reknarhagnaðarfræði

Reknarhagnaðarfræði is an Icelandic term that translates to "accounting for realized gains and losses." It refers to the accounting practices and principles related to the recognition and reporting of profits or losses that have been definitively concluded or settled. This concept is particularly relevant in financial accounting and taxation, where the timing of recognizing these gains and losses can have significant implications for a company's financial statements and tax liabilities.

The core idea behind reknarhagnaðarfræði is that a gain or loss is only considered "realized" when a transaction is completed. This means that an asset has been sold, a debt has been settled, or some other event has occurred that irrevocably changes the entity's financial position. Until such a point, any increase or decrease in the value of an asset is considered unrealized and is typically not recognized in the income statement.

For instance, if a company holds shares that have increased in value, this increase is an unrealized gain until the shares are sold. Upon sale, if the selling price exceeds the original cost, the difference is a realized gain, which then becomes subject to accounting recognition and potentially taxation. Conversely, if the shares are sold for less than their cost, the difference is a realized loss. The principles of reknarhagnaðarfræði dictate when and how these realized amounts should be reported. This distinguishes it from concepts like mark-to-market accounting, which may recognize unrealized gains and losses based on current market values, depending on specific accounting standards.