Accounting Terms Glossary
International financial reporting and accounting terminology — 1691 English terms with definitions and real usage examples. Search across the term, definition or example instantly.
A
[Amount] recoverable
The higher of fair value less costs to sell and value in use.
Example: The asset's carrying amount exceeded its recoverable amount.
Amounts recognised (in the balance sheet and income statement)
Amounts recorded in the financial statements.
Example: The amounts recognised in the balance sheet include the deferred tax asset.
Accelerated depreciation allowances
Tax rules allowing faster write-down of assets.
Example: Accelerated depreciation allowances reduce taxable profit in early years.
Acceptable under IFRSs
Describes an accounting treatment or presentation that complies with the requirements of International Financial Reporting Standards.
Example: The proposed revenue recognition policy is acceptable under IFRSs and does not require any modification.
Accountability of management
Management's duty to account for its stewardship.
Example: Accountability of management requires transparent reporting to owners.
Accounting
The process of recording, classifying and summarising financial transactions.
Example: Accounting provides the figures used in the annual report.
Accounting acquiree
The entity whose accounting is treated as the acquiree in a reverse acquisition.
Example: In a reverse acquisition, the legal parent is the accounting acquiree.
Accounting and Reporting by Retirement Benefit Plans
The standard that prescribes how retirement benefit plans report their obligations and plan assets to participants.
Example: The plan's financial statements were prepared under the standard on Accounting and Reporting by Retirement Benefit Plans.
Accounting arbitrage
Exploiting differences between accounting rules to gain value.
Example: The group used accounting arbitrage across two jurisdictions.
Accounting estimate
An approximation of a monetary amount when no precise measurement is possible.
Example: The useful life of the machine is an accounting estimate.
Accounting for Government Grants and Disclosure of Government Assistance
Standard on accounting for government grants and related disclosures.
Example: Government grants are recognised only when there is reasonable assurance of compliance.
Accounting for inventories
Measuring and reporting inventory at the lower of cost and net realisable value.
Example: Accounting for inventories requires measuring them at the lower of cost and net realisable value.
Accounting for Investments in Associates
The standard governing how an investor accounts for its significant influence investments in associates, normally using the equity method.
Example: Under the equity method of accounting for investments in associates, the investor recognises its share of the associate's profit.
Accounting for revenue and associated expenses
Recognising revenue together with related expenses.
Example: Accounting for revenue and associated expenses follows the accrual basis.
Accounting income
Profit measured under accounting rules rather than tax rules.
Example: Accounting income may differ from taxable income.
Accounting mismatch
An inconsistency arising when related assets and liabilities are measured on different bases.
Example: Measuring one item at fair value may create an accounting mismatch.
Accounting model
The framework of measurement and recognition bases an entity applies when preparing its financial statements.
Example: The entity changed its accounting model for investment property from cost to fair value.
Accounting period
Period covered by financial statements, usually one year.
Example: The accounting period ends on 31 December each year.
Accounting policies
The specific principles and bases an entity applies in preparing financial statements.
Example: The entity disclosed its accounting policies for inventories.
Accrual accounting assumption
Transactions are recorded when they occur, not when cash moves.
Example: Under the accrual basis, revenue is recognised when earned.
Accumulated depreciation
Total depreciation charged against an asset to date.
Example: Accumulated depreciation is deducted from the asset's cost.
Accumulated profit or loss
The cumulative net earnings of an entity that have not been distributed as dividends or transferred to another reserve.
Example: The board decided to retain the accumulated profit or loss to fund future capital expenditure.
Accumulating compensated absences
Paid absences that accumulate for future use.
Example: Accumulating compensated absences are recognised as employees earn them.
Achieve comparability
Making financial statements comparable across entities and periods.
Example: Uniform policies help achieve comparability between companies.
Acquired entity
The business or entity whose control is obtained by the acquirer.
Example: The acquirer recognises the assets of the acquired entity at fair value.
Acquired goodwill
The excess of the consideration transferred over the fair value of identifiable net assets acquired in a business combination.
Example: Acquired goodwill of 4 million was recognised and tested annually for impairment.
Acquired in a business combination
Asset or liability obtained through a business combination.
Example: The patent was acquired in a business combination last year.
Acquiree
The business or entity that the acquirer obtains control over.
Example: The acquiree's assets were measured at fair value.
Acquirer
The entity that obtains control of another entity.
Example: The acquirer recognises the identifiable net assets at fair value.
Acquisition
A business combination where one entity obtains control of another.
Example: The acquisition was accounted for using the acquisition method.
Acquisition date
The date on which the acquirer effectively obtains control of the acquiree in a business combination.
Example: Consideration transferred is measured at fair value at the acquisition date.
Acquisition method
The method used to account for business combinations.
Example: Under the acquisition method, identifiable assets are measured at fair value.
Active market
A market where transactions occur frequently enough to provide pricing.
Example: The shares are traded on an active market.
Active use
Use of an asset in the production or supply of goods and services.
Example: The equipment is in active use in the manufacturing process.
Actively marketed
Describes an asset that is being actively offered for sale in its present condition at a reasonable price.
Example: The building was actively marketed during the entire reporting period.
Actuarial assumptions
Demographic and financial estimates used to measure benefit obligations.
Example: Actuarial assumptions include discount rates and mortality rates.
Actuarial gains and losses
Changes in the present value of a defined benefit obligation from experience adjustments.
Example: Actuarial gains and losses arise from changes in actuarial assumptions.
Actuarial present value of promised retirement benefits
Present value of promised pension benefits using actuarial assumptions.
Example: The actuarial present value of promised retirement benefits is disclosed annually.
Actuarial valuation
Valuation of benefit obligations using actuarial assumptions.
Example: An actuarial valuation is performed annually for the pension plan.
Actuarial valuation method
A projected technique used to measure defined benefit obligations by estimating future payments and discounting them to present value.
Example: The entity used the projected unit credit actuarial valuation method to measure its pension obligation.
Additional comparative information
Extra prior-period information beyond the minimum.
Example: Additional comparative information was presented voluntarily.
Additional consideration
Extra payment transferred beyond the initial consideration in a transaction.
Example: The acquirer paid additional consideration for the earn-out.
Additional disclosure
Supplementary information provided beyond the minimum required disclosures.
Example: The entity provided additional disclosure about its related-party transactions.
Additional Exemptions for First-Time Adopters
Optional reliefs that ease the transition to IFRS for entities applying the standards for the first time.
Example: The company used the Additional Exemptions for First-Time Adopters when measuring its pension obligation at transition.
Adjust for consolidation procedures
Correcting figures to remove intragroup effects before consolidation.
Example: We must adjust for consolidation procedures before reporting.
Adjusted fair value
Fair value modified to reflect specific rights, restrictions or conditions.
Example: The adjusted fair value reflected the transfer restrictions.
Adjusted weighted-average shares
Weighted-average shares adjusted for dilutive potential shares.
Example: Diluted EPS uses the adjusted weighted-average number of shares.
Adjusting event (after the balance sheet date)
An event after the reporting date that requires adjustment.
Example: The settlement of a court case was an adjusting event.
Adjusting event after the reporting period
An event occurring after the reporting date that provides evidence of conditions that existed at the end of the reporting period and requires adjustment.
Example: A customer's bankruptcy after the year-end was an adjusting event after the reporting period because it confirmed an existing receivable impairment.
Adjustment
A change to a previously recorded amount.
Example: The adjustment corrected the prior year's figures.
Administrative expenses
Costs of running the entity not tied to production or selling.
Example: Administrative expenses include office salaries and rent.
Admission fees
Amounts charged for initial admission to a membership or service arrangement.
Example: Admission fees are recognised as revenue when the service is provided.
Advance
A payment made by a customer before goods or services are delivered, creating an obligation on the seller.
Example: The customer paid a 10,000 advance before delivery of the equipment.
Adverse economic consequences
Negative financial effects arising from an event or decision.
Example: The ruling had adverse economic consequences for the entity.
Adverse event
An unfavourable occurrence that may give rise to a loss or liability.
Example: The insurer paid claims following the adverse event.
After-tax amount
An amount net of income tax.
Example: The gain is reported as an after-tax amount.
Agency
A relationship where one party acts on behalf of another.
Example: The agency arrangement gives the agent authority to bind the principal.
Aggregate
A total amount obtained by adding together individual components or items.
Example: The note presents the aggregate of all related party transactions for the period.
Aggregation
Combining items into classes.
Example: Aggregation of similar items aids understanding.
Aggregation criteria
Rules for grouping items that share similar characteristics for reporting.
Example: The aggregation criteria determine how items are presented together.
Agreement date
The date on which the parties reach a binding agreement.
Example: The fair values were measured as of the agreement date.
Agreements for the construction of real estate
Contracts to build real estate where revenue recognition depends on whether the agreement is treated as a sale of goods or a construction service.
Example: Under agreements for the construction of real estate, revenue may need to be recognised over time.
Agreements in progress
Contracts still being negotiated or not yet completed.
Example: Revenue from agreements in progress is recognised over time.
Agricultural activity
Managing the biological transformation of living animals or plants for sale.
Example: The farm's agricultural activity includes raising livestock.
Agricultural produce
The harvested product of a biological asset.
Example: Agricultural produce is measured at fair value less costs to sell at harvest.
Agriculture
The standard covering biological assets and agricultural produce.
Example: Agriculture addresses the accounting for biological assets.
Allocation
The process of assigning a cost, revenue or amount to different periods, assets or activities.
Example: The allocation of the purchase price to the identifiable assets acquired was completed within the measurement period.
Allocation method
The method used to allocate an amount.
Example: The allocation method spreads cost over reporting periods.
Allowance
A contra account reducing the carrying amount of an asset.
Example: The company recorded an allowance for doubtful debts.
Allowance account
A contra account recording estimated reductions in the value of a receivable.
Example: The allowance account is deducted from gross receivables.
Allowed alternative treatment
An alternative accounting treatment that older standards permitted alongside the benchmark treatment.
Example: The company applied the allowed alternative treatment and revalued its property, plant and equipment.
American share option
Option that may be exercised at any time before expiry.
Example: The American share option can be exercised any time.
Amortisation
Systematic allocation of the cost of an intangible asset over its useful life.
Example: Amortisation of the patent is charged monthly.
Amortisation method
The method used to allocate a depreciable amount over useful life.
Example: The straight-line amortisation method is applied to the intangible asset.
Amortisation period
The period over which an intangible asset is amortised.
Example: The amortisation period reflects the asset's expected useful life.
Amortised cost
The amount at which a financial asset or liability is measured after adjusting for principal repayments, accumulated amortisation and impairment.
Example: The bond is measured at amortised cost using the effective interest method.
Amortised cost of a financial asset or financial liability
The amount measured using the effective interest method.
Example: The loan is carried at amortised cost.
Amortising interest rate swap
A swap whose notional amount declines over its life.
Example: The amortising interest rate swap hedged the loan repayments.
Amount of inventories
The carrying amount of inventory recognised in the financial statements.
Example: The amount of inventories carried at net realisable value was disclosed.
Amount payable
The monetary sum that an entity is obliged to pay, typically under a contract or liability.
Example: The amount payable to suppliers at year end was disclosed in the notes.
Amount per share
Monetary value attributable to a single share.
Example: The dividend amount per share was two liras.
Amounts recognised [in the statement of financial position or in the statement of comprehensive income]
Monetary amounts recorded in the financial statements under applicable standards.
Example: The note shows amounts recognised in the statement of financial position.
Analysis
Detailed examination of information to support decisions.
Example: Management performed a sensitivity analysis of the cash flows.
Annual leave
Paid leave accruing to employees.
Example: Annual leave is a short-term employee benefit.
Annual periods
Reporting periods of one year for which an entity presents its financial statements.
Example: The entity presents financial statements for annual periods ending on 31 December.
Annuitant
A person receiving an annuity.
Example: The annuitant receives annual payments for life.
