Tesla Takes Advantage of New Accounting Rule for Digital Assets
Elon Musk’s Tesla (TSLA) has seemingly capitalized on a recent accounting regulation that permits companies to mark their digital asset holdings to market value each quarter. According to the company’s fourth-quarter earnings report, Tesla’s portfolio now includes 9,720 bitcoins, valued at an impressive $1.076 billion as of the close of 2024. This marks a significant increase from the previously reported value of just $184 million over several quarters.
In conjunction with this accounting change, Tesla also reported a substantial boost to its Generally Accepted Accounting Principles (GAAP) income, reflecting an increase of $600 million attributed to its digital asset holdings. To put this into perspective, the company achieved an overall GAAP income of $2.3 billion during the fourth quarter.
The new guideline established by the Financial Accounting Standards Board (FASB) mandates that corporate holders of digital assets begin marking these assets to market value by the first quarter of 2025. However, companies were granted the option to adopt this rule earlier, at their discretion, which Tesla has clearly chosen to do.
Prior to the enactment of this new rule, companies were required to report their digital asset holdings at their lowest valuation during the period of ownership, often leading to conservative accounting practices. This shift towards more favorable accounting treatment has provided Tesla with a notable opportunity to enhance its financial reporting.
In terms of earnings, Tesla reported an adjusted earnings per share (EPS) of $0.73 for the fourth quarter, falling short of analysts’ expectations, which were set at $0.76. It is important to note that the gains associated with its bitcoin holdings pertained to GAAP accounting and did not influence the adjusted EPS figure. Following the earnings release, Tesla’s shares saw a rise of 3.5% in after-hours trading.
According to Bitcoin Treasuries, Tesla’s holding of 9,720 BTC positions it as the sixth-largest publicly traded company to include bitcoin on its balance sheet, reflecting its strategic approach to digital assets in the evolving financial landscape.
