Meitu Dealing with Impairment Loss Of Over $17 Million on Bitcoin Funding

In short

  • Software program firm Meitu is dealing with an impairment lack of over $17 million on its Bitcoin holdings.
  • Nonetheless, the agency shouldn’t be planning on parting methods with its cryptocurrency any time quickly.

Hong Kong-based software program firm Meitu purchased 941 Bitcoin and 31,000 Ethereum this March and April to the collective tune of $100 million.

By the top of Q2, nevertheless, the value of Bitcoin had dropped from over $50,000 to round $35,000, and the truthful worth of Meitu’s Bitcoin funding had slipped to $32.2 million.

Primarily based on guidelines governing an organization’s intangible belongings—like Bitcoin and Ethereum—if the worth of these holdings decreases for the reason that time of buy, an organization must file it as a loss on their monetary statements. 

“Consequently, the lower in truthful worth of the acquired Bitcoin as at June 30 within the quantity of $17.3 million is anticipated to be recognised as an impairment loss,” the agency mentioned in an announcement.

Meitu’s crypto impairment loss

Guidelines governing the holding of intangible belongings are laborious on firms. 

If, hypothetically, Meitu’s Bitcoin had elevated in worth for the reason that time of the corporate’s funding, as a result of it’s classed as an intangible asset, the corporate couldn’t checklist it as a revenue. 

The one method the corporate may revenue from its intangible belongings can be to promote them. And proper now, Meitu has no intention of promoting its crypto. 

“Because the cryptocurrency acquisitions, the group has neither acquired nor bought any cryptocurrencies pursuant to the cryptocurrency funding plan, and there are at present no plans to promote the identical within the close to future,” the corporate mentioned. 

Nonetheless, it’s not all unhealthy information for Meitu. The corporate’s Bitcoin funding is perhaps costing it cash, however its Ethereum wager has not been as troublesome. 

Meitu has gained $14.7 million on its Ethereum funding—though once more, this received’t be listed as any form of revenue till such time as it’s bought. 

Corporations face losses on Bitcoin holdings

Meitu shouldn’t be the one firm that has taken losses as a consequence of its Bitcoin holdings in latest months. 

In line with analysts, Tesla—which purchased $1.5 billion value of Bitcoin in February 2021—may file an impairment loss as massive as $100 million over its Bitcoin holdings. The truth that companies are dealing with these losses isn’t any shock, provided that Bitcoin simply registered one in all its worst quarterly performances in historical past

Source link