Annuitisation
Converting a lump sum into a stream of regular payments.
Example: Annuitisation turns the pension pot into monthly income.
Annuity
A series of equal payments made at regular intervals over a period.
Example: The retiree receives a monthly annuity from the pension plan.
Antidilution
The effect whereby converting potential ordinary shares would increase earnings per share or reduce loss per share.
Example: Those options were antidilutive and therefore excluded from diluted earnings per share.
Antidilutive
Increasing earnings per share or reducing loss per share.
Example: Those potential shares are antidilutive and were excluded.
Appendix
A supplementary section attached to a standard or document.
Example: The illustrative examples are presented in the appendix.
Applicability
Whether a standard or treatment applies to a situation.
Example: The applicability of the standard depends on the entity type.
Application guidance
Guidance explaining how a standard is applied.
Example: The application guidance explains how the standard is applied.
Application of requirements
The manner in which an entity applies the specific requirements of a standard to its transactions and balances.
Example: The appendix provides guidance on the application of requirements relating to lease modifications.
Application supplement
Additional guidance supplementing a standard.
Example: The application supplement clarifies the standard's use.
Applying the Restatement Approach Under IAS 29 Financial Reporting in Hyperinflationary Economies
Guidance on restating financial statements in hyperinflationary economies under IAS 29.
Example: The entity applied the restatement approach under IAS 29.
Appraisal
An expert assessment of the value of an asset or liability.
Example: An independent appraisal was obtained for the property.
Arm’s length transaction
A transaction between unrelated, willing parties each acting in its own interest.
Example: Related party disclosures confirm whether transactions were conducted on an arm's length basis.
Artistic-related intangible assets
Non-monetary assets arising from artistic works such as films.
Example: Film rights are artistic-related intangible assets.
Asking price
The price a seller is willing to accept for an asset.
Example: The quoted asking price was higher than the bid price.
Assess
To evaluate or measure something.
Example: The entity must assess whether an indicator of impairment exists.
Assessing control
Evaluating whether an investor controls an investee.
Example: Assessing control requires evaluating power, exposure and returns.
Asset
A resource controlled by an entity as a result of past events from which future economic benefits are expected to flow.
Example: The machine is recognised as an asset because it will generate future economic benefits.
Asset exchange transactions
Transactions exchanging one asset for another.
Example: Asset exchange transactions are measured based on commercial substance.
Asset-specific performance risk
Risk that a particular asset will not perform as expected.
Example: Asset-specific performance risk affects the fair value of the asset.
Assets acquired
The identifiable assets obtained by the acquirer in a business combination.
Example: The assets acquired were measured at their acquisition-date fair values.
Assets held by a long-term employee benefit fund
Funds set aside in a separate long-term fund to settle employee benefit obligations.
Example: Assets held by a long-term employee benefit fund are measured at fair value at each reporting date.
Assets retired from active use
Assets no longer used in operations but still held.
Example: The plant lists assets retired from active use separately.
Associate
An entity over which the investor has significant influence.
Example: The investment in the associate is accounted for using the equity method.
Audit report
The auditor's formal opinion on the financial statements.
Example: The audit report gave an unmodified opinion.
Authorise [financial statements for issue]
Formally approving financial statements for publication.
Example: The board authorised the financial statements for issue.
Available-for-sale financial assets
A former category of non-derivative financial assets designated as available for sale, measured at fair value with changes in other comprehensive income.
Example: Gains on available-for-sale financial assets were previously recognised in other comprehensive income until disposal.
Award credits
Credits given to customers for future discounts.
Example: Award credits are a separate performance obligation.
Corridor
A permitted range of actuarial gains and losses previously not recognised.
Example: Actuarial gains within the corridor were deferred.
‘Cost of sales’ method
A method presenting expenses analysed by function, showing cost of sales.
Example: Under the ‘cost of sales’ method, expenses are classified by function.
B
Back-out
To reverse or eliminate an entry or an adjustment previously recognised.
Example: The accountant had to back out the incorrect accrual before closing the period.
Balance sheet
Statement showing assets, liabilities and equity at a date.
Example: The balance sheet shows total assets of one million.
Balance sheet date
The date at the end of the reporting period for the statement of financial position.
Example: Events after the balance sheet date were disclosed.
Balance sheet liability method
Method recognising deferred tax from balance sheet differences.
Example: Deferred tax is calculated using the balance sheet liability method.
Bank
A financial institution taking deposits and lending.
Example: Disclosures for banks address credit and liquidity risk.
Bank overdraft
A short-term borrowing facility that allows an entity to withdraw more money than its account balance.
Example: The bank overdraft is repayable on demand and is presented as a current liability.
Bankruptcy
A legal process for insolvent entities.
Example: Bankruptcy proceedings were disclosed as a subsequent event.
Bargain purchase
A business combination where consideration is below fair value of net assets.
Example: The bargain purchase resulted in a gain for the acquirer.
Basic earnings per share
Profit attributable to ordinary shareholders divided by the weighted average number of shares.
Example: The entity reported basic earnings per share of two lira.
Basic loan features
Contractual terms of a debt instrument, such as interest and repayment, that are typical of a basic lending arrangement.
Example: The instrument was assessed to have basic loan features and therefore met the solely payments of principal and interest test.
Basis adjustment
Adjustment to the tax base of an asset or liability.
Example: A basis adjustment was made after the asset revaluation.
Basis for Conclusions
A document explaining the reasoning behind the conclusions in a standard.
Example: The Basis for Conclusions explains why the Board rejected the alternative.
Basis point
One hundredth of a percentage point.
Example: The interest rate rose by 25 basis points.
Bearer biological asset
Living assets held to produce goods.
Example: Bearer plants are accounted for as property, plant and equipment.
Benchmark treatment
The preferred or reference accounting treatment allowed by a standard, used as the default approach unless an alternative is applied.
Example: Entities should apply the benchmark treatment unless national regulations require an allowed alternative.
Beneficial contracts
Contracts entered into for the entity's benefit.
Example: Beneficial contracts may be recognised in a business combination.
Beneficiary
A person or entity entitled to receive benefits from an arrangement.
Example: The beneficiary receives the trust distributions.
Benefit
An advantage or entitlement received under a plan or contract.
Example: Employees receive a pension benefit after retirement.
Benefit improvements
Increases in the benefits of a defined benefit plan, which give rise to past service cost.
Example: The benefit improvements granted this year increased the defined benefit obligation.
Benefit obligation
Present value of promised employee benefits payable.
Example: The benefit obligation was measured at year end.
Benefit to users
The usefulness of financial information to primary users of financial statements.
Example: Improved disclosures increase the benefit to users.
Best estimate
The most likely amount used to measure a provision.
Example: The provision is measured at management's best estimate.
Bias
A tendency that distorts judgement or information.
Example: Bias in estimates can affect the neutrality of information.
Bid bonds
Guarantees or bonds provided by a party to secure its performance when bidding for a contract.
Example: The contractor lodged bid bonds to support its tender for the construction project.
Bid price
The price at which a buyer will purchase.
Example: The bid price is used for short positions.
Bid-ask spread
The difference between the best bid and best ask price.
Example: A narrow bid-ask spread indicates a liquid market.
Bifurcation methodology
An approach separating an embedded derivative from its host contract.
Example: The bifurcation methodology was applied to the convertible bond.
Binding sale agreement
A legally enforceable agreement to sell an asset that commits the parties to the transaction.
Example: Because there was a binding sale agreement, the property was classified as held for sale.
Binomial
Two-outcome valuation model used for option pricing.
Example: The binomial model valued the employee share options.
Biological asset
A living animal or plant within the scope of agricultural activity.
Example: The biological asset was measured at fair value less costs to sell.
Biological transformation
Growth, degeneration, production or procreation in living assets.
Example: Biological transformation results in changes in an asset's fair value.
Black-Scholes-Merton formula
An option pricing model.
Example: The Black-Scholes-Merton formula values the share option.
Board of directors
The governing body elected by shareholders to oversee the strategic direction and management of an entity.
Example: The board of directors approved the annual financial statements for issue.
Bond
A debt security paying interest.
Example: The bond is measured at amortised cost.
Bonus issue
Free shares issued to existing shareholders from reserves.
Example: The company announced a one-for-ten bonus issue.
Bonus plan
An arrangement granting employees additional rewards based on performance.
Example: The bonus plan rewards staff when annual targets are met.
Book of contracts
The complete set of insurance contracts an insurer manages together as a portfolio.
Example: Management reviews the book of contracts regularly to assess insurance risk.
Book value
Amount at which an asset is recorded in the books.
Example: The machine's book value is lower than its market value.
Borrower
The party that receives funds and is obligated to repay them.
Example: The borrower must repay the loan with interest.
Borrowing Costs
Interest and other costs of borrowing funds.
Example: Borrowing costs directly attributable to the asset are capitalised.
Bottom-up test
An impairment test starting at the lowest level of cash generation.
Example: The bottom-up test assessed individual assets for impairment.
Brand
A marketing-related intangible asset such as a name or symbol that identifies a product and creates value for the entity.
Example: An internally generated brand cannot be recognised as an intangible asset.
Build-operate-transfer
A concession model for delivering infrastructure.
Example: Under build-operate-transfer, the operator builds and runs the asset.
Business
An integrated set of activities and assets conducted for profit.
Example: The acquirer purchased the business as a going concern.
Business combination involving entities or businesses under common control
A combination of entities all ultimately controlled by the same party.
Example: The merger of two subsidiaries is a combination under common control.
Business Combinations
The standard governing how an acquirer recognises and measures the assets, liabilities and goodwill in a combination.
Example: The acquisition was accounted for in accordance with the standard on Business Combinations.
Business Combinations – Subsequent Adjustment of Fair Values and Goodwill Initially Reported
Later correction of provisional fair values and goodwill in combinations.
Example: The standard addresses subsequent adjustment of fair values and goodwill initially reported.
Business Combinations- “Date of Exchange” and Fair Value of Equity Instruments
Guidance on the exchange date and fair value of equity instruments in business combinations.
Example: The interpretation addressed the date of exchange in a business combination.
Business Combinations-Classification either as Acquisitions or Unitings of Interests
Classification of business combinations as acquisitions or mergers.
Example: The combination was classified as an acquisition.
Business model
How an entity manages its financial assets.
Example: The business model determines how financial assets are classified.
Business segment
A distinguishable component of an entity that engages in business activities earning revenues and incurring expenses.
Example: Each business segment's results are reported separately in the segment note.
Business unit
A component of an entity's operations.
Example: The business unit was reported as a separate component.
Buying segment
A component of an entity used as a unit for purchasing decisions.
Example: The buying segment negotiated its own supply contracts.
By class of financial asset
Disaggregation of information according to categories of financial assets.
Example: Credit risk is disclosed by class of financial asset.
By-product
A secondary product produced incidentally in a joint production process, immaterial in value relative to the main product.
Example: The by-product is measured at net realisable value and deducted from the cost of the main product.
C
Call options
Contracts giving the right to buy an asset.
Example: Written call options are treated as liabilities.
Callable
A financial instrument that the issuer may redeem before maturity.
Example: The bond is callable at the issuer's option.
Cap
An upper limit on an interest rate.
Example: The loan carries a cap on the variable interest rate.
Capital
The resources invested in an entity.
Example: Capital is presented within equity.
Capital appreciation
An increase in the value of an investment or asset over its original cost.
Example: The investment was held primarily for capital appreciation rather than dividend income.
Capital approach
Maintaining capital in financial or physical terms.
Example: The capital approach distinguishes financial and physical capital.
Capital asset pricing model
A model relating expected return to systematic risk.
Example: The capital asset pricing model estimates the cost of equity.
Capital contribution
Resources contributed by owners in exchange for equity interests.
Example: The parent made a capital contribution to its subsidiary.
Capital expenditure
Spending on acquiring or improving long-term assets that is capitalised rather than expensed.
