Fair value gain vs unrealized gain

rlohoidarlohoida
in CCIR.Instructions

Hi,

Is fair value gain (loss) the same as unrealized gain (loss)?

Comments

  • grahamgraham

    Short answer:

    They are very close but I don't think they are quite the same thing. You probably won't have to know that for the exam however.

    Longer answer:

    The terms "fair value gain" and "unrealized gain" are not actually defined in the syllabus readings so I looked up the definitions online:

    • Fair value is the estimated price at which an asset is bought or sold when both the buyer and seller freely agree on a price. Fair value gain is the difference between the fair values of an asset at the beginning and end of the accounting period.

    • Unrealized gain is an increase in the value of an asset that has yet to be sold for cash. As such, an unrealized gain is one that takes place on paper, as it has yet to be realized.

    These definitions do seem to imply that fair value gain and unrealized gain refer to the same thing, but one of the annual statement exhibits makes me think there is a slight difference. On page 20.42 of the core return:

    So the change in unrealized gain is a component of fair value but this seems like a very subtle point. I assume there is a slight difference then between "unrealized gain" and "fair value gain", otherwise they would not have 2 different terms. But again, none of this is explained in the syllabus readings, so I doubt you would have to know it.

  • rlohoidarlohoida

    Thank you for comprehensive response!

  • grahamgraham

    You're welcome @rlohoida!

Sign In or Register to comment.