Company: MSTR
Filing Date: 2025-01-06
Form Type: 8-K
Source: 0001193125-25-001854
Chunk: 13

Company: Strategy Inc
Filing Date: 2025-01-06
Form: 8-K
Item: Item 8.01
Chunk 13
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 ASU2023-08requires in-scopecrypto assets (including the Company’s bitcoin holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. ASU2023-08also requires certain interim and annual disclosures for crypto assets within the scope of the standard. The Company adopted this guidance effective January 1, 2025 on a prospective basis, with a cumulative-effect adjustment to the opening balance of retained earnings. Prior periods will not be restated.

Prior to January 1, 2025, the Company accounted for its digital assets, which are comprised solely of bitcoin, as indefinite-lived intangible assets in accordance with Accounting Standards Codification (“ ASC”) 350, Intangibles - Goodwill and Other. The Company’s digital assets were initially recorded at cost. Subsequently, they were measured at cost, net of any impairment losses incurred since acquisition. Impairment losses were recognized as “ Digital asset impairment losses” in the Company’s Consolidated Statements of Operations in the period in which the impairment occurred. Gains (if any) were not recorded until realized upon sale, at which point they were presented net of any impairment losses in the Company’s Consolidated Statements of Operations. In determining the gain to be recognized upon sale, the Company calculated the difference between the sales price and carrying value of the specific bitcoins sold immediately prior to sale.

Although the Company will continue to initially record its bitcoin purchases at cost, upon adopting ASU2023-08, any subsequent increases or decreases in fair value will be recognized as incurred in the Company’s Consolidated Statements of Operations, and the fair value of the Company’s bitcoin will be reflected within the Company’s Consolidated Balance Sheets each reporting period-end. Upon adopting ASU2023-08, the Company will no longer account for its bitcoin under a cost-less-impairment accounting model and will no longer establish a deferred tax asset related to bitcoin impairment losses. Instead, the Company will establish a deferred tax liability if the market value of bitcoin at the reporting date is greater than the average cost basis of the Company’s bitcoin holdings at such reporting date, and any subsequent increases or decreases in the market value of bitcoin will increase or decrease the deferred tax liability.

The Company estimates that the adoption of ASU2023-08will result in a net increase to its 2025 beginning retained earnings balance in the range of approximately $12.7 billion to $12