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Accounting Rules Make the Outcome of Tesla’s Bitcoin Sale Unclear

“The only thing that’s certain is death and taxes.” This idiom may be overused, but adding a third item to that list is usually pretty clever.

For example, my editor would probably say: “The only thing that’s certain is death, taxes and a lot of misplaced commas that I have to edit out.” My personal favorite use comes from The Roots’ Tariq “Black Thought” Trotter’s freestyle where he says: “The only thing for sure is taxes, death and trouble.”

This week we’ll dive into the less-commonly used version of this phrase: “The only thing that’s certain is death, taxes and a whole bunch of off-base accounting rules governing the treatment of digital assets on corporate balance sheets leading to a misrepresentation of corporate earnings.”

That’s right, we’re talking about U.S. accounting rules this week. And right on cue, Tesla announced last Wednesday that it sold 75% of its bitcoin in the second quarter. So let’s dive in.

That (and maybe more …) below.

George Kaloudis

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Regrettably, we will first have to dive into the story everyone was squawking about on Wednesday so that we can cleanly set up a transition to our main accounting topic. That story is Tesla selling $936 million worth of bitcoin (BTC), which made up roughly 75% of its holdings.

Even more regrettably, I am sorta kinda coming to the defense of Tesla. Corporations are people too!

So it goes.

‘I might pump, but I don’t dump’

Unlike what most of the internet wants you to believe, Tesla did not “paper hand” the bitcoin it bought last year for a loss. From Tesla’s second quarter earnings call:

“Additionally, we converted a majority of our bitcoin holdings to fiat for a realized gain offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the [income statement].”

Not sure if you realize this, but a realized gain means Tesla realized a gain. And to realize…

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