Tesla’s Bitcoin Holdings Lead to Earnings Boost due to Accounting Standard Change
Tesla’s reported net income for the fourth quarter got a significant boost due to a recent change in accounting rules. The Financial Accounting Standards Board (FASB) introduced a new policy in 2024, which mandates that companies record digital assets such as bitcoin at their fair market value each quarter. Previously, companies had to report their bitcoin holdings at their lowest recorded value during their ownership.
According to Tesla’s earnings release, its digital assets went from having a carrying value of $184 million in the previous four quarters to $1.08 billion in the December quarter. This marked-to-market benefit resulted in a 68 cents per share increase in earnings for the quarter. Tesla’s chief financial officer, Vaibhav Taneja, mentioned on the earnings call that the net income increase was $600 million due to the new accounting standard.
Prior to the quarter, Tesla’s bitcoin holdings had a carrying value of $184 million, despite their fair market value being $729 million at the end of the third quarter. The company’s bitcoin holdings increased in value by approximately $347 million due to the quarterly rally. Many experts attribute the recent rise in bitcoin to the optimism surrounding a potential second term for the Trump administration, with Tesla CEO Elon Musk being one of the company’s biggest supporters. Musk, who has leaned towards supporting Republican candidate Ron DeSantis in the 2024 presidential election, is a top adviser to the current US administration.
The company’s quarterly earnings and revenue fell short of analysts’ expectations, despite Tesla’s digital asset holdings playing a significant role in its earnings growth. Despite this, the stock climbed in after-hours trading following the release of the earnings report.