Tesla Writes Down $170M in Bitcoin Impairment Charges in Q2

Tesla Writes Down $170M in Bitcoin Impairment Charges in Q2

Electric carmaker Tesla recorded a $170 million impairment cost towards the carrying worth of its bitcoin property.

The firm additionally recorded positive aspects of $64 million from a few of its bitcoin gross sales in a submitting with the Securities and Exchange Commission on Monday, July 25, 2022.

The 10-Q submitting is a extra full model of the quarterly earnings submitting lodged with the SEC.

According to pointers revealed by the Association of International Certified Professional Accountants, crypto property are indefinite-lived intangible property. Companies should write down the worth of an asset that has dipped under its buy worth, taking an impairment loss, relying on the end result of an impairment take a look at. An impairment take a look at checks an asset to see whether or not the honest market worth, the worth it could possibly be bought for on the open market, is lower than its carrying worth. For digital property, carrying worth is similar as the acquisition worth.

When it bought its bitcoin final yr, Tesla stated it could look at its bitcoin holdings each quarter to verify for impairments.

Any positive aspects can solely be recorded as soon as appreciated digital property have been bought.

Tesla sells 75% of bitcoin holdings

Tesla bought $936 million value of bitcoin final week to bolster its money place in the wake of the shutdown of its Shanghai manufacturing unit as China offers with surging Covid-19 circumstances. The sale represents roughly 75% of its $1.5 billion cryptocurrency stash, which the corporate started accumulating in Q1 2021. The firm didn’t disclose when it bought its bitcoin.

The bitcoin sale didn’t appreciably have an effect on Tesla’s free money circulation. Investors had raised a priority that the sale had boosted Tesla’s free money circulation, the distinction between cash from operations and capital spending, to $621 million. But the discount of free money circulation from $2.1 billion in Q1 took place due to Shanghai lockdowns.

Tesla not shunning bitcoin, says Musk

CEO Elon Musk stated that the sale doesn’t point out a broader shunning of bitcoin. The firm nonetheless holds Dogecoin amongst its remaining $218 million value of cryptocurrencies. He nonetheless personally has bitcoin, Dogecoin, and ether, in line with a tweet in March of this yr.

Tesla briefly accepted bitcoin funds however stopped in May 2021 due to Musk’s considerations relating to bitcoin’s environmental footprint.

Musk was subpoenaed by the SEC on June 13, 2022, for a 2018 tweet saying he had organized funding to take Tesla non-public. An settlement with the SEC in 2018 mandated {that a} committee vet Musk’s tweets earlier than they’re despatched.

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