Realisationsprinzip

Realisationsprinzip is a fundamental principle of accounting in Germany, embedded in the Handelsgesetzbuch (HGB) and the German generally accepted accounting principles (GoB). It requires that revenues and profits are recognized in the financial statements only when they have been realized, i.e., when the economic benefit is earned, the claim to payment is legally enforceable, and the risks and rewards of ownership or performance have transferred to the other party.

In practice, Realisationsprinzip affects the timing of revenue recognition. Revenue from the sale of goods is typically recognized when the goods are delivered and the risks and rewards have transferred, or when a service is performed and the entitlement to consideration is established. The principle also implies that gains from transactions should not be recorded before realization and that uncertain or contingent amounts are avoided or prudently estimated.

The Realisationsprinzip is complemented by other GoB principles, notably the Vorsichtsprinzip (prudence). Together they aim to prevent overstatement of assets and profits and to ensure a faithful and cautious presentation of the enterprise’s financial position. The principle is distinct from cash-basis rules, as it focuses on when performance and the corresponding income are realized, independent of when cash is actually received.

With reforms and modernization efforts, including BilMoG, German accounting has incorporated more nuanced approaches to revenue recognition, but the Realisationsprinzip continues to underpin the recognition timing in many areas of financial reporting under HGB.