Impairment & Fair Market Value FAQ

Impairment & Fair Market Value FAQ

What is impairment testing?

Impairment testing compares the carrying value (what your books say an asset is worth) against its recoverable amount (what the market says it’s worth). If the market value has fallen below the carrying value, the asset may need to be written down — this write-down is called an impairment loss.

CryptaCount runs impairment testing at period-end or on demand. Each inventory lot is evaluated individually against the current market price.

When does impairment apply?

Impairment applies to cost-based accounting methods — those where assets are recorded at their original purchase price rather than current market value. The FMV (mark-to-market) method does not use impairment because assets are always carried at market price.

Method	Impairment Type	Reversal Allowed?
Historic FIFO	One-way (loss only)	No — once written down, the carrying value stays reduced
Historic WAVG	Not recorded	N/A
LIFO	One-way (loss only)	No
HIFO	One-way (loss only)	No
Specific ID	One-way (loss only)	No
NRV + FIFO	Two-way (loss + reversal)	Yes — up to original cost
NRV + WAVG	Two-way (loss + reversal)	Yes — up to original cost
FMV	N/A (mark-to-market)	N/A

What is the difference between one-way and two-way impairment?

One-way impairment (Historic FIFO, LIFO, HIFO, Specific ID): If the market price drops below cost, the carrying value is written down. If the price later recovers, the write-down is not reversed — the lower value sticks. This follows US GAAP and conservative accounting principles.

Two-way impairment (NRV + FIFO, NRV + WAVG): If the market price drops below cost, the carrying value is written down. If the price later recovers (up to the original cost), the previous write-down reverses. This follows the IAS 2 lower-of-cost-and-NRV model used under IFRS.

Note

Two-way reversal is capped at the original cost. If you bought ETH at €2,000 and it was impaired to €1,200, a recovery to €3,000 only reverses the impairment back to the €2,000 original cost — not to the new market price.

What impairment models does CryptaCount support?

CryptaCount supports five impairment models, configured at the workspace level:

Model	Standard	Behaviour
IAS 36	IFRS	Recoverable amount test. Impair if carrying > recoverable. Reversal allowed up to original cost (IFRS) or disallowed (US GAAP).
Fair Value Through P&L	ASU 2023-08 / IFRS FV option	No impairment test — revalue every period through profit & loss. Gains and losses recognized immediately.
Prudence Principle	European conservative	Always write down to market. No reversal.
Lower of Cost or Market	Classic LCM	Impair if market < cost. Reversal only if allowed by configuration.
Lower of Cost or NRV	IAS 2	Impair if NRV < cost. Reversal allowed up to original cost.

The model is set in Settings → Workspace Accounting under impairment configuration.

How does CryptaCount source price data?

CryptaCount fetches market prices from multiple aggregated price feeds. Prices are cached and updated regularly via a scheduled sync.

When evaluating impairment or revaluation, the engine looks up the market price for each asset symbol on the review date. Prices are denominated in the workspace’s functional currency (e.g., USD, EUR, GBP).

What happens when a price is missing?

If no market price is available for an asset on the review date, that asset’s lots are skipped during impairment review. The impairment report flags the skipped assets so you can investigate.

Common causes of missing prices:

• The asset is too new or too obscure for the price feeds to cover
• The price feed had a gap on that specific date
• The asset is a custom token, LP token, or derivative not tracked by standard feeds

You can check price coverage in Reconciliation — the “Price Availability” check (CHK005) flags transactions and periods with missing exchange rates.

How does FMV revaluation work?

The FMV (Fair Market Value) method revalues all open lots to current market prices at each reporting date. Unlike cost-based methods, FMV recognizes unrealized gains and losses immediately through profit & loss.

The revaluation process:

1. For each open lot, fetch the current market price
2. Compare to the lot’s current carrying value (which may include prior revaluations)
3. Compute the delta — the change since the last revaluation
4. If the delta exceeds the materiality threshold, create a journal entry
5. Update the lot’s carrying value to the new market price

This follows FASB ASC 350-60 for digital assets and is appropriate for investment funds, entities electing fair value through profit or loss, and GAAP financial statements.

How does FMV revaluation work for EUR reporting?

If your functional currency is EUR (or any non-USD currency), FMV revaluation resolves prices in your functional currency via CryptaCount’s exchange rate service. The engine:

1. Fetches the asset’s USD market price
2. Converts to EUR using the ECB-sourced exchange rate for the review date
3. Applies the EUR-denominated price to the revaluation calculation

This ensures gains, losses, and carrying values are consistent with your reporting currency. Exchange rate availability is verified by the period-close exchange rate coverage check.

What is the difference between realized and unrealized gains?

Realized gains/losses occur when you actually dispose of (sell, swap, or transfer out) a crypto asset. The gain or loss is the difference between the proceeds (what you received) and the cost basis (what you paid, adjusted for any impairment).

Unrealized gains/losses exist on paper — the market value of an asset you still hold has changed since you acquired it, but you haven’t sold it yet.

	Realized	Unrealized
When recognized	At disposal	At reporting date (FMV method) or not at all (cost methods)
Triggers	Sale, swap, payment, transfer	Period-end revaluation
Which methods	All methods	FMV only (cost methods recognize gains only on disposal)
Tax impact	Usually taxable immediately	Depends on jurisdiction and accounting framework

Tip

Under cost-based methods (Historic FIFO, WAVG, etc.), unrealized gains are not recognized — you only recognize a gain when you sell. Under FMV, unrealized gains hit the income statement at each reporting date.

Where can I see impairment results?

• Balances → Lots — individual lot details show impairment amounts, dates, and whether reversal is allowed
• Reports → Income Statement — impairment losses and reversals appear as line items
• Reconciliation — the period-close checks verify lot consistency after impairment runs
• Accounting → Generate Journals — impairment events create journal entries that debit impairment expense and credit the asset account

Can I run impairment manually?

Yes. You can trigger an impairment review on demand in addition to the automatic review that runs during period-end close. This is useful for interim reporting or when you need to assess the impact of a market crash before the period ends.