Realization Principle
/ˌriːəlaɪˈzeɪʃən ˈprɪnsəpl/
Definitions
- (n.) An accounting concept dictating that revenue is recognized only when it is earned and realizable, not necessarily when cash is received.
The realization principle requires that sales revenue be recorded only when the goods are delivered to the customer.
- (n.) A tax law doctrine stating that gain or loss is recognized only upon a transaction resulting in a measurable change in property rights.
Under the realization principle in tax law, unrealized appreciation of assets is not taxable until sold.
Forms
- realization principle
Related terms
See also
Commentary
This term bridges accounting and tax law; clarity in context is essential as its application governs when income is recognized for financial reporting and tax purposes.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.