting nearly 100,000 netizens to like it.

The bitcoin market is volatile and ups and downs, so the long and short debate is also very fierce. Bitcoin peaked at $69,000 last year, and dropped to around $33,000 in January this year. Highlighting the cryptocurrency’s extreme volatility , JPMorgan noted that Bitcoin’s price has fallen 50 percent from its peak of nearly $69,000 in November last year , saying: “The biggest challenge for Bitcoin going forward is its volatility and boom-bust cycles, which hinder further institutional adoption.”

Global regulators are also generally wary of virtual currencies including Bitcoin. Regulators need to provide the banking industry with “robust guidance” on the risks associated with digital asset management, according to a list of priorities released Monday by Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation (FDIC). Banking institutions must consider the risks posed by cryptocurrencies and “determine the extent to which banking organisations can safely engage in crypto-asset-related activities.”

Previously, the U.S. Securities and Exchange Commission (SEC) has also repeatedly delayed its decision to apply for a Bitcoin ETF. It is believed that relevant agencies need to submit information on expected transaction volumes, prevention of fraud and manipulation , and other matters.

On February 8, according to a related report, the U.S. Securities and Exchange Commission (SEC) is seeking public comment on whether an ETF directly linked to the price of Bitcoin could become a fraudulent tool, calling on the public to apply for Grayscale Bitcoin Trust (stock symbol) GBTC) into an ETF pegged to Bitcoin’s spot price to submit written comments.

Institutional analysis said that despite the recent price fluctuations, the demand for ETFs linked to the spot price of Bitcoin is likely to continue in the short term.

Tesla’s 10-K annual report filing with the Securities and Exchange Commission (SEC) also revealed that on November 16, 2021, the Securities and Exchange Commission (SEC) issued a subpoena to Tesla, requesting Tesla to provide relevant performance The administrative process involved in the 2018 settlement.

Because Musk said on social media in 2018 that he was trying to take the company private, he was subsequently charged with securities fraud by the U.S. Securities and Exchange Commission (SEC). In September 2018, the two sides reached a settlement agreement, and Tesla needed to monitor Musk’s public statements.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tesla-still-holds-1-99-billion-in-bitcoin-after-its-book-was-devalued-by-hundreds-of-millions-of-dollars-due-to-sharp-fluctuations-in-bitcoin-prices/
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