CFAI P323 Q10 and P325 Q15, What is unrealized g/L on nonmonetary assets and liabilities and unrealized exchange rate holding gains on monetary asset? Can anyone explain to me what do ‘unrealized’ mean here?
You realize gain or loss when you sell an asset either non-monetary assets like inventory, PPE or foreign currency on balance sheet most probably at available for sale.
Unrealized gnl is exactly what it sounds like…gnl that have not been realized through the sale of the asset or liability. when a parent is consolidating the net nonmentary assets of its sub to its books and the sub operates in a country where its currency is appreciating-that would be recorded as an unrealized gain on the parents equity comphensive income …and vice versa if they had a net monetary liablity… not sure if this answers ur question…
Good example in the notes. Lets say a sub makes a sale on Dec. 25 2010 when ex rate is 1.50 for delivery on Jan. 15. On Dec. 30 parent company calculates financials when ex rate is 1.25. They would book an unrealized loss on that sale. If then when the sale settles on Jan. 15 the ex rate is back up to 1.75 they would then book a realized gain.