Tekjufærsla

Tekjufærsla is an accounting term that refers to the recognition of revenue in financial statements. It is governed by specific accounting principles, primarily the accrual basis of accounting, which dictates that revenue should be recognized when it is earned and realized or realizable, rather than when cash is received. This means that even if a company has not yet received payment for goods or services, it can still record the revenue if it has fulfilled its obligations and is reasonably assured of receiving payment.

The core principle behind tekjufærsla is the matching principle, which aims to report revenues and the expenses incurred to generate those revenues in the same accounting period. This provides a more accurate picture of a company's profitability. For example, if a company sells a product on credit, the revenue is recognized at the time of sale, even though the cash payment will be received later. Similarly, if a service is provided over several months, the revenue is recognized as the service is performed.

There are specific criteria that must be met for revenue to be recognized. These generally include the existence of persuasive evidence of an arrangement, delivery or performance of the goods or services, the seller's price being fixed or determinable, and the collectability of the payment being reasonably assured. Deviations from these principles can lead to misstatements in financial reports, impacting investors' and creditors' understanding of a company's financial health. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) provide detailed guidance on the application of tekjufærsla.