The electric vehicle (EV) manufacturer Tesla disclosed in its most recent quarterly earnings report that it has invested a total of $1.5 billion in Bitcoin since the beginning of 2021. The report was filed with the United States Securities and Exchange Commission (SEC) of the United States of America.
Out of this total, the company is presently sitting on an unrealized loss of 170 million dollars due to a change in the fair value of its investment. This is offset by a gain of $64 million from Bitcoin that was realised at different times over the past two years. This means that at the end of the third quarter, the company lost a total of $106 million.
According to the document, Tesla’s losses did not have a significant impact on its primary business activities. In the first nine months of 2021, the electric vehicle manufacturer’s earnings increased by 169% year-over-year, reaching $3.3 billion. Tesla, on the other hand, claims that the value of its Bitcoin holdings on its balance sheet is no more than $218 million.
According to the principles of accounting, digital assets are categorised as intangible assets with an infinite lifespan. As a result of this, Tesla will be required to record impairment costs for any fall in their fair values. However, the company will not make upward adjustments for any price gains until after a sale has taken place. Because of this advantageous tax classification, a company’s losses can be subtracted from its profits to lower its overall tax bill, while capital gains are not taxed until they are sold.
Elon Musk, the chief executive officer of Tesla, is well-known in the cryptocurrency industry for his advocacy of digital assets, his fondness for memecoins like Dogecoin, and his aspiration to acquire social media behemoth Twitter for a price of $44 billion.
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