Realisation principle (realisatiebeginsel)
Revenue is recognised in the period in which it is realised, usually on delivery or performance of the service.
What does realisation principle mean?
Revenue is recognised in the period in which it is realised, usually on delivery or performance of the service.
Profit is recognised when it is sufficiently realised. Delivery and contract terms determine the moment; an invoice date alone is not decisive. Special rules may apply to work in progress.
How does it work?
The core is in art. 2:384(2) DCC: profits are included only insofar as they were realised at the balance sheet date. An order, a quote or an increase in the value of inventory therefore yields no result yet. For the sale of goods the moment is usually delivery; for services, what has been performed up to the balance sheet date counts. The Guidelines elaborate this in chapter 270 of the RJ volume and B13 of the RJk volume.
Exceptions are in the law itself. Increases in value of financial instruments, other investments and agricultural inventories with frequent market quotations may go directly into the result (art. 2:384(7) DCC). For other assets at current value the increase goes to the revaluation reserve (art. 2:390(1) DCC).
Example
A BV delivers a € 5.000 machine (excluding VAT) to the customer on 28 December and invoices on 5 January. The performance was done in December: the € 5.000 turnover belongs in the old year, with an amount still to be invoiced on the balance sheet. On 20 December the same BV received a € 3.000 deposit for an order to be delivered in February. That is money, not profit: on 31 December it stands as a prepayment received under liabilities (art. 2:375(1) DCC). Turnover in December from these two orders: € 5.000, not € 8.000.
In the annual accounts
Turnover in the P&L and the related receivable on the balance sheet.
Difference from the matching principle
The realisation principle determines when revenue may be booked; the matching principle then determines which costs belong in the same period. First you establish that the € 5.000 sale falls in December, then you allocate the cost price of that machine to December.
Common mistakes
- Taking payment as the only moment of realisation
- Booking an unfulfilled performance as turnover
What to watch for
- Check deliveries in the two weeks before and after the balance sheet date using delivery notes and timesheets, not invoice dates.
- For projects that straddle the year boundary, record how you measure progress; work-in-progress projects have their own rules (RJ 221; for micro and small entities RJk B5.3).
- Micro and small entities may choose tax-based accounting policies (art. 2:395a(7) and 2:396(6) DCC); the moment of profit then follows the tax rules and you state this in the notes.
Legal basis and source
art. 2:384 DCC
Frequently asked questions
Does the invoice date or the delivery date count?
The delivery date, or for services the period in which the work was performed. Whoever invoices later books an amount still to be invoiced at the balance sheet date.
May an increase in value of the business premises be booked as profit?
No. If you choose valuation at current value, the increase goes to the revaluation reserve in equity (art. 2:390(1) DCC). Profit arises only on sale.
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