Tesla Reports Significant Increase in Bitcoin Holdings Due to Accounting Change
Tesla's fourth-quarter earnings revealed a major increase in reported bitcoin holdings due to a new accounting rule, boosting net income by $600 million despite auto revenue declines.
Tesla has revealed a notable increase in its reported net income for the fourth quarter, largely attributed to a shift in accounting rules regarding digital asset valuation. In June, Elon Musk indicated a potential support for Ron DeSantis in the upcoming 2024 presidential election.
In its earnings release, Tesla announced that its carrying value for digital assets surged from $184 million to $1.08 billion in the December period. This dramatic increase follows a recent policy change by the Financial Accounting Standards Board (FASB), which states that companies must mark their digital asset holdings to market each quarter starting in 2025.
Previously, companies like Tesla were required to value their bitcoin holdings at the lowest price recorded during ownership, ignoring any subsequent price increases. This new rule allowed Tesla to report a significant earnings per share boost of 68 cents in the latest quarter. CFO Vaibhav Taneja informed that the increase in net income amounted to $600 million, driven by bitcoin's market performance.
Taneja noted, "It's important to point out that the net income in Q4 was impacted by a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets."
At the end of the third quarter, while Tesla's bitcoin holdings were valued at $184 million, their fair market value was considerably higher at $729 million. This indicates that the actual increase in value for the period was roughly $347 million, reflecting bitcoin's recent rally.
The gains in bitcoin are tied to investor optimism regarding a potential second administration under Donald Trump, widely supported by the crypto industry. Musk has been noted as one of Trump’s major financial backers and is now an advisor in the White House. Additionally, Musk ally David Sacks has been appointed as the White House AI and crypto czar.
According to Bitcoin Treasuries, Tesla ranks as the sixth-largest holder of bitcoin among publicly traded companies.
Despite the reported challenges, including a drop in auto revenue by 8% from the previous year, Tesla's stock saw an uptick in after-hours trading.
