Cost basis methods: FIFO, LIFO and average cost
How Conta Finance decides which purchases a sale consumes, and how that changes the realized and unrealized gains.
Where to find it:your-organization.conta.financeOrganization settingsPreferencesCost basis method
Each time an asset comes into your portfolio, Conta Finance records an acquisition lotOne acquisition of an asset: how much came in, when, and at what cost.: the amount, the day and the cost. Each time the asset leaves, by a sale, a swap or a payment, the disposalAn asset leaving your portfolio, by a sale, a swap or a payment. It consumes lots. consumes lots. The method decides which lots it consumes first.
The three methods
| Method | Which lots a disposal consumes |
|---|---|
| FIFO | First in, first out. The oldest acquisition lots are disposed of first. This is the default. |
| LIFO | Last in, first out. The most recent acquisition lots are disposed of first. |
| Average cost | Weighted average acquisition price across all lots of each asset. In Spain this is the PMP. |
An example
You buy 1 ETH at $2 000, then 1 ETH at $3 000. Later you sell 1 ETH at $3 500. The price of ETH is still $3 500 at the end of the period.
| FIFO | LIFO | Average cost | |
|---|---|---|---|
| Cost of the ETH sold | $2 000 | $3 000 | $2 500 |
| Realized gain | $1 500 | $500 | $1 000 |
| Cost basis of the ETH you hold | $3 000 | $2 000 | $2 500 |
| Unrealized gain | $500 | $1 500 | $1 000 |
| Total P&L | $2 000 | $2 000 | $2 000 |
The total is the same with every method. The method only moves the gain between the realizedThe gain or loss fixed by a disposal: what you received minus the cost of the lots it consumed. part, which belongs to this period, and the unrealizedThe gain or loss on what you still hold: market value minus cost basis. It is on paper only. part, which stays on paper.
Your accounts are one portfolio
All the accounts of an organization form one portfolio. When you move an asset from one of your wallets to another, it is not a disposal: no lot is consumed and no gain is realized. The lots move with the asset.
Change the method
- Open the organization menu at the top of the sidebar and select Organization settings.
- In Cost basis method, select FIFO, LIFO or Average cost.
Choose the method your tax rules require, before you close the first period. Saved reportsA copy of the gains and losses figures, stored under a name. Nothing calculates it again, so it never changes. keep the figures they were saved with.