Losses that result from assets/ investments whose value decreased/ depreciated but are still recognized on an entity’s balance sheet (i.e., have not yet been sold or disposed of). Unrealized losses turn into realized losses when an asset that has lost value is removed from an entity’s balance sheet (i.e., derecognized). Depending on the type of asset/ investment (whose value got negatively impacted), unrealized losses may or may not have an effect on an entity’s accounting.

Unrealized losses constitute the difference between the purchase price and the current price of an asset/ investment, which have not turned into monetary losses.

See more: unrealized loss.