A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of $155,000. However, the company cannot record the holding gain on its financial statements because of the cost principle and the revenue recognition principle. On the other hand, if the company sells the land for $175,000 a holding gain of $155,000 will appear on its income statement as the company also records the $175,000 on its balance sheet and removes the land’s original cost of $20,000.
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For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
