Tesla purchased a total of $1.5 billion in Bitcoin in 2021 and held nearly $2 billion worth of the popular cryptocurrency at the end of the year.
In the 10-K filing with the US Securities and Exchange Commission (SEC), Tesla reported that it had invested a total of $1.50 billion in Bitcoin in Q1 2021. The company indicated that the fair market value of its Bitcoin holdings as of December 31, 2021 was $1.99 billion.
Tesla stressed that it believes in the long-term potential of digital assets both as an investment and as a liquid alternative to cash. As with any investment, and in accordance with how the manufacturer manages cash and cash equivalent accounts, Tesla may increase or decrease its holdings of digital assets at any time depending on the needs of the business and its view of the market and environmental conditions.
Digital assets are considered indefinite-lived intangible assets under applicable accounting rules. Accordingly, any decrease in their fair values below the company's carrying values for such assets at any time subsequent to their acquisition will require Tesla to recognize impairment charges, whereas it may make no upward revisions for any market price increases until a sale. The manufacturer explained that for any digital assets held now or in the future, these charges may negatively impact its profitability in the periods in which such impairments occur even if the overall market values of these assets increase. For example, in the year ending December 31, 2021, Tesla recorded approximately $101 million of impairment losses resulting from changes to the carrying value of its Bitcoin and gains of $128 million on certain sales of Bitcoin by the company in March 2021.
As of December 31, 2021, the carrying value of Tesla's digital assets held was $1.26 billion, which reflects cumulative impairments of $101 million. The fair market value of such digital assets held as of December 31, 2021 was $1.99 billion.
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