Example: Capital expenditure on the new factory was recognised as property, plant and equipment.
Capital gain
Profit from selling a capital asset above cost.
Example: It reported a capital gain on the land sale.
Capital maintenance
The concept that profit is earned only after capital is maintained.
Example: Capital maintenance may be measured in financial or physical terms.
Capital maintenance adjustment
Adjustment to preserve capital in inflation accounting.
Example: A capital maintenance adjustment was recognised in equity.
Capitalisation
Recording a cost as an asset.
Example: Capitalisation of borrowing costs applies to qualifying assets.
Capitalisation of interest
The addition of borrowing costs directly attributable to the acquisition or construction of a qualifying asset to the cost of that asset.
Example: Capitalisation of interest on the loan used to build the plant began once the construction started.
Capped interest rate
An interest rate with an upper limit.
Example: The capped interest rate protects the borrower.
Capping mechanism
A feature limiting how high a rate or payment can rise.
Example: The capping mechanism limits the interest rate on the loan.
Carried at cost
Measuring an asset or liability at its initial cost less adjustments.
Example: Investments in subsidiaries are carried at cost in separate statements.
Carry forward
To transfer an amount, such as a loss or balance, to a future period.
Example: The unused tax loss may be carried forward to offset future taxable profits.
Carrying amount
Amount recognised in the statement of financial position.
Example: The carrying amount of the building was revalued.
Cash
Currency on hand and demand deposits held by an entity.
Example: Cash includes notes, coins and bank deposits.
Cash alternative
The option to settle an award in cash instead of shares.
Example: Employees were offered a cash alternative to the share award.
Cash basis
Recognising transactions when cash moves.
Example: Under the cash basis, revenue is recognised when cash is received.
Cash equivalents
Short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
Example: Cash equivalents include treasury bills with a maturity of three months or less.
Cash flow
A movement of cash into or out of an entity.
Example: The cash flow forecast covers the next twelve months.
Cash flow hedge
A hedge of exposure to variability in cash flows.
Example: The forward contract was designated as a cash flow hedge.
Cash flow projections
Estimated future cash inflows and outflows used in valuation.
Example: The impairment test used five-year cash flow projections.
Cash flow risk
The risk that the amount of future cash flows associated with a financial instrument will fluctuate.
Example: A variable-rate loan exposes the entity to cash flow risk.
Cash flow statement = Statement of cash flows
Statement reporting cash inflows and outflows over a period.
Example: The cash flow statement shows strong operating inflows.
Cash Flow Statements
A statement showing cash inflows and outflows during a period.
Example: The cash flow statement classifies flows into operating, investing and financing.
Cash flows
Inflows and outflows of cash and cash equivalents.
Example: The statement of cash flows reports operating cash flows.
Cash generating unit
The smallest group of assets generating cash inflows.
Example: Impairment is tested at the level of the cash generating unit.
Cash inflow
An increase in cash and cash equivalents arising from operating, investing or financing activities.
Example: The largest cash inflow during the year came from the sale of a subsidiary.
Cash instrument hedging
Hedging using cash instruments.
Example: Cash instrument hedging reduces foreign exchange exposure.
Cash on hand
Currency and coins physically held by the entity.
Example: Cash on hand is counted at the close of each day.
Cash outflow
A payment of cash that reduces an entity's cash balance.
Example: Purchasing equipment resulted in a significant cash outflow.
Cash payments
Outflows of cash and cash equivalents reported by an entity during the period.
Example: Cash payments to suppliers are classified as operating cash flows.
Cash price equivalent
Amount that would be paid if payment were immediate.
Example: The asset was recorded at its cash price equivalent.
Cash proceeds
Cash received from a transaction or disposal.
Example: The cash proceeds from the sale were recognised immediately.
Cash surrender value
The amount received on cancelling an insurance policy.
Example: The policy's cash surrender value was recognised as an asset.
Cash-settled share option
A share-based payment settled in cash.
Example: A cash-settled share option creates a liability.
Cash-settled share-based payment transaction
A share-based payment transaction in which the entity settles the obligation in cash based on the value of equity instruments.
Example: The obligation under the cash-settled share-based payment transaction is measured at each reporting date.
Catastrophe bond
A bond that transfers catastrophe risk to investors.
Example: The catastrophe bond transferred risk to investors.
Catastrophe provisions
Reserves set aside for losses from major catastrophic events.
Example: The insurer increased its catastrophe provisions after the storm.
Cedant
The party that transfers a risk or asset to another.
Example: The cedant transferred part of the risk to the reinsurer.
Certificates of deposit
Negotiable bank instruments representing a time deposit that can be traded before maturity.
Example: The treasury invested surplus cash in certificates of deposit with a three-month term.
Cessation (of capitalisation)
Point when adding costs to an asset's value stops.
Example: Cessation of capitalisation occurred when the asset was ready.
Change in accounting estimate
An adjustment to a previously recognised estimate, applied prospectively.
Example: A change in accounting estimate is applied prospectively.
Changes in Existing Decommissioning, Restoration and Similar Liabilities
Changes in provisions for decommissioning and restoration.
Example: Changes in existing decommissioning liabilities are added to the asset cost.
Chief executive officer
The most senior executive of an entity.
Example: The chief executive officer is a member of key management personnel.
Chief operating decision maker
The person or group responsible for allocating resources and assessing the performance of operating segments.
Example: Operating segments are identified on the basis of reports reviewed by the chief operating decision maker.
Claim
A demand for payment or a right.
Example: The claim was recognised as a provision.
Claims development
The pattern over time of how insurance claims are reported and settled.
Example: Claims development tables show incurred losses by year.
Class A preference share
A class of shares carrying preferential rights over ordinary shares.
Example: Class A preference shares rank ahead for dividend payments.
Class of assets
A grouping of assets of similar nature and use for disclosure and revaluation purposes.
Example: Revaluations must be applied to an entire class of assets to avoid selective measurement.
Class of financial assets
Group of financial assets with similar characteristics.
Example: Disclosure is required by class of financial assets.
Class of financial instruments
A grouping of financial instruments with similar characteristics.
Example: Disclosures are provided by class of financial instruments.
Class of property, plant and equipment
A grouping of PP&E of similar nature and use.
Example: Revaluation is applied to an entire class of property, plant and equipment.
Classification
Assigning items to categories.
Example: Classification of financial assets depends on the business model.
Classification of Financial Instruments – Contingent Settlement Provisions
Guidance on how contingent settlement provisions affect whether a financial instrument is classified as a liability or equity.
Example: The interpretation addresses the classification of financial instruments where contingent settlement provisions exist.
Classification of inventory
Categorising inventory items.
Example: Classification of inventory distinguishes raw materials and finished goods.
Classification of rights issues
Determining whether a rights issue is debt or equity.
Example: The classification of rights issues depends on the currency.
Clean-up call
An option to redeem a remaining balance when it becomes insignificant.
Example: The issuer exercised the clean-up call on the remaining notes.
Close members of the family of the individual
Family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.
Example: Sales to close members of the family of the individual were disclosed as related party transactions.
Closely related
Having a strong economic connection to a transaction or party.
Example: The two contracts are closely related and treated together.
Closing market prices
Quoted prices at the close of trading on a market.
Example: The shares were valued using closing market prices.
Closing rate
The spot exchange rate at the reporting date.
Example: Monetary items are translated at the closing rate.
Co-operative
An entity owned and controlled by its members.
Example: A co-operative is controlled by its members rather than investors.
Collar
A combination of a cap and a floor that limits the range within which an interest rate or price may fluctuate.
Example: The entity entered into an interest rate collar to limit its exposure to changes in market rates.
Collateral
Assets pledged to secure a loan.
Example: The collateral secures the bank loan.
Collateralised (asset, borrowing)
Backed by assets pledged as security for an obligation.
Example: The collateralised borrowing is secured by receivables.
Collectability
The likelihood that amounts due will actually be collected.
Example: Revenue is recognised only when collectability is reasonably assured.
Collection
The receipt of cash from customers in settlement of receivables.
Example: Collection of overdue trade receivables improved the company's cash position.
Collection date
Date on which a receivable is expected to be collected.
Example: The collection date was postponed to March.
Collective marks
Marks distinguishing goods of members of an association.
Example: Collective marks are owned by the association, not one member.
Collective power
Power held jointly by more than one party.
Example: The two investors hold collective power over the entity.
Combined instrument
An instrument with both liability and equity components.
Example: A convertible bond is a combined instrument.
Commencement
The date on which a lease or other arrangement takes effect and the related rights and obligations arise.
Example: The lessee recognises a right-of-use asset at the commencement of the lease.
Commencement of the lease term
The date the lessee may use the leased asset.
Example: The lease liability is measured at commencement of the lease term.
Commercial loans
Loans extended to businesses rather than individuals.
Example: Commercial loans carry terms suited to business needs.
Commercial paper facilities
Arrangements enabling short-term unsecured debt issuance.
Example: The company drew on its commercial paper facilities for working capital.
Commercial substance
The requirement that a transaction changes an entity's future cash flows to be recognised.
Example: The exchange of assets lacked commercial substance because the cash flows did not change.
Commercially viable quantities of mineral resources
Mineral deposits extractable profitably on a commercial basis.
Example: Exploration ceased once commercially viable quantities were confirmed.
Commission
A fee paid to an agent for facilitating a transaction.
Example: The broker earned a commission on the sale.
Commitment
A binding agreement to perform a future act.
Example: The entity disclosed a firm commitment for a capital purchase.
Commitment date
The date on which a commitment is made.
Example: The commitment date affects the measurement of the arrangement.
Commitment fee
A fee charged by a lender for committing to make funds available under a loan facility.
Example: The commitment fee is amortised over the life of the loan facility.
Commodity
A basic good traded in markets.
Example: The commodity is measured at fair value.
Comparability
The quality allowing users to identify similarities and differences.
Example: Comparability requires consistent accounting policies.
Comparability over time
The quality allowing users to compare an entity's statements across periods.
Example: Consistent policies improve comparability over time.
Comparable interim period
The corresponding interim period of the prior year presented for comparison in interim financial statements.
Example: The half-year results were presented alongside the comparable interim period of the previous year.
Comparative balance sheet
Balance sheet presented alongside a prior period's figures.
Example: The comparative balance sheet covers the previous year.
Comparative information
Prior-period amounts presented alongside current-period figures.
Example: Comparative information was restated for consistency.
Comparative statement of financial position
A balance sheet presented with the prior period for comparison.
Example: A comparative statement of financial position is presented for the prior year.
Compensated absences
Paid leave such as vacation or sick leave.
Example: Compensated absences are recognised when employees render service.
Compensation
Amounts payable to employees or third parties, or received as redress for a loss or damage.
Example: The entity received compensation from its insurer for the fire damage to the warehouse.
Competitive harm exemption
An exemption from disclosure that would harm competitiveness.
Example: The entity applied the competitive harm exemption to segment data.
Complementary assets
Assets that together create benefits greater than in isolation.
Example: The software and hardware are complementary assets.
Complete set of financial statements
The full statements required, including balance sheet, profit or loss, and notes.
Example: The entity presented a complete set of financial statements.
Completeness
The property that financial information includes all transactions and events necessary for users' understanding.
Example: The auditor assessed the completeness of the recorded liabilities.
Compliance with International Accounting Standards
Conforming financial statements to international accounting standards.
Example: The notes confirm compliance with International Accounting Standards.
Component
A part of an item that is accounted for separately.
Example: A significant component of the asset was replaced.
Component of an entity
Operations whose activities can be distinguished operationally.
Example: A discontinued component of the entity was reported separately.
Components of equity
The separate parts making up equity.
Example: Share capital and reserves are components of equity.
Compound financial instrument
A non-derivative financial instrument that contains both a liability and an equity component, such as a convertible bond.
Example: The convertible bond is a compound financial instrument split into a liability and an equity component.
Compound financial instruments
Instruments with both equity and liability components.
Example: Compound financial instruments are split into their components.
