What is Realization in Accounting?

Realization is the point in time when revenue has been generated. Realization is a key concept in revenue recognition. Realization occurs when a customer gains control over the good or service transferred from a seller.

Realization Indicators

There are numerous indicators of when realization can occur, such as the following:

When the seller has the right to receive payment.
When the customer has legal title to the transferred asset.
When physical possession of the asset has been transferred by the seller.
When the customer has taken on the significant risks and rewards of ownership related to the asset transferred by the seller.
When the customer accepts an asset.
When the customer can prevent other entities from using or obtaining benefits from the asset.