The gains or losses that arise from variations in the prices of assets or liabilities that are still reported on an entity’s statement of financial position (SFP). Unrealized gains represent an increase in the value of an entity’s assets or a decrease in the value of its liabilities over a specific period (i.e., reporting period or at a given point in time). Unrealized losses result from a decrease in the value of an entity’s assets or an increase in the value of its liabilities over a specific period (i.e., reporting period or at a given point in time). These gains/ losses do not have an impact on income (hence they are said to be unrealized).

Unrealized gains or losses are recorded in an account called “accumulated other comprehensive income” (AOCI), which is presented in the owner’s equity section of the statement of financial position. These result from changes in the value of assets that have not yet been recognized or from changes in the value of liabilities that have not been settled.