Compound instrument
A financial instrument containing both liability and equity components.
Example: A convertible bond is a compound instrument.
Concentration of (credit etc) risk
Exposure to a single counterparty or similar risks grouped together.
Example: The entity disclosed its concentration of credit risk by customer.
Confidence level
The probability that the actual outcome will fall within a stated range in actuarial or risk measurements.
Example: The actuary used a 95% confidence level when estimating the provision.
Configuration of the cash flows
Character of cash flows tied to a transferred asset.
Example: The configuration of the cash flows affected the accounting treatment.
Consensus
General agreement among parties on a particular matter.
Example: The committee reached a consensus on the interpretation.
Consequential amendment
An amendment made as a result of another change.
Example: A consequential amendment was made to the related standard.
Consideration
What is given in exchange for something.
Example: The consideration transferred was measured at fair value.
Consistency – Alternative Methods
The accounting principle requiring an entity to apply the same method consistently from period to period, including when using alternative methods.
Example: Consistency requires that once an alternative method is chosen, it is applied consistently in subsequent periods.
Consistency – Capitalisation of Borrowing Costs
Applying the same accounting policy consistently.
Example: Consistency in capitalising borrowing costs is expected.
Consistency – Different Cost Formulas for Inventories
Requiring consistent use of inventory cost formulas across periods.
Example: The guidance addresses consistency of different cost formulas for inventories.
Consolidated and Separate Financial Statements
Standards governing group and standalone financial statement presentation.
Example: Consolidated and separate financial statements follow different measurement rules.
Consolidated balance sheet
A statement presenting the assets, liabilities and equity of a parent and its subsidiaries as a single entity.
Example: The consolidated balance sheet combines the parent and all its subsidiaries.
Consolidated financial statements
Group statements combining parent and subsidiaries as one entity.
Example: The group prepares consolidated financial statements annually.
Consolidated Financial Statements and Accounting for Investments in Subsidiaries
Standards governing group financial statements and subsidiary investments.
Example: Consolidated financial statements present the group as a single entity.
Consolidated group
A parent and its subsidiaries presented as one entity.
Example: The consolidated group includes all controlled subsidiaries.
Consolidated statement of financial position
A group balance sheet combining parent and subsidiaries.
Example: The consolidated statement of financial position eliminates intragroup balances.
Consolidation
The process of combining the financial statements of a parent and its subsidiaries into a single set of financial statements.
Example: Consolidation is required for all subsidiaries controlled by the parent entity.
Consolidation adjustments
Adjustments made when consolidating statements.
Example: Consolidation adjustments eliminate intragroup profits.
Consolidation and Equity Method – Potential Voting Rights and Allocation of Ownership Interests
Guidance on potential voting rights and ownership interest allocation.
Example: Potential voting rights affect consolidation and the equity method.
Consolidation purposes
The objectives served by combining a parent and its subsidiaries.
Example: Uniform accounting policies are applied for consolidation purposes.
Consolidation—special purpose entities
Guidance on when an entity must consolidate a special purpose entity it controls.
Example: Under the rules on consolidation of special purpose entities, the fund was included in the group accounts.
Construction contract
Contract for building assets over a agreed period.
Example: Revenue on the construction contract is recognised over time.
Construction Contracts
Contracts specifically negotiated for the construction of an asset.
Example: Revenue from construction contracts is recognised by stage of completion.
Construction or upgrade services
Services that build or improve infrastructure assets.
Example: Revenue from construction or upgrade services is recognised over time.
Constructive obligation
An obligation arising from established practice or policy.
Example: A constructive obligation may arise from a published policy.
Consumer price index
A measure of the average change over time in the prices paid by consumers for a basket of goods and services.
Example: The economy was considered hyperinflationary because the cumulative consumer price index exceeded 100 per cent over three years.
Contingency
A condition whose outcome is uncertain.
Example: The contingency was disclosed but not recognised.
Contingent asset
A possible asset arising from past events, confirmed only by future events.
Example: The contingent asset is disclosed but not recognised.
Contingent consideration
Additional consideration payable depending on future events or performance.
Example: Contingent consideration is measured at fair value at acquisition date.
Contingent consideration arrangement
An agreement to pay additional consideration in a business combination if specified future events occur.
Example: The contingent consideration arrangement required the acquirer to pay more if profit targets were met.
Contingent liability
Possible obligation depending on uncertain future events.
Example: A contingent liability was disclosed but not recognised.
Contingent rent
Lease payments that vary based on future conditions.
Example: Contingent rent depends on the tenant's sales volume.
Contingent settlement provision
A provision whose settlement depends on future events.
Example: A contingent settlement provision was recognised for the guarantee.
Contingent share agreement
An agreement to issue shares contingent on conditions.
Example: The contingent share agreement depends on future profits.
Contingently issuable ordinary shares
Ordinary shares that an entity may be required to issue upon the satisfaction of certain conditions, included in diluted EPS calculations.
Example: Contingently issuable ordinary shares are included in the diluted earnings per share calculation when the conditions are met.
Contingently issuable shares
Shares issuable only if certain conditions are met.
Example: Contingently issuable shares are included in diluted EPS when conditions are met.
Continuing involvement
Ongoing exposure to transferred assets retained by the transferor.
Example: The transferor retained continuing involvement in the receivables.
Continuing involvement approach
A method measuring retained interests after transferring a financial asset.
Example: The continuing involvement approach was applied to the transferred receivables.
Continuing operations
The operations of an entity that are not discontinued and are presented separately in the income statement.
Example: Profit from continuing operations rose despite the disposal of the retail division.
Contract
Agreement creating enforceable rights and obligations between parties.
Example: The contract was signed by both parties in June.
Contract-based intangible assets
Intangible assets arising from contractual or legal rights.
Example: Licences are contract-based intangible assets.
Contracts that may be settled in (ordinary) shares or cash
Contracts giving the entity or holder a choice of shares or cash.
Example: Contracts settled in shares or cash are treated as compound instruments.
Contractual arrangement
An arrangement governed by a contract.
Example: The service is provided under a contractual arrangement.
Contractual cash flows
The cash flows specified by the terms of a contract, used to assess whether a financial asset meets the solely payments of principal and interest test.
Example: The business model is assessed based on how the contractual cash flows are collected.
Contractual completion
The date contractual obligations are fulfilled.
Example: Revenue may be recognised on contractual completion.
Contractual maturity analysis
Analysis of when financial liabilities fall due under contracts.
Example: The contractual maturity analysis shows cash flows by period.
Contractual obligation
A duty enforceable by law arising from a contract.
Example: The entity had a contractual obligation to deliver the goods.
Contractual right to receive the cash flows
A legal entitlement arising from a contract to receive the cash flows of a financial asset.
Example: The entity transferred its contractual right to receive the cash flows to the factor.
Contractual rights
Enforceable rights arising from a contract.
Example: Goodwill includes certain contractual rights.
Contractual terms and conditions
The stated provisions governing rights and obligations of a contract.
Example: The instrument's classification depends on its contractual terms and conditions.
Contractual-legal criterion
Criterion identifying an intangible asset by legal or contractual rights.
Example: The contractual-legal criterion supported recognising the intangible asset.
Contractually linked instruments
Instruments whose cash flows are linked by contract.
Example: Contractually linked instruments are assessed as a group.
Contributed equity
The amount of capital contributed by shareholders in exchange for shares in the entity.
Example: Contributed equity increased following the issue of new shares to existing shareholders.
Contribution
A payment into a plan or by owners.
Example: The contribution to the pension plan was paid annually.
Contributor
A party that provides assets or funding to an arrangement.
Example: Each contributor receives benefits proportionate to its share.
Control
The power to govern an entity's financial and operating policies for benefits.
Example: The parent has control over its subsidiary.
Control (of an asset)
The power to obtain the economic benefits from an asset and to restrict others' access to those benefits.
Example: The lessee obtained control of the asset and recognised a right-of-use asset.
Control (of an enterprise)
Power to govern financial and operating policies of an entity.
Example: Control of the enterprise was obtained in October.
Control (of an entity)
The power to govern financial and operating policies for benefits.
Example: The parent obtained control of the subsidiary in March.
Control number
Number evidencing the residual effect of potential ordinary shares.
Example: The control number confirms the diluted loss per share position.
Controlled entity
An entity controlled by another entity.
Example: A controlled entity is consolidated by its parent.
Convenience translation
The translation of financial statements into another currency solely for the convenience of readers, without restating in accordance with standards.
Example: The convenience translation of the financial statements was prepared using the closing exchange rate.
Convergence
Aligning national and international standards.
Example: Convergence aims to harmonise accounting standards globally.
Conversion factor
The ratio used to convert a convertible instrument into shares.
Example: The conversion factor determines shares per bond.
Conversion option
A right to convert one financial instrument into another.
Example: The conversion option is an embedded derivative in the bond.
Convertible bonds
Bonds that may be converted by the holder into a fixed number of the issuer's ordinary shares.
Example: The convertible bonds were split into a liability component and an equity component.
Convertible debt
Debt exchangeable into equity shares of the issuer.
Example: The convertible debt was split into liability and equity.
Convertible instruments
Financial instruments that may be converted into equity shares.
Example: Convertible instruments are split into liability and equity components.
Convertible preference share
A preference share convertible into ordinary shares.
Example: Convertible preference shares are included in diluted EPS.
Copyright
A legal right over creative works.
Example: The copyright was recognised as an intangible asset.
Core goodwill
The portion of goodwill that represents the expected synergies and going concern element of an acquired business.
Example: Core goodwill represents the expected synergies from combining the two businesses.
Corporate assets
Assets that serve the entity as a whole.
Example: Corporate assets are allocated when testing groups of units.
Cost
The amount of resources sacrificed to acquire an asset.
Example: The asset is measured at cost on initial recognition.
Cost formula
A technique such as FIFO or weighted average assigning inventory costs.
Example: The entity applies the weighted average cost formula to inventory.
Cost method
A measurement method that records assets at their acquisition cost, used for certain investments and for inventory under specific rules.
Example: Under the cost method, the subsidiary investment was carried at its original purchase price.
Cost model
Accounting policy carrying assets at cost less depreciation.
Example: The entity applies the cost model to its buildings.
Cost of an acquisition
The consideration paid to obtain control of another entity.
Example: The cost of an acquisition includes cash and equity issued.
Cost of an asset acquired in exchange or part exchange for dissimilar asset
Cost measured at fair value when assets of different nature are exchanged.
Example: The cost of an asset exchanged for a dissimilar asset is its fair value.
Cost of an asset acquired in exchange or part exchange for similar asset
Cost when assets of a similar nature are exchanged.
Example: For similar assets, the cost is the carrying amount of the asset given up.
Cost of an investment
The amount paid or the fair value of consideration given to acquire an investment, including directly attributable transaction costs in some cases.
Example: The cost of an investment in a subsidiary includes the fair value of the consideration transferred.
Cost of an investment in a subsidiary, jointly controlled entity or associate
The cost of an investment in another entity.
Example: The cost of the investment is measured at the fair value of the consideration.
Cost of conversion
Costs incurred to convert materials into finished goods.
Example: Cost of conversion includes direct labour and overheads.
Cost of inventories
The total cost of purchase, conversion, and other costs of inventory.
Example: The cost of inventories includes conversion costs.
Cost of inventories of a service provider
The costs a service provider recognises for inventories, mainly labour and other costs directly related to providing the service.
Example: For the consultancy, the cost of inventories of a service provider consisted primarily of direct staff time.
Cost of purchase
Price paid plus directly attributable acquisition expenditures.
Example: Inventory was measured at cost of purchase.
Cost plus contract
A contract where the contractor is reimbursed costs plus a fee.
Example: Under a cost plus contract, allowable costs are reimbursed.
Cost plus method
A transfer pricing method adding a mark-up to costs.
Example: Under the cost plus method, a mark-up is added to the supplier's costs.
