Tesla experienced a significant boost in net income due to a recent change in accounting practices for digital currencies. The Financial Accounting Standards Board (FASB) mandated that companies must now mark their digital asset holdings to market each quarter, starting in 2025. This shift allowed Tesla, the sixth-largest bitcoin holder among public companies, to report a substantial profit increase despite falling short of fourth-quarter earnings and revenue expectations.
The accounting change proved beneficial for Tesla, as the company reported a $600 million increase in net income, largely attributed to the new FASB rule. Previously, companies like Tesla had to record their bitcoin holdings at the lowest value during ownership, which often undervalued their assets. Tesla's Chief Financial Officer, Vaibhav Taneja, highlighted the impact of this adjustment on the company's financials.
"It's important to point out that the net income in Q4 was impacted by a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets." – Vaibhav Taneja
The actual increase in Tesla's bitcoin holdings during the period amounted to approximately $347 million, reflecting a fourth-quarter rally in bitcoin's value. As a result, Tesla's earnings per share saw a boost of 68 cents for the quarter. The carrying value of Tesla's digital assets soared to $1.08 billion in December, up from $184 million recorded over the previous four quarters.
Tesla's fourth-quarter earnings and revenue did not meet analysts' expectations, with auto revenue experiencing an 8% decline from the previous year. Despite these challenges, the increase in bitcoin's value offered a silver lining. The recent gains in the cryptocurrency market were tied to optimism surrounding the second Trump administration, which received significant support from the crypto industry.
Elon Musk, Tesla's CEO, played a noteworthy role as a supporter of Trump's presidential campaign and currently serves as a top adviser in the White House. Additionally, David Sacks, a longtime ally of Musk, was appointed by Trump as the White House AI and crypto czar.