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[sharechat] Is a paper loss a real loss?

From:	"vincent.wang" <vincent.wang@xtra.co.nz>
Date:	Tue, 5 Sep 2000 10:10:42 +1200

A paper loss is an unrealized loss. The accounting book told us that when we book the value of any asset, we should not book a value higher than the value the asset can be realized(sold).

Following example is a good illustration why this is the right way to make your booking:

ABC Company is an investment company buying and selling shares(just like GPG and BRY). On 31/12/1999, the company held three investments:

cost market price on 31/12/99

------ ------------------------------------

stock A $1.00 $0.50

stock B 2.00 1.00

stock C 3.00 3.00

Total $6.00 $4.50

If the company is for sell on 31/12/99, do you pay $6.00 or $4.50 to buy this company assuming other things being equal?

Small investors are not different from an investment company. We should adopt the similar generally accepted accounting principles to treat our book. We can't assume the share prices of stock A and B would recover in the future.

Hope this would help.

RGDS,

Vincent Wang

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