Cost recovery approach
Recognising revenue only up to recoverable costs.
Example: The cost recovery approach recognises revenue to the extent of costs.
Cost-based measurement
A measurement approach that records an item at its historical cost, adjusted for depreciation, amortisation or impairment.
Example: Investment property held for own use is subject to cost-based measurement under the chosen model.
Costs of conversion
Costs of converting materials into finished goods.
Example: Costs of conversion include labour and overheads.
Costs of disposal
Incremental costs directly attributable to disposing of an asset.
Example: Costs of disposal are deducted from fair value.
Costs of Modifying Existing Software
Expenditures incurred to alter or upgrade already-acquired software.
Example: Costs of modifying existing software were capitalised.
Costs to sell
The incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax.
Example: The asset was written down to fair value less costs to sell.
Counterparty
Other party to a financial instrument or transaction.
Example: The counterparty failed to settle the derivative.
Country of domicile
The country where an entity has its registered or principal office.
Example: The entity disclosed its country of domicile in the notes.
Country of incorporation or residence
The country where an entity is incorporated or resident.
Example: The country of incorporation determines the applicable tax rules.
Coupon
The interest payment on a bond.
Example: The bond pays a fixed annual coupon.
Create or enlarge an accounting mismatch
To cause or worsen a situation in which the recognition and measurement of related items are inconsistent, giving rise to measurement or recognition inconsistency.
Example: An entity may use fair value option only if it eliminates or significantly reduces an accounting mismatch.
Credit derivative default product
A derivative protecting against default.
Example: The credit derivative transfers default risk.
Credit enhancements
Arrangements that improve the credit quality of an obligation.
Example: Credit enhancements reduce the risk borne by investors.
Credit exposures
The amounts at risk of loss from counterparty default.
Example: Credit exposures are monitored against approved limits.
Credit facilities
Arrangements under which an entity may borrow funds from a lender up to an agreed limit.
Example: The company secured additional credit facilities to fund its expansion.
Credit insurance contract
Insurance protecting against customer default on receivables.
Example: The company holds a credit insurance contract on exports.
Credit quality
An assessment of the creditworthiness of a financial asset or counterparty.
Example: The entity disclosed the credit quality of its receivables.
Credit risk
The risk that a counterparty fails to meet its obligations.
Example: The entity disclosed its maximum exposure to credit risk.
Credit spread
The yield difference reflecting credit risk.
Example: A wider credit spread increases the discount rate.
Creditors
Parties that have provided credit to an entity and to whom the entity owes money.
Example: The financial statements provide useful information to existing and potential creditors.
Creditworthiness
The ability to repay debt.
Example: The lender assessed the borrower's creditworthiness.
Criteria for recognising
Conditions that must be met before an item is recorded.
Example: The criteria for recognising a provision include a present obligation.
Cross-reference
A pointer linking information presented in different parts of the statements.
Example: The note contains a cross-reference to the balance sheet.
CTDs
The cumulative exchange differences arising on translating the financial statements of a foreign operation.
Example: On disposal of the foreign subsidiary, the accumulated CTDs were reclassified to profit or loss.
Cumulative additional depreciation
Total extra depreciation charged since an asset's revaluation.
Example: Cumulative additional depreciation was transferred to retained earnings.
Cumulative interest accreted
Total interest accumulated on a financial instrument to date.
Example: The cumulative interest accreted increased the carrying amount.
Cumulative preference dividends
Unpaid preference dividends that accumulate.
Example: Cumulative preference dividends are deducted from profit for EPS.
Cumulative translation differences
Exchange differences accumulated in equity.
Example: Cumulative translation differences are reclassified on disposal.
Currency risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Example: The entity discloses its currency risk exposure by currency and maturity.
Currency translation
Converting amounts into another currency.
Example: Currency translation uses the closing rate for assets.
Currency units
The monetary units in which amounts are measured and presented.
Example: Amounts are expressed in currency units of the reporting entity.
Current asset
An asset expected to be realised within the normal operating cycle.
Example: Inventory is classified as a current asset.
Current cost
The amount of cash or cash equivalents that would have to be paid to acquire an asset at the present time.
Example: The current cost of replacing the machinery was far higher than its historical cost.
Current cost approach
Measurement using the current cost to replace an asset.
Example: The current cost approach reflects today's replacement prices.
Current investment
An investment expected to be realised within one year.
Example: The current investment is measured at fair value.
Current liabilities
Obligations expected to be settled within twelve months.
Example: Trade payables are presented under current liabilities.
Current offer price
The current quoted price of an instrument.
Example: The fair value was based on the current offer price.
Current service cost
The increase in the present value of a defined benefit obligation resulting from employee service in the current period.
Example: Current service cost is recognised immediately in profit or loss.
Current tax
Tax payable for the current period.
Example: Current tax is measured using enacted tax rates.
Curtailment
A significant reduction in the scope of a defined benefit plan.
Example: The plan curtailment reduced future benefit obligations.
Cushions
Excess amounts providing protection, such as subordinated tranches absorbing losses.
Example: Subordinated tranches act as cushions against losses.
Customer list
An intangible asset representing information about customers that is often recognised in a business combination.
Example: The customer list acquired in the combination was recognised as an intangible asset.
Customer Loyalty Programmes
Schemes awarding customers credits for future goods or services.
Example: The airline's Customer Loyalty Programmes grant redeemable miles.
Customer relationship intangible assets
Intangible assets arising from relationships with existing customers.
Example: Customer relationship intangible assets were recognised in the acquisition.
D
Database
An organised collection of data treated as an intangible asset.
Example: The acquired database was recognised as an intangible asset.
Date of acquisition
The date control of the acquiree is obtained.
Example: Goodwill is measured at the date of acquisition.
Date of exchange
The date on which an exchange of assets or an acquisition transaction is recognised and measured.
Example: The fair value of the asset was determined at the date of exchange.
Date of transition to IFRS
The start of the first IFRS reporting period.
Example: The date of transition to IFRS determines the opening statement.
Dealing securities
Securities held for trading purposes by the entity.
Example: Dealing securities are measured at fair value.
Death benefit
An amount paid to beneficiaries upon the death of a member.
Example: The plan provides a death benefit to the participant's family.
Debt
An obligation to transfer economic resources to another party as a result of past events.
Example: Total debt increased after the company issued new bonds.
Debt for equity swaps
Transactions exchanging debt obligations for equity shares.
Example: The restructuring included several debt for equity swaps.
Debt instrument
A financial instrument representing an obligation to pay.
Example: A debt instrument may be measured at amortised cost.
Debt securities
Financial instruments representing a creditor relationship.
Example: Debt securities are classified based on the business model.
Debt-to-adjusted capital ratio
A ratio of debt to adjusted capital.
Example: The debt-to-adjusted capital ratio measures financial leverage.
Debt-to-equity ratio
A financial ratio measuring total liabilities against shareholders' equity, indicating financial leverage and risk.
Example: The entity's debt-to-equity ratio remained within the covenant limits agreed with its lender.
Decision tree
A structured guide for making decisions.
Example: A decision tree helps classify financial instruments.
Decision-useful information
Information that helps users make economic decisions.
Example: Financial statements should provide decision-useful information.
Decommissioning
The process of removing an asset from service and restoring the site.
Example: A provision was recognised for decommissioning the plant.
Decommissioning costs
Costs expected to be incurred in dismantling or restoring a site at the end of an asset's useful life.
Example: A provision for decommissioning costs was recognised when the plant was constructed.
Decommissioning funds
Restricted assets set aside for future dismantling costs.
Example: Decommissioning funds are held in a separate account.
Decommissioning obligations
Obligations to dismantle and restore a site after use.
Example: Decommissioning obligations are recognised as a provision.
Decommissioning, Restoration and Environmental Rehabilitation Funds
Funds set aside for decommissioning and environmental restoration.
Example: Contributions to decommissioning funds are recognised as an asset.
Deductible temporary difference
A difference that reduces future taxable amounts.
Example: A deductible temporary difference gives rise to a deferred tax asset.
Deemed cost
An amount used as a substitute for cost, such as fair value at the date of transition, on first-time adoption of IFRSs.
Example: On first-time adoption, the entity elected fair value at transition date as deemed cost for its property.
Defer
To postpone recognition.
Example: The entity may defer recognition in limited cases.
Deferral method
An approach that spreads an item over future periods.
Example: Under the deferral method, the grant is recognised over time.
Deferred acquisition costs
Insurance acquisition costs recognised as an asset and amortised over time.
Example: Deferred acquisition costs are amortised over the policy period.
Deferred income
A liability arising from payments received before the related revenue is earned.
Example: The subscription fees received in advance were recorded as deferred income.
Deferred policy acquisition costs
Insurer's acquisition costs deferred and amortised over policy term.
Example: Deferred policy acquisition costs are amortised over the contract.
Deferred tax
Tax payable or recoverable in future periods from temporary differences.
Example: Deferred tax arises from temporary differences.
Deferred tax assets
Tax recoverable in future periods from deductible differences.
Example: A deferred tax asset is recognised to the extent recovery is probable.
Deferred tax income
Tax income recognised from deferred tax.
Example: Deferred tax income arose from the reversal of a temporary difference.
Deferred tax liabilities
Amounts of income tax payable in future periods in respect of taxable temporary differences.
Example: Deferred tax liabilities arise from the temporary differences between the carrying amount and the tax base of assets.
Deficit balance
A negative balance.
Example: The plan had a deficit balance at year-end.
Defined benefit liability
The present value of promised retirement benefits less plan assets.
Example: The defined benefit liability increased due to lower discount rates.
Defined benefit obligation
The present value of promised retirement benefits owed to employees.
Example: The defined benefit obligation was discounted using a market rate.
Defined benefit obligation (present value of)
The present value of expected future benefit payments required to settle employee service earned to date.
Example: The actuary calculated the present value of the defined benefit obligation at the year end.
Defined benefit plan
Post-employment plan promising specified benefits on retirement.
Example: The defined benefit plan showed a large deficit.
Defined benefit plans
Post-employment plans where benefits are defined by a formula.
Example: The defined benefit plan obligation is actuarially measured.
Defined contribution plans
Pension plans where the employer pays fixed contributions.
Example: Under defined contribution plans, the employer's obligation is limited to contributions.
Demand amount
An amount payable on demand.
Example: The loan's demand amount is repayable immediately.
Demand deposits
Deposits that the depositor may withdraw at any time without prior notice.
Example: Demand deposits are classified as current liabilities because they are repayable on call.
Demand feature
A feature allowing the holder to demand redemption.
Example: A demand feature may cause liability classification.
Demerger
The separation of a division into a distinct entity.
Example: The demerger created two separately listed companies.
Demonstrably committed
Being bound by a formal plan with no realistic possibility of withdrawal.
Example: The entity was demonstrably committed to the restructuring plan.
Deposit account
A bank account holding funds on which interest is earned for a fixed term.
Example: Surplus cash was placed in a one-year deposit account.
Deposit accounting
Method treating insurance contracts like financial deposits.
Example: Deposit accounting applies to these short-duration contracts.
Deposit component
The saving element embedded in an insurance contract.
Example: The deposit component is separated from the insurance element.
Depreciable amount
Cost of an asset less its residual value.
Example: The depreciable amount is allocated over the useful life.
Depreciable assets
Assets subject to depreciation.
Example: Depreciable assets are written down over their useful lives.
Depreciable replacement cost approach
A valuation approach that estimates the current replacement cost of an asset and deducts accumulated depreciation and impairment.
Example: The valuer applied the depreciable replacement cost approach to estimate the plant's fair value.
Depreciation
Allocating a tangible asset's cost over its life.
Example: Depreciation is charged on a straight-line basis.
Depreciation methods
Techniques for allocating the depreciable amount of an asset over time.
Example: Depreciation methods include straight-line and reducing balance.
Derecognise (a financial instrument)
Removing a financial instrument from the statement of financial position.
