Business intelligence firm MicroStrategy reportedly acted contrary to the Securities and Exchange Commission’s accounting practices for its crypto purchases.
According to a Bloomberg report, a comment letter from the SEC released Thursday showed the regulatory body objected to MicroStrategy reporting information related to its Bitcoin (BTC) purchases based on non-GAAP, or Generally Accepted Accounting Principles. The business intelligence firm has been reporting it used these methods of calculating figures for its BTC buys excluding the “impact of share-based compensation expense and impairment losses and gains on sale from intangible assets” — essentially, negating some of the effects of the volatility of the crypto market.
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GAAP rules are seemingly not designed for reporting the value of cryptocurrencies. However, MicroStrategy has purchased 124,391 BTC as of Dec. 30, representing more than $4.7 billion in value across several buys totaling roughly $3.8 billion since August 2020. The company reported it used non-GAAP practices to exclude “cumulative impairment losses” from the cost and based the value of its holdings on the market price of 1 BTC at 4:00 EST on the last day of each period.
MicroStrategy said following a BTC purchase in July 2021 that it "believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis." The SEC reportedly said MicroStrategy should "remove this adjustment in future filings.”
Related: MicroStrategy CEO won’t sell $5B BTC stash despite crypto winter
The report came as shares of MicroStrategy fell more than 17.8% in the last 24 hours to reach a six-month low price of $375. The drop may have been affected by BTC also falling to a six-month low as the crypto asset dipped under $38,000.
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