Cost Basis FAQ

Cost Basis FAQ

What cost basis methods does CryptaCount support?

CryptaCount supports 8 accounting methods for cryptocurrency valuation:

Method	Lot Selection	Unrealized G/L	Impairment	Best For
Historic FIFO	First-In-First-Out	Not recognized	One-way (loss only)	US tax reporting, IRS compliance
Historic WAVG	Weighted average	Not recognized	Not recorded	Simplified tax, high-volume trading
FMV	Mark-to-market	Recognized immediately	N/A (always at market)	GAAP financial statements, investment funds
NRV + FIFO	FIFO	Not recognized	Two-way (loss + reversal)	IFRS compliance, conservative accounting
NRV + WAVG	Weighted average	Not recognized	Two-way (loss + reversal)	Conservative simplified accounting
LIFO	Last-In-First-Out	Not recognized	One-way (loss only)	Minimizing gains in rising markets
HIFO	Highest-cost-first	Not recognized	One-way (loss only)	Tax optimization
Specific ID	Manual lot selection	Not recognized	One-way (loss only)	Maximum control over tax outcomes

Caution

These method names are CryptaCount-specific. Historic FIFO is not just “FIFO” — it includes the historic cost model with one-way impairment. Similarly, NRV + FIFO combines Net Realizable Value measurement with FIFO lot ordering.

What cost basis method should I use?

It depends on your jurisdiction and accounting framework:

• US tax reporting: Historic FIFO is the IRS default. LIFO, HIFO, and Specific ID are permitted if consistently applied and documented. Wash sale rules do not currently apply to crypto.
• France: Historic WAVG — weighted average is mandatory for individuals.
• Japan: Historic WAVG — total average method is required.
• Australia: Taxpayer’s choice of Historic FIFO, LIFO, HIFO, or Specific ID. Must be consistent.
• IFRS businesses: NRV + FIFO or NRV + WAVG for crypto classified as inventory (IAS 2 lower-of-cost-and-NRV).
• Investment funds / GAAP: FMV for mark-to-market fair value reporting.

Check the Tax Jurisdiction Guide or consult your tax adviser.

How does the three-level override hierarchy work?

CryptaCount resolves the cost basis method with a three-level hierarchy:

1. Workspace default — Set in workspace accounting settings. Applies to all assets unless overridden.
2. Asset class override — Override the workspace default for a specific asset class (e.g., all stablecoins use Historic WAVG).
3. Individual asset override — Override for a specific asset (e.g., BTC uses Specific ID).

The most specific level wins. If no override exists at a given level, it falls through to the next level up.

Can I change my cost basis method after transactions are processed?

Yes. Change the method at any level and recalculate balances. CryptaCount recomputes all gains and losses under the new method.

However, some jurisdictions require consistency — changing methods mid-year may have tax implications. Consult your tax adviser before changing methods on production client data.

Why are my gains different from another platform?

Common sources of cost basis differences:

Different method selected. Ensure both platforms use the same method. Note that CryptaCount’s method names are specific — “FIFO” on another platform may not match Historic FIFO exactly (impairment handling differs).

Different price source. Fair market value prices at transaction time vary between price feed providers. Small price differences compound on high-value transactions.

Missing transactions. If one platform has synced more transactions (especially token transfers or DeFi interactions), cost basis will differ. Compare transaction counts.

Fee treatment. CryptaCount includes gas fees as part of the transaction cost basis.

DeFi event handling. Complex DeFi transactions may be classified differently across platforms, affecting when gains are recognized.

What is the difference between Historic FIFO and HIFO?

Historic FIFO disposes the oldest lots first. HIFO disposes the highest-cost lots first.

In a rising market, Historic FIFO typically produces higher gains (older, cheaper units are sold). HIFO produces lower gains (most expensive units are sold first, leaving a smaller spread).

HIFO is a tax optimization method — it defers gain recognition by consuming high-cost lots first. Not all jurisdictions permit it.

How does weighted average work with multiple purchases?

Each purchase updates the blended average. Example:

1. Buy 2 ETH at €1,800 → average cost: €1,800
2. Buy 3 ETH at €2,400 → average cost: (2×1800 + 3×2400) / 5 = €2,160
3. Sell 1 ETH → uses €2,160 as cost basis. Remaining 4 ETH still at €2,160 average.
4. Buy 1 ETH at €2,000 → new average: (4×2160 + 1×2000) / 5 = €2,128

The average recalculates on every acquisition. Disposals use the current average at the time of disposal.

What does “NRV” mean in NRV + FIFO and NRV + WAVG?

NRV stands for Net Realizable Value — the estimated selling price minus the costs of disposal. These methods implement the IAS 2 accounting standard: inventory is valued at the lower of cost and NRV.

Key difference from Historic methods: NRV methods support two-way impairment — if the market price drops below cost, the carrying value is written down, but if it later recovers (up to original cost), the write-down reverses. Historic methods only support one-way impairment (write-down only, no reversal).

If your crypto assets are not classified as inventory under IFRS, you likely don’t need NRV methods.

What is Specific Identification and when should I use it?

Specific Identification means you manually choose which lot (specific purchase) to match against each disposal via the Lot Viewer under Balances → Lots. This gives full control over which cost basis is used for each sale.

Use it when:

• You have a large position with purchases at significantly different prices
• The lot choice materially impacts the tax outcome
• Your jurisdiction permits lot selection (US, Australia, and others)

Don’t use it for:

• High-volume trading accounts (too many individual selections)
• Jurisdictions that mandate a specific method (France, Japan)
• Situations where Historic FIFO or Historic WAVG produces an acceptable result

What is the FMV (Fair Market Value) method?

FMV is a mark-to-market method. Assets are revalued to their market price at each reporting date, and unrealized gains and losses are recognized immediately — unlike all other methods, which only recognize gains on disposal.

FMV is appropriate for:

• Investment funds that report NAV
• GAAP financial statements requiring fair value measurement
• Entities that elect fair value through profit or loss

FMV does not record impairment (it’s always at market), and it doesn’t use lot tracking.