Example: The entity derecognised the financial asset upon transfer.
Derecognition
The removal of a previously recognised asset or liability from the statement of financial position.
Example: Derecognition of the trade receivable followed the transfer of substantially all risks and rewards.
Derivative
Financial instrument whose value derives from an underlying.
Example: The derivative is measured at fair value.
Derivative assets
Financial assets whose value derives from an underlying item.
Example: Derivative assets are measured at fair value through profit or loss.
Derivative features
Characteristics causing an instrument to behave like a derivative.
Example: The host contract's derivative features required separate accounting.
Derivative financial instruments
Instruments whose value derives from an underlying item.
Example: Derivative financial instruments are measured at fair value.
Derivative liabilities
Financial liabilities whose value changes in response to an underlying variable and are typically measured at fair value.
Example: The derivative liabilities arising from the interest rate swap are measured at fair value through profit or loss.
Designated and effective hedging instrument
An instrument formally designated and effective for hedging.
Example: The designated and effective hedging instrument offsets the risk.
Designation as at fair value through profit or loss
Choosing to measure a financial instrument at fair value through profit or loss.
Example: The entity used designation as at fair value through profit or loss.
Determination of cost
The process of establishing the cost amount of an item.
Example: The determination of cost follows the applicable cost formula.
Determining Whether an Arrangement Contains a Lease
The guidance used to assess whether a contract conveys the right to use an asset in return for payment.
Example: Under the guidance on Determining Whether an Arrangement Contains a Lease, the contract was treated as a lease.
Development
Application of research findings to produce new or improved products.
Example: Development costs were capitalised this year.
Development costs
Costs incurred to develop products or processes that may be capitalised.
Example: Development costs were capitalised as an intangible asset.
Diluted earnings per share
EPS adjusted for the effect of all dilutive potential shares.
Example: Diluted earnings per share reflects the convertible bond.
Dilution
A reduction in earnings per share from potential shares.
Example: The convertible bonds caused a dilution of EPS.
Dilutive effect
The reduction in earnings per share that would occur if potential ordinary shares were converted into ordinary shares.
Example: The share options have a dilutive effect on basic earnings per share.
Dilutive potential ordinary shares
Potential shares that reduce earnings per share.
Example: Dilutive potential ordinary shares reduce basic EPS.
Diminishing balance method
A depreciation method applying a fixed rate to the reducing carrying amount.
Example: The diminishing balance method charges higher depreciation early.
Direct insurance contract
An insurance contract that is not a reinsurance contract.
Example: A direct insurance contract covers the policyholder's own risk.
Direct labour
The cost of workers directly involved in producing goods or delivering services.
Example: Direct labour and materials are included in the cost of the finished goods.
Direct method of reporting cash flows from operating activities
Reporting operating cash flows by major gross cash classes.
Example: The entity uses the direct method of reporting cash flows from operating activities.
Direct operating expenses
Expenses directly attributable to operating an investment property.
Example: Direct operating expenses are disclosed separately.
Directly attributable
Costs that can be traced to a specific asset or transaction.
Example: Only directly attributable costs are capitalised.
Directors
Members of the governing board of an entity.
Example: Directors are considered key management personnel.
Disaggregated information
Information broken down into its component parts or categories to provide more detail to users of financial statements.
Example: Disaggregated information about classes of assets helps users assess the entity's risk exposure.
Disclose
To present information in the financial statements.
Example: Entities must disclose related party transactions.
Disclosure
Presentation of information in notes to financial statements.
Example: The standard requires extensive disclosure of related parties.
Disclosure and presentation
Requirements governing how information is shown and explained in statements.
Example: The standard sets out disclosure and presentation requirements.
Disclosure approach
A method of presenting information in the notes rather than in the primary financial statements.
Example: The board chose a disclosure approach instead of recognising the item in the accounts.
Disclosure of government assistance
Revealing the nature and amounts of government grants received.
Example: Disclosure of government assistance is required in the notes.
Disclosure requirement
A rule requiring information to be presented in the financial statements.
Example: The disclosure requirement applies to all material items.
Disclosure – Service Concession Arrangements
Disclosure requirements for service concession arrangements.
Example: Disclosures for service concession arrangements include the concession term.
Disclosures in the Financial Statements of Banks and Similar Financial Institutions
Disclosure requirements for banks and similar institutions.
Example: The standard requires specific disclosures by banks.
Discontinued (operations)
A component of an entity that has been disposed of or is classified as held for sale and represents a separate major line of business.
Example: The results of the discontinued operation are presented separately in the statement of profit or loss.
Discontinued operation
A component disposed of or held for sale.
Example: The discontinued operation is presented separately.
Discontinuing operation
A component disposed of or classified as held for sale.
Example: The discontinuing operation is presented separately.
Discount rate
The rate used to convert future cash flows to present value.
Example: A pre-tax discount rate was applied to the projections.
Discounted basis
A measurement that brings future cash flows to present value using a discount rate.
Example: The insurer measured its liabilities on a discounted basis to reflect the time value of money.
Discounted basis (on a)
Measured by discounting future cash flows to present value.
Example: The provision was recognised on a discounted basis.
Discounted cash flow projections
Estimated future cash flows reduced to present value.
Example: The recoverable amount was based on discounted cash flow projections.
Discounting
Reducing a future amount to its present value.
Example: The provision was measured by discounting future cash outflows.
Discretionary participation feature
A contractual right to share in profits.
Example: The discretionary participation feature entitles policyholders to bonuses.
Disposal consideration
The amount received or receivable in exchange for disposing of an asset or a business.
Example: The gain on disposal was measured as the disposal consideration less the carrying amount.
Disposal group
Assets and liabilities to be disposed of together.
Example: The disposal group is measured at the lower of carrying amount and fair value less costs.
Disposal plan
A formal plan to sell or otherwise dispose of an asset.
Example: A disposal plan was approved by the board.
Disposal transaction
A transaction in which an asset or business is sold or otherwise disposed of.
Example: The disposal transaction resulted in a gain on sale.
Dissenting opinion
A formal statement by a board member who disagrees with a standard or decision.
Example: Two board members attached a dissenting opinion to the new standard.
Distributions of Non-Cash Assets to Owners
Transferring assets other than cash to owners as dividends.
Example: The interpretation covers distributions of non-cash assets to owners.
Dividend yield
Annual dividend per share divided by the share price.
Example: The dividend yield was used as an input in the valuation.
Dividends
Distributions of profit to shareholders.
Example: Dividends declared after the reporting date are not recognised as a liability.
Domain name
A registered internet address.
Example: The domain name is recognised as an intangible asset.
Doubtful debts
Receivables for which full collection is uncertain and which are therefore assessed for impairment.
Example: A provision was recognised for doubtful debts based on the ageing of trade receivables.
Downstream transactions
Transactions from a parent to its subsidiary.
Example: Downstream transactions are eliminated on consolidation.
Dual listed corporation
A company whose shares are listed on more than one exchange.
Example: The dual listed corporation reports under two regulators.
Dual trigger contract
An insurance contract payable only on a specified uncertain future event.
Example: The dual trigger contract may be accounted for as a derivative.
E
Earlier application is encouraged
A statement in a standard allowing, and encouraging, entities to apply it before its mandatory effective date.
Example: The standard states that earlier application is encouraged but not required.
Earnings
Net profit of an entity for a reporting period.
Example: Earnings rose sharply in the fourth quarter.
Earnings contingency
Additional consideration payable if specified earnings targets are met.
Example: The earnings contingency is payable over two years.
Earnings per share
Profit attributable to each ordinary share.
Example: Basic earnings per share is disclosed on the income statement.
Earnings Per Share – Financial Instruments and Other Contracts That May Be Settled in Shares
Interpretation on EPS and share-settleable instruments.
Example: The interpretation addresses instruments that may be settled in shares.
Earnings – diluted
The earnings figure used in diluted earnings per share, adjusted for the effects of all dilutive potential ordinary shares.
Example: Diluted earnings per share was calculated using diluted earnings and the diluted weighted average share count.
Economic benefits
Benefits flowing from an asset.
Example: Economic benefits include revenue from using the asset.
Economic characteristics and risks
Features and risks of a contract used to test embedded derivatives.
Example: The host contract's economic characteristics and risks were assessed.
Economic decision-making needs of users
The informational requirements of those making resource allocation decisions.
Example: Financial statements should meet users' economic decision-making needs.
Economic life
The period over which an asset is expected to be economically usable, or the number of units expected to be produced from it.
Example: The useful life of the leased asset did not exceed its economic life.
Effect of assumed conversions
Impact on earnings per share of hypothetically converted instruments.
Example: The effect of assumed conversions increased the diluted share count.
Effective date
The date from which a standard or amendment must be applied.
Example: The amendment's effective date is 1 January 2025.
Effective interest method
Method allocating interest over the life of a financial instrument.
Example: The bond is measured using the effective interest method.
Effective interest rate
The rate that exactly discounts future cash flows.
Example: The effective interest rate includes transaction fees.
Effects of Changes in Foreign Exchange Rates
The standard that prescribes how to translate foreign currency transactions and foreign operations into the presentation currency.
Example: The standard on the effects of changes in foreign exchange rates governs how exchange differences are recognised.
Elements of cost of exploration and evaluation assets
The components making up exploration and evaluation asset cost.
Example: Elements of cost include acquisition and exploration costs.
Eligibility conditions
Requirements that must be satisfied to use a particular treatment.
Example: The hedge met all the eligibility conditions.
Eligible for capitalisation
Qualifying for recognition as an asset rather than an expense.
Example: Borrowing costs were eligible for capitalisation.
Eligible hedged items
Assets, liabilities or forecast transactions that qualify for hedge accounting.
Example: The firm commitment to buy steel was an eligible hedged item.
Elimination of Unrealised Profits and Losses on Transactions with Associates
Removing intragroup unrealised gains from associate transactions.
Example: The standard requires elimination of unrealised profits and losses on transactions with associates.
Embedded derivative
A derivative component included within a host contract.
Example: The embedded derivative was separated from the host contract.
Embedded prepayment penalties
Penalty terms included within a host contract.
Example: Embedded prepayment penalties were separated from the host contract.
Employee benefits
All forms of consideration given to employees.
Example: Employee benefits include wages, pensions and share options.
Employee share ownership plan
An arrangement under which employees acquire shares in the entity, often as a form of remuneration.
Example: The employee share ownership plan gives staff the right to acquire shares at a discount.
Employee share purchase plan
A plan allowing employees to buy shares.
Example: The employee share purchase plan encourages share ownership.
Employee turnover rates
The rate at which employees leave and are replaced.
Example: Employee turnover rates affect estimated share-based payments.
Employees and others providing similar services
Individuals rendering personal services to an entity under its direction.
Example: Share-based payments apply to employees and others providing similar services.
Employer payroll taxes and insurance contributions
Taxes and social security contributions an employer pays on behalf of its employees.
Example: Employer payroll taxes and insurance contributions are recognised as part of employee benefit expense.
Enactment
Formal passing of tax law making it substantively effective.
Example: Deferred tax was measured after the new law's enactment.
End of reporting period
The final date of the period covered by financial statements.
Example: Assets were measured at the end of the reporting period.
End of the reporting period
The last day of the period covered by the financial statements.
Example: Events after the end of the reporting period are evaluated for adjustment.
Enforcement of covenants
Applying contractual conditions against a borrower.
Example: Enforcement of covenants allows the lender to demand repayment.
Enhanced disclosure
Additional or more detailed disclosures required to provide users with a better understanding of an entity's transactions and risks.
Example: Enhanced disclosure requirements apply to entities that use fair value measurements.
Enterprise
An entity engaged in business.
Example: The enterprise prepares general purpose financial statements.
Enterprises whose shares are (not) publicly traded
Entities distinguished by whether their shares trade publicly.
Example: The standard applies to enterprises whose shares are not publicly traded.
Entities whose debt or equity securities are publicly traded
Entities with securities listed or traded in a public market.
