Tesla’s fourth-quarter earnings report revealed a significant increase in the value of its Bitcoin holdings, thanks to a new accounting rule. The electric vehicle manufacturer reported its 9,720 Bitcoin at a market value of $1.076 billion at the end of 2024, a substantial jump from the previously reported $184 million. This revaluation resulted in a $600 million boost to Tesla’s GAAP income for the quarter, representing a considerable portion of the company’s total GAAP income of $2.3 billion.
This accounting shift is attributed to a new standard issued by the Financial Accounting Standards Board (FASB), mandating companies to mark digital assets to market each quarter. While the rule’s official implementation begins in the first quarter of 2025, companies are permitted to adopt it earlier, as Tesla has chosen to do. Previously, companies were required to report digital asset holdings at their lowest valuation during the ownership period.
The previous accounting treatment for digital assets often resulted in an understated reflection of their true value on corporate balance sheets. The new “fair value” accounting provides a more accurate and transparent picture of a company’s financial position by reflecting the current market value of these assets. This change allows investors to better understand the impact of digital asset holdings on a company’s overall financial performance. For Tesla, this translates to a significant positive impact on its reported income.
This accounting change, however, did not impact Tesla’s adjusted earnings per share (EPS), which fell short of analyst expectations. The company reported an adjusted EPS of $0.73, missing the estimated $0.76. While the Bitcoin gain positively affected GAAP income, it had no bearing on the adjusted EPS, a metric often used by investors to gauge a company’s core operational performance. Despite the EPS miss, Tesla’s shares saw a 3.5% increase in after-hours trading.
According to Bitcoin Treasuries, Tesla’s 9,720 BTC makes it the sixth-largest publicly traded company holding Bitcoin. This substantial holding underscores Tesla’s continued involvement in the digital asset space. The new accounting rule provides a clearer view of the financial implications of this investment, highlighting the potential for significant gains or losses from digital asset holdings. The market’s positive reaction to Tesla’s earnings, despite the EPS miss, suggests that investors recognize the potential long-term value of these assets.
In conclusion, the adoption of the new FASB accounting rule has significantly impacted Tesla’s fourth-quarter financial reporting, leading to a substantial increase in GAAP income due to the revaluation of its Bitcoin holdings. This change offers greater transparency regarding the value of digital assets on corporate balance sheets. While the adjusted EPS missed expectations, the market responded favorably, indicating a positive outlook for Tesla’s Bitcoin strategy and the broader implications of the new accounting standard for digital assets.
