...ah jurek, you must be a good fisherman......
Realized vs Non-Realized (or Unrealized) Gains/Losses
No magic here, the terms explain pretty much all you need to know. Due to different expirations of collars, hedges, etc. , you may have realized gains/losses or unrealized based on when the expiration takes place.
If the expiration takes place on or before the reporting date, we have REALIZED gains/loss (these you take to/from the bank) - hard number, no argument.
If the expiration takes place AFTER the reporting date, we need to estimate by "mark to market" (basically a fancy way of saying, this is the market or estimated price at the reporting date) - this will now create a "moment in time" gain/loss because it's based on an estimate of market price - so no real money gains/losses occurred but a statement is made that if liquidated today, the hedge, collar etc would have a gain/loss on PAPER - and would influence the value stated.
With the upcoming IFRS Reporting starting towards the end of next year in Canada, I highly recommend picking up a book on how mark to market works - it is a DRAMATIC change of how company valuations will be effected (creating a whole new accounting discipline called Valuations). For example, using GAAP, if you carry Land and Building Capital Assets on your Balance Sheet, you traditionally present the COST VALUE and depreciate accordingly, in the IFRS world, the building valuation is mark to market for each reporting date.....you got it, that old building in downtown Vancouver that cost $750,000 in 1980, may now be valued at $7,000,000 - making a huge realized gain (CRA still hasn't proposed how to deal with these gains/losses for taxation - so far it seems they will remain in GAAP....we'll see).
I'm curious to see how CLL land leases will be treated/valued when mark to market, or current valuations take place..?
Good luck,
Booster