The financial accounting term holding gains and losses refers to increases and decreases to the replacement cost of an asset or the value of a liability. Holding gains and losses can be realized as well as unrealized.
A company can experience a holding gain or loss merely as a result of owning an asset or liability; this change in value occurs only as a consequence of the passage of time. The reporting of such a gain or loss is normally computed net of inflation. The following examples demonstrate this point:
Holding gains and losses can be realized or unrealized, and their treatment will vary with the asset or liability. For example, the value of a building may increase over time; but until it's sold, that gain in value is unrealized. Once sold, the gain is recorded on the company's balance sheet; eventually flowing to the income statement.
Generally, the conservatism constraint provides guidance on this topic; stating that all probable losses are recorded and disclosed as they are discovered (realized), while gains are deferred until verified (unrealized).