Why unrealised gain matters to a first-time founder
An unrealised gain can make a balance sheet or investment report look stronger without producing cash. Founders should not spend or promise that value as though a sale were certain. Accounting treatment and tax consequences depend on the asset, reporting framework and jurisdiction, while market prices can reverse before the asset is sold.
Examples of unrealised gain
A company buys listed shares for ₦40 million. At year end, their market value is ₦52 million, creating a ₦12 million unrealised gain. The company still holds the shares and has received no sale proceeds. Its accountant determines whether and where the gain appears in the financial statements under the applicable standards.
Common misunderstanding
It is not a realised gain, which arises when a sale or other disposal fixes the outcome. “Paper profit” also does not mean imaginary: the value may be supported by a market price and recognised in accounts. It remains exposed to price changes, transaction costs, liquidity limits and any tax rules.
When to use it
Use the term in valuation reports, investment reviews and financial statements when an asset’s measured value has risen but no disposal has occurred. Separate realised cash proceeds from valuation movements in forecasts. For private shares or illiquid assets, document the valuation basis and involve accounting or valuation specialists when the amount is material.
US spelling: unrealized gain.