Example: Such standards apply to entities whose debt or equity securities are publicly traded.
Entity
Any distinguishable economic unit that prepares financial statements.
Example: The reporting entity presents consolidated financial statements for the group.
Entity-specific value
Value of an asset to the specific entity holding it.
Example: Entity-specific value may differ from fair value.
Environmental obligations
Duties to prevent, reduce or remedy environmental damage.
Example: Environmental obligations were recognised as a provision.
Equal prominence
Presenting all financial statements with equal emphasis.
Example: All statements are presented with equal prominence.
Equalisation provisions
Provisions smoothing insurance claims over time.
Example: Equalisation provisions are not permitted in some jurisdictions.
Equity
The residual interest in the assets of an entity after deducting all of its liabilities.
Example: Total equity increased as a result of the profit for the year and the share issue.
Equity accounting method – recognition of losses
Recognising losses under the equity method.
Example: Recognition of losses under the equity method is limited to the investment.
Equity balances
The components and amounts making up shareholders' equity.
Example: Equity balances include share capital and retained earnings.
Equity capital
Funds contributed by owners as opposed to borrowed capital.
Example: Equity capital provides a buffer against losses.
Equity compensation benefits(=stock (=share) compensation benefits)
Benefits granted to employees in the form of the entity's own equity instruments.
Example: The equity compensation benefits were measured at the fair value of the shares granted.
Equity compensation plans (=share (=stock) compensation plans)
Arrangements paying employees in shares or share options.
Example: Equity compensation plans were approved by shareholders.
Equity component
The portion of a compound instrument classified as equity.
Example: The equity component is measured at the residual amount.
Equity holders
The owners of an entity's equity instruments.
Example: Profit attributable to equity holders of the parent is disclosed.
Equity index
An index tracking share prices.
Example: The return is linked to an equity index.
Equity instrument
Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Example: Ordinary shares are an example of an equity instrument issued by the entity.
Equity instrument granted
An equity instrument issued under a share-based payment.
Example: The fair value of the equity instrument granted is measured at grant date.
Equity interests
Ownership stakes in an entity represented by shares.
Example: The group holds equity interests in several associates.
Equity issue
The issuance of shares to raise capital.
Example: The equity issue raised additional funds for expansion.
Equity method
A method of accounting for investments in associates under which the investment is adjusted for the investor's share of profits.
Example: The 30% interest in the associate was accounted for using the equity method.
Equity securities
Financial instruments representing ownership in an entity.
Example: Equity securities are measured at fair value.
Equity – costs of an equity transaction
Incremental costs directly attributable to issuing or acquiring equity instruments.
Example: Transaction costs of issuing new shares are deducted from equity.
Equity-settled share-based payment transaction
A transaction settled by issuing equity instruments.
Example: In an equity-settled share-based payment, the expense is credited to equity.
Estimated costs
Costs estimated for the future.
Example: Estimated costs to complete are reviewed each period.
Estimated future cash flows
Projected cash flows used in valuation and impairment testing to determine recoverable amounts.
Example: The recoverable amount was based on the estimated future cash flows discounted to their present value.
European share option
An option exercisable only at maturity.
Example: A European share option can be exercised only at expiry.
Evaluating the Substance of Transactions Involving the Legal Form of a Lease
Assessing whether a transaction is a lease based on its substance.
Example: We evaluated the substance of the transaction despite its legal form.
Event-driven fair value measurements
Fair value measurements triggered by specific events rather than periodic reporting.
Example: Event-driven fair value measurements were required after the restructuring.
Events After the Balance Sheet Date
Events occurring between the reporting date and the date the financial statements are authorised for issue.
Example: Under the standard on Events After the Balance Sheet Date, the fire was treated as an adjusting event.
Events after the reporting period
Events occurring between the reporting date and authorization of financial statements.
Example: Events after the reporting period required an adjustment to the year-end figures.
Events occurring after the balance sheet date
Favourable or unfavourable events arising between the reporting date and authorisation of statements.
Example: Management assessed events after the balance sheet date before finalising the accounts.
Eventual recipients
The parties who ultimately receive goods or services.
Example: Eventual recipients of share-based payments are identified in the grant.
Evidence of impairment
Objective evidence that an asset is impaired.
Example: Evidence of impairment triggers a write-down.
Exchange difference
The difference resulting from translating a given number of units of one currency into another currency at different exchange rates.
Example: The exchange difference on translating the foreign subsidiary was recognised in other comprehensive income.
Exchange of assets
Swapping one asset for another.
Example: An exchange of assets is measured at fair value if it has commercial substance.
Exchange rate
Rate at which one currency is exchanged for another.
Example: The exchange rate moved sharply against us last quarter.
Exchange transaction
A transaction in which two parties exchange assets or services.
Example: The exchange transaction swapped one property for another.
Executory contract
A contract under which neither party has yet performed any of its obligations.
Example: The executory contract was not recognised until either party performed.
Exemptions
Reliefs from applying certain requirements of a standard or framework.
Example: The standard grants several exemptions for first-time adopters.
Exercise date
The date on which an option or warrant may be exercised.
Example: The exercise date of the share options falls in March.
Exercise of rights
Using a right, such as a share option.
Example: The exercise of rights resulted in the issue of new shares.
Exercise price
The price at which an option can be exercised.
Example: The exercise price was set below the market price.
Existing liability
A present obligation arising from a past event that is expected to result in an outflow of resources.
Example: A provision is recognised only when an existing liability is probable at the reporting date.
Expected value
A probability-weighted average of possible outcomes.
Example: The expected value of the provision was calculated from possible outcomes.
Expenditure
Outflow of resources or incurrence of liabilities.
Example: Capital expenditure rose significantly this year.
Expenses
Decreases in economic benefits during the period, usually as outflows.
Example: Operating expenses rose sharply in the fourth quarter.
Experience account
A notional account used to track the difference between actual experience and assumptions in insurance accounting.
Example: Actuarial gains recorded in the experience account reflected better than expected mortality.
Experience adjustments
Differences between actuarial assumptions and what actually occurred.
Example: Experience adjustments reduced the defined benefit obligation this year.
Expiry date
The date on which a contract or option ceases to be valid.
Example: The option lapsed without being exercised by its expiry date.
Explicit and unreserved statement of compliance
A statement that financial statements comply fully with IFRS.
Example: An explicit and unreserved statement of compliance with IFRSs is required.
Exploration and evaluation assets
Assets arising from mineral exploration.
Example: Exploration and evaluation assets are tested for impairment.
Exploration and evaluation expenditures
Costs incurred in the search for mineral resources and the determination of technical feasibility and commercial viability.
Example: Exploration and evaluation expenditures are recognised as assets pending the determination of commercial viability.
Exploration for and Evaluation of Mineral Resources
The standard on mineral exploration and evaluation assets.
Example: The standard addresses exploration and evaluation expenditures.
Exposure draft
Proposed standard published for public comment.
Example: The board issued an exposure draft on revenue recognition.
Expropriation of major assets
Government seizure of significant assets from an entity.
Example: The expropriation of major assets caused a large impairment loss.
Extinguishing Financial Liabilities with Equity Instruments
The guidance on accounting for the settlement of a financial liability by issuing the debtor's own equity instruments.
Example: Under the interpretation on Extinguishing Financial Liabilities with Equity Instruments, the gain was recognised in profit or loss.
Extraordinary items
Gains or losses clearly distinct from ordinary business activities.
Example: IFRS no longer permits the separate presentation of extraordinary items.
Face (of financial statements or notes)
The main body where financial statements or notes are presented.
Example: The disclosures are presented on the face of the financial statements.
Fair presentation
Faithful representation of transactions in the financial statements.
Example: Fair presentation requires faithful representation of the entity's position.
Fair value
The price to sell an asset in an orderly transaction.
Example: Fair value is measured using market participant assumptions.
Fair value gains and losses
Gains or losses arising from remeasuring an asset or liability to its fair value at the reporting date.
Example: Fair value gains and losses on the trading portfolio are recognised in profit or loss.
Fair value hedge
A hedge of changes in fair value.
Example: A fair value hedge offsets changes in the hedged item's value.
Fair value less costs to sell
Fair value of an asset minus disposal costs.
Example: The machine was measured at fair value less costs to sell.
Fair value measurement
The price received to sell an asset in an orderly transaction.
Example: Fair value measurement of the building used recent market data.
Fair value model
A measurement approach under which investment property is carried at fair value with changes recognised in profit or loss.
Example: The company applies the fair value model to all of its investment property.
Faithful representation
Information that faithfully depicts what it purports to represent.
Example: Faithful representation requires complete, neutral and error-free information.
Fees
Charges paid for services or membership.
Example: The entity paid annual fees to the stock exchange.
Fellow subsidiary
A subsidiary of the same parent as another entity.
Example: The fellow subsidiary is consolidated within the same group.
Fidelity bonds
Insurance against employee dishonesty.
Example: Fidelity bonds cover losses from employee fraud.
Fiduciary activities
Activities in which an entity holds or manages assets on behalf of others, without recognising those assets as its own.
Example: Assets held in fiduciary activities are not recognised in the entity's statement of financial position.
Fiduciary capacity
Acting on behalf of others.
Example: The bank acts in a fiduciary capacity for its clients.
FIFO
Inventory costing method: first in, first out.
Example: Under FIFO, the oldest inventory is sold first.
FIFO formula
Cost formula assuming the earliest inventory items are sold first.
Example: The FIFO formula was applied to value the closing inventory.
Finance lease
A lease that transfers substantially all the risks and rewards of ownership to the lessee.
Example: The equipment was recognised as a finance lease because ownership transferred at the end of the term.
Finance lease obligations
Liabilities arising from leases that transfer substantially all ownership risks.
Example: Finance lease obligations are split between current and non-current portions.
Financial asset
Any asset that is cash, an equity instrument, or a contractual right to receive cash.
Example: Trade receivables are recognised as a financial asset.
Financial asset or financial liability at fair value through profit or loss
Instrument measured at fair value with changes in profit or loss.
Example: The derivative is classified at fair value through profit or loss.
Financial asset or liability held for trading
Instruments held to profit from short-term movements.
Example: Financial assets held for trading are measured at fair value through profit or loss.
Financial assets acquired at a discount that reflects incurred credit losses
Financial assets purchased at a price that already reflects incurred credit losses, for which interest income is calculated on the credit-adjusted effective rate.
Example: For financial assets acquired at a discount that reflects incurred credit losses, interest income is recognised using the credit-adjusted effective interest rate.
Financial capital
Capital measured in money terms.
Example: Financial capital is maintained in nominal monetary units.
Financial conglomerate
Group dominated by financial activities across sectors.
Example: The financial conglomerate spans banking and insurance.
Financial guarantee
A contract requiring the issuer to pay if a debtor defaults.
Example: The parent issued a financial guarantee for the subsidiary's loan.
Financial guarantee contract
A contract requiring the issuer to make payments if a specified debtor fails to meet its obligations.
Example: The parent's financial guarantee contract over the subsidiary's loan was disclosed as a contingent liability.
Financial institution
Entity providing financial services such as banking or insurance.
Example: The financial institution disclosed its exposure to credit risk.
Financial instruments
Contracts that create a financial asset for one party and a liability or equity for another.
Example: Derivatives are financial instruments measured at fair value.
Financial instruments puttable at fair value
Instruments giving the holder a right to put them back at fair value.
Example: Puttable instruments may be classified as equity in limited cases.
Financial Instruments: Disclosure and Presentation
Standard on disclosure and presentation of instruments.
Example: This standard addresses how financial instruments are presented.
Financial Instruments: Disclosures
The standard that requires entities to disclose information about the significance of financial instruments and the nature and extent of related risks.
Example: The entity complied with the disclosure requirements of Financial Instruments: Disclosures.
Financial Instruments: Presentation
The standard on presenting financial instruments.
Example: This standard governs the presentation of financial instruments.
