A recent filing with the US Securities and Exchange Commission (SEC) suggests that Playboy suffered significant losses due to a drop in the value of payments received for its NFTs. The losses are the result of Ether (ETH) that the company received after selling its NFT “Rabbitars” . These irreplaceable tokens were launched back in 2021, when the cryptocurrency market was growing rapidly.
In total, Playboy took a $4.9 million impairment loss after the cryptocurrency winter wiped out most of the market’s value over the past year. As of last December, the value of ETH from the sale was $327,000. Playboy accounts for its digital assets as “indefinite-lived intangible assets,” according to a company statement . These assets are subject to impairment losses when their fair value falls well below their carrying amount in any particular period.
ETH lost more than half of its value after Playboy sold Rabbitars
According to the document, “the market price of one [Ether] on our primary market ranged from $964 to $3,813 during the year ended December 31, 2022, but the book value of each Ether we held at the end of the reporting period reflects the lowest price of one Ethereum listed on an active exchange at any time since it was received.”
Thus, “negative fluctuations in the market price of Ethereum can have a material impact on a company’s profit and book value, while price increases will positively affect the company’s profit when the Ethereum on the balance sheet is sold at a profit.”
Since Playboy launched the Rabbitars NFT collection in October 2021, ETH has lost about 60% of its value. However, recently there have been signs that the market is turning around and ETH may regain its lost value in due time.
However, according to Playboy, impairment losses on its digital assets are not recoverable, even if the fair value increases after the loss has been recorded.
