Why highest in, first out (HIFO) matters to a first-time founder
Selecting the highest-cost units first generally raises recognised cost and lowers the gain or profit on a disposal compared with lower-cost methods. That can affect tax and reporting, but HIFO is not accepted for every asset or jurisdiction. Consistent records must identify each unit’s cost.
Examples of highest in, first out (HIFO)
A company holds three identical tokens bought for ₦40,000, ₦70,000 and ₦100,000, then sells one for ₦120,000. Under HIFO, it assigns the ₦100,000 unit, producing a ₦20,000 gain before fees. Another permitted identification method could produce a different gain, even though cash received is unchanged.
Common misunderstanding
HIFO does not necessarily describe the physical item shipped first. It is usually a cost-allocation or specific-identification choice. It also is not a universally recognised financial-reporting method, and tax authorities may require specific identification, FIFO, average cost or another rule for particular assets.
When to use it
Use it only when applicable accounting and tax rules permit the method and your records can prove the selected units. Set the policy before reporting a disposal, not after seeing the tax result. Ask an accountant about consistency, disclosure and jurisdiction-specific treatment, especially for securities or digital assets.