unrealised gains and losses
Unrealised FX gains or losses reflect the change in the value of foreign currency denominated sales/purchase transactions that are recorded in financial statements prior to the settlement of the invoices. For example, a U.S.-based company sells EUR 100,000 worth of motor vehicle parts to a European distributor.
When the invoice was recognised, the spot EUR-USD rate was 1.10. As financial statements are drawn, the transaction hasn’t been settled still, and the exchange rate has moved to 1.15. The corresponding unrealised FX gain of USD 5,000 is recorded on the balance sheet under the owner’s equity section.