How does Tres Finance calculate cost basis?
Tres Finance calculates the cost basis by using the following methodologies:
FIFO - First in, First out
WAC - Weighted Average Cost
First in First Out (FIFO):
When an asset is transferred out of a wallet its cost is determined by using the cost of the first asset received in the stack of identical assets. See below for an example.
As you can see the amount of the token transferred out .017266 is deducted from the first lot of the Matic stack and the cost basis is calculated based on the unit price of the first lot in the stack, in this case, 0.97967. Future Matic transfers out of the wallet will continue to reduce the 1st lot of the stack until its balance is reduced to zero at which point the next lot in the stack will be used to calculate cost basis.
Weighted Average Cost (WAC):
When using the WAC method, the cost is calculated by Dividing the total cost of an asset received by the amount of that asset's tokens in each wallet. Every time a new inflow is received the calculation is done again by adding all the costs of each lot that have been received by the number of tokens held.
Required configuration - Organization Vs. Wallet
When setting up your account you must choose how you want your cost basis to be calculated.
It can be done as an entire organization which would include all wallets or it can be done on a per wallet basis. As discussed above cost basis can be calculated by either FIFO or WAC. These calculations can change depending on if you choose to configure your account cost basis on a per wallet basis or per organization basis.
Per Wallet: Configuring your cost basis to calculate on a per wallet basis means Cost is calculated separately for each asset in each wallet.
Per Organization: Configuring your cost basis to calculate on a per organization basis means Cost is calculated by combining all identical assets into one stack (in the case of FIFO) even if the assets are deposited into different wallets. In the case of WAC all identical assets are also combined and the calculation mentioned earlier is done on a much larger scale.
How to Track your cost basis in Tres?
Ledger view - When clicking on the Ledger tab and then on any transaction you’ll be able to see that for each transaction whether an inflow or an outflow there will be see the "CB" icon where you will be able to see the cost of each lot in your stack. See below for an example
Asset view - When clicking on the Asset tab, selecting an asset, and then clicking on the amount next to the “FIFO Cost Basis” row you will also be able to see the stack of that specific asset for the entire organization as well as how its cost is calculated. You can also click on the “Wallet Breakdown” button to see which wallet holds that asset and the fair market value of that asset as of the date you are searching.
How are Internal Transfers Accounted For?
Per Asset Configuration: In the event of a transfer of assets between two wallets in the same organization no gain is calculated, the cost of the asset stays the same as it was when originally transferred into the first wallet and the order of the asset stack stays the same.
Per Wallet Configuration: In the event of a transfer of assets between two wallets in the same organization no gain is calculated, and the cost of the asset stays the same as it was when originally transferred into the first wallet. The difference takes place in the order of the stack. Since the per-wallet configuration separates the stack of assets configured on a per-wallet basis, the asset will be removed from the stack of the original wallet and slide into the stack of the receiving wallet. The stack of the receiving wallet will be adjusted based on the method of accounting that has been selected, either FIFO or WAC.