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As I know, an unrealized gain occurs when the market value of the securities are greater than their carring value . Normally, unrealized gains are not recognized.When the allowance method is used, however, unrealized gains are recognized when the allowance to reduce to market account is reduced. The unrealized gain can be recored only to the extent of the write-downs for unrealized loss. That is, under the allowance method, the valuation of the portfolio can never exceed the original cost of the total portfolio. An unrealized gain(i.e., reduction of prior unrealized lossed) is recorded in an adjusting entry at the end of the accounting period. Normally, under the direct method, previously recorded write-downs are not reversed and unrealized gains are not recognized. Recognition comes about when they are realized through the sale of the securities.