Holding gains are generally defined as increases (decreases) in the replacement costs of the asset

Asset

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...

s held during a given period. Holding gains and losses accrue to the owners of assets and liabilities purely as a result of holding the assets or liabilities over time, without transforming them in any way.

For example, if a company holds bottles of wine in its inventory and that specific wine becomes more expensive on the market, the replacement cost of the wine in the inventory increases as it has become more expensive for the company to replace its current stock of wine. Thus, by merely holding the wine in the inventory, the assets of the company have risen in value.

There are different types of holding gains and the types depend on the accounting system the company uses or may use. Holding gains are most frequently used in inflation

Inflation

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 accounting and income

Income

Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

 measurement. For instance holding gains or losses can result from depreciation

Depreciation

Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....

, stock

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

, gearing adjustments or monetary working capital

Working capital

Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is...

adjustments.

Holding gains can be realized (e.g., sold goods) or unrealized (e.g. stock).