Weighted average cost
Also known as: average cost, ACB, adjusted cost base
A cost method that pools identical units and uses their average base cost per unit when calculating a gain on disposal.
Definition
The weighted average cost method pools all units of an identical asset and divides total cost by total units to get an average cost per unit, which is then used as the base cost on disposal. Canada calls a similar concept the adjusted cost base (ACB). It contrasts with FIFO, which tracks specific lots. South African practice generally expects FIFO for identical crypto assets, though averaging may appear in accounting records.
Example
You buy 1 BTC at R400,000 and 1 BTC at R600,000. The weighted average cost is R500,000 per BTC, so selling 1 BTC uses a R500,000 base cost.
Jurisdiction notes
- South Africa: FIFO is the generally accepted method in South Africa; averaging is more common in some other jurisdictions and in accounting records.
- United Kingdom: HMRC's Section 104 pool uses a form of average cost for most identical tokens.