Digital Assets and Performance: A Look at Telegram's Income Statement

The uselessness and contents of an income statement, in particular to evaluate past performance of a company, along with providing a basis for predicting future performance, and help stakeholders assess the risk or uncertainty of future cash flows, can certainly vary company to company (Warfield, 2022). Last month, Telegram, a popular messaging application, had their income statement released to the public, shortly after the company’s financial statements were filed in the British Virgin Islands (Edwards, 2023). There’s been controversy associated with the valuation of the business. Moreover, one line item that stands out on their income statement is the Gain/(loss) on revaluation of digital assets as well. Let’s take a look below! 

(Source: Edwards 2024, Yahoo Finance)

After reviewing the company’s income statement, we can determine that the company chose to follow the multistep format instead of the single step format. Terry Warfield, PwC Chair in Accounting, prominent author, and a professor of accounting and information systems at the Wisconsin School of Business, explains “The multiple-step income statement is so named because it shows the several steps in determining net income.” This is different from the single-step format in which “only one step, subtracting total expenses from total revenues, is required in determining net income or net loss (Warfield 2024).” 

Telegram provides details regarding their Revenue and Operating Expenses, which then are calculated to determine their “Operating Loss”, which is one of the subtotals, along with "Loss before income tax," before arriving at the net income or “loss for the year.” In contrast, if Telegram used the single step approach for calculating, the company would have combined all their revenues in one section and expenses in the other, to then calculate their loss for the year. 

Furthermore, Telegram provides information regarding their Gain/(loss) on revaluation of digital assets within the section of non-operating income and expenses. In 2022 there was a loss due to the Fair Market Value of digital assets decreasing year after year. However, in 2023, Telegram shows there was a positive unrealized gain associated with the revaluation of their digital asset holdings. The unrealized gain is the delta between the Fair Market Value and the original cost basis of their digital assets, that we derived at the time of acquisition. 

Telegram also displays their other comprehensive income for both the 2022 and 2023 fiscal years using the one statement approach rather than the two statement approach. Telegram presents their total comprehensive loss for the year, in a single continuous statement, directly after the operating and non-operating sections. In contrast, if Telegram chose to take the two-statement approach, the company would have had a traditional “Income Statement” along with a separate “Comprehensive Income Statement.” 

Based on the financial data provided on Telegram’s income statement, stakeholders can clearly observe the risks involved with Telegram acquiring digital assets. The Gain/(loss) on revaluation of digital assets increased by approximately 120.64% year after year. Although impressive on a percentage basis, the more positive impact on the company's financials was actually because of their increase in revenue from 2022 to 2023, specifically an increase of over $114 million due to their core-operating activities. 

Sources: 

Edwards, Jim. "Telegram Financials: It’s a loss-making company (that holds a lot of crypto)" Yahoo Finance, 03 SEPT. 2024, https://finance.yahoo.com/news/telegram-financials-show-huge-crypto-161255172.html 

 Warfield, Donald E. Kieso, Jerry J. Weygandt, Terry D. Intermediate Accounting. Available from: MBS Direct, (18th Edition). Wiley Global Education US, 2022.