Financial Instruments: Recognition and Measurement
IAS 39 standard on financial instruments accounting.
Example: IAS 39 covers recognition and measurement of financial instruments.
Financial liability
A contractual obligation to deliver cash or another financial asset.
Example: The bond is classified as a financial liability.
Financial liability at fair value through profit or loss
A financial liability initially and subsequently measured at fair value with changes recognised in profit or loss.
Example: The trading bonds were designated as financial liabilities at fair value through profit or loss.
Financial performance
The results of an entity's operations measured through income and expenses.
Example: The statement of comprehensive income presents financial performance.
Financial position
The economic resources, obligations, and equity of an entity at a point in time.
Example: The statement of financial position reports assets, liabilities and equity.
Financial reporting
Reporting an entity's financial position and performance.
Example: The objective of financial reporting is to provide useful information.
Financial Reporting in Hyperinflationary Economies
Standard requiring restatement under hyperinflation.
Example: Entities apply restatement in hyperinflationary economies.
Financial Reporting of Interests in Joint Ventures
The standard governing how a venturer reports its interests in jointly controlled entities and other joint arrangements.
Example: The standard on the financial reporting of interests in joint ventures permits proportionate consolidation or the equity method.
Financial review
A review of an entity's financial position.
Example: The financial review discusses the entity's performance.
Financial risk
Risk of loss from financial price movements.
Example: Financial risk includes currency and interest rate exposure.
Financial service fees
Fees charged for managing or arranging financial assets.
Example: Financial service fees were recognised as revenue over time.
Financial statements
Structured representations of an entity's financial position and performance, including notes.
Example: The financial statements were authorised for issue on 20 March.
Financial year-to-date basis
Reporting results accumulated from the start of the financial year.
Example: Interim reports are prepared on a financial year-to-date basis.
Financing activities
Activities that change the size and composition of contributed equity and borrowings.
Example: Proceeds from bank loans are classified as financing activities.
Financing device
An arrangement whose substance is a financing transaction.
Example: The arrangement was assessed as a financing device in substance.
Finder’s fees
Fees paid to an intermediary.
Example: The finder's fees were expensed as incurred.
Finished good
A completed product that has passed through the production process and is ready for sale.
Example: Finished goods are measured at the lower of cost and net realisable value.
Firm commitment
A binding agreement for a future transaction.
Example: A firm commitment to buy inventory is disclosed.
Firm purchase commitment
Binding agreement to buy goods at fixed terms.
Example: The firm purchase commitment was hedged against price changes.
Firm sales contracts
Binding agreements to sell goods on fixed terms.
Example: The firm sales contracts locked in prices for next year.
First IFRS financial statements
The first annual financial statements in which an entity adopts IFRS with an explicit statement of compliance.
Example: The company presented its first IFRS financial statements for the year ended 31 December.
First IFRS reporting period
The earliest period for which an entity presents full IFRS financial statements.
Example: The first IFRS reporting period required restating comparative figures.
First-in, first-out
An inventory cost formula assuming the earliest items acquired are sold first.
Example: The company values its inventory using the first-in, first-out method.
First-time adopter
An entity presenting IFRS financial statements for the first time.
Example: A first-time adopter applies IFRS 1 on transition.
First-time adoption
Adopting IFRS for the first time.
Example: First-time adoption requires retrospective application.
First-time Adoption of International Financial Reporting Standards
The standard that sets out the procedures an entity must follow when it adopts IFRSs for the first time.
Example: On first-time adoption of International Financial Reporting Standards, the entity prepared an opening IFRS statement of financial position.
First-time application
Applying IFRS for the first time.
Example: First-time application requires an opening IFRS statement.
First-time Application of IASs as the Primary Basis of Accounting
Guidance for entities adopting IASs as their primary accounting basis.
Example: First-time application requires restating comparative figures.
Fixed asset
A long-term tangible asset used in operations.
Example: The new machine is recorded as a fixed asset.
Fixed coupon rate
A contractual interest rate on a bond that remains constant over its life.
Example: The bond pays a fixed coupon rate of 5% per annum.
Fixed price contract
A contract where the price is set and does not vary.
Example: The fixed price contract exposed the builder to cost overruns.
Fixed production overheads
Indirect production costs that remain relatively constant regardless of output volume.
Example: Fixed production overheads are allocated based on normal capacity.
Flat yield curve
A yield curve with similar rates across maturities.
Example: Under a flat yield curve, short and long rates are similar.
Floating rate
An interest or exchange rate that varies.
Example: The loan bears a floating rate linked to market rates.
Floor
A lower limit on an interest rate or price, below which it cannot fall, often used in hedging arrangements.
Example: The interest rate floor protected the entity against a fall in market rates below the agreed level.
For consolidation purposes
For the purpose of preparing consolidated statements.
Example: Uniform accounting policies are used for consolidation purposes.
Forecast
Prediction of future financial results or conditions.
Example: Management prepared a forecast of next year's sales.
Forecast transaction
An expected but not yet committed future transaction.
Example: The forecast transaction was hedged with a forward contract.
Foreign currency
A currency other than the functional currency of the reporting entity.
Example: Transactions in a foreign currency are translated at the spot rate on the transaction date.
Foreign currency borrowing
Debt denominated in a currency other than the entity's functional currency.
Example: Foreign currency borrowing created exchange differences on translation.
Foreign currency derivative
A derivative whose cash flows are driven by foreign exchange rates.
Example: The group entered a foreign currency derivative to hedge its exports.
Foreign currency derivatives
Derivatives whose value depends on foreign exchange rates.
Example: Foreign currency derivatives were used to hedge the exposure.
Foreign currency exchange prices
Prices expressed in a foreign currency.
Example: Foreign currency exchange prices were used for translation.
Foreign currency transaction
A transaction denominated in a currency other than the entity's functional currency.
Example: A foreign currency transaction is initially recorded using the spot exchange rate at the date of the transaction.
Foreign currency translation reserve (FCTR)
A reserve holding translation differences.
Example: The foreign currency translation reserve accumulates exchange differences.
Foreign entity
Subsidiary or operation located in another country.
Example: The foreign entity's assets are translated at closing rates.
Foreign exchange contract
An agreement to exchange currencies at a set rate.
Example: The company signed a foreign exchange contract to fix the rate.
Foreign exchange differences
Gains or losses arising from translating amounts denominated in one currency into another.
Example: Foreign exchange differences on the euro loan were recognised in profit or loss.
Foreign exchange rates
Rates at which one currency can be exchanged for another.
Example: Foreign exchange rates at the reporting date are used for translation.
Foreign Exchange – Capitalisation of Losses Resulting from Severe Currency Devaluations
Accounting treatment allowing certain exchange losses from severe devaluations to be capitalised.
Example: The entity applied the rules on capitalisation of losses from severe currency devaluations.
Foreign operation
A subsidiary or branch operating in a different country.
Example: Assets of a foreign operation are translated at the closing rate.
Forgivable loans
Loans the lender may forgive.
Example: A forgivable loan is treated as a grant when forgiven.
Former subsidiary
An entity that was previously controlled by the parent but is no longer a subsidiary.
Example: The retained interest in the former subsidiary is measured at fair value at the date control is lost.
Forward contract
A contract to buy or sell at a future date.
Example: The forward contract fixes the exchange rate.
Forward coupon rate
Interest rate implied by forward rates for a future period.
Example: The forward coupon rate was used to value the swap.
Forward purchase contract
A contract to buy an asset at a future date and price.
Example: The forward purchase contract secured the raw material supply.
Forward repurchase agreement
An arrangement to sell a security now and repurchase it at a specified future date and price.
Example: The securities sold under a forward repurchase agreement remained on the balance sheet.
Framework
The conceptual basis guiding the development and application of standards.
Example: The Framework underpins the preparation of financial statements.
Framework for the Preparation and Presentation of Financial Statements
The conceptual framework setting out the concepts underlying financial statement preparation.
Example: The Framework guides the selection of accounting policies.
Franchise fee
A fee paid for the right to use a franchisor's system.
Example: The initial franchise fee is recognised as revenue when earned.
Frozen credit spread method
A method holding the credit spread constant.
Example: The frozen credit spread method keeps the spread fixed at inception.
Full fair value
The fair value of the entire interest in an acquiree, used to measure goodwill including the non-controlling interest.
Example: Goodwill was measured using the full fair value of the acquiree, including the non-controlling interest.
Fully proportionate (pro rata) share of the cash flows
A proportionate share of cash flows.
Example: The investor receives a fully proportionate share of the cash flows.
Function of expense
Expense presentation grouped by function such as cost of sales.
Example: The statement presents expenses by function of expense.
Functional currency
The currency of the primary economic environment where the entity operates.
Example: The functional currency of the Turkish subsidiary is the lira.
Fundamental errors
Errors of such significance that the financial statements of prior periods can no longer be considered reliable.
Example: The prior period fundamental errors were corrected by restating the comparative figures.
Fundamental Errors and Changes in Accounting Policies
Topic covering corrections of material errors and changes in accounting policies.
Example: Fundamental errors are corrected retrospectively under the standard.
Funded amount
The amount of assets set aside to fund an obligation.
Example: The funded amount exceeded the present value of the obligation.
Funding
Providing resources to finance an activity or obligation.
Example: The plan's funding status is disclosed annually.
Funding (of post-employment benefits)
Contributions made to finance benefit plans.
Example: Funding of post-employment benefits reduces the plan deficit.
Funding (of retirement benefits)
The process of setting aside assets in a fund to meet future retirement benefit obligations.
Example: The funding of retirement benefits is arranged through a separately administered pension fund.
Future cash flow
Cash expected in future periods.
Example: The asset's value in use is based on future cash flows.
Future economic benefit
Potential to generate cash flows or other benefits.
Example: An asset embodies a future economic benefit.
Futures contract
A standardised contract to buy or sell at a future date.
Example: The futures contract traded on an organised exchange.
G
GAAP
The set of accounting rules and conventions an entity follows in a given jurisdiction.
Example: The reconciliation from previous GAAP to IFRS was presented in the notes.
Gain on disposal
Profit recognized when an asset is sold above its carrying amount.
Example: A gain on disposal was recorded for the sale of the subsidiary.
Gains
Increases in economic benefits not arising from contributions by owners.
Example: The revaluation resulted in gains recognised in other comprehensive income.
General purchasing power approach
Restating amounts using a general price index.
Example: Under the general purchasing power approach, accounts are restated for inflation.
General purpose financial statements
Statements prepared for a broad range of users.
Example: General purpose financial statements meet the needs of most users.
General recognition principle
The fundamental principle that items are recognised when they meet the definition of an element and the related recognition criteria.
Example: Under the general recognition principle, an asset is recognised when it is probable that future economic benefits will flow to the entity.
Geographical segments
Segments based on geography.
Example: Revenue is disclosed by geographical segments.
Going concern
Assumption that the entity will continue operating.
Example: The financial statements were prepared on a going concern basis.
Goodwill
An asset representing future benefits from a business combination.
Example: Goodwill arose from the acquisition of the smaller rival.
Governing board
The body responsible for the oversight and strategic direction of an organisation.
Example: The governing board approved the annual financial statements.
Governing body
The group responsible for overseeing an entity or organization.
Example: The governing body approved the annual financial statements.
Governing charter
The legal document establishing an entity's constitution and rules.
Example: The company's governing charter restricts the transfer of shares.
Government
Government, government agencies and similar bodies.
Example: Government grants are recognised when received or receivable.
Government assistance
Government action providing an economic benefit.
Example: Government assistance is disclosed even if it is not a grant.
Government Assistance – No Specific Relation to Operating Activities
Government assistance granted without conditions tied to the operating activities of the entity, which may warrant disclosure.
Example: The standard addresses government assistance with no specific relation to operating activities.
Government Grants
Assistance from government in the form of transfers.
Example: Government grants are recognised when the conditions are met.
Government guarantee
Government's promise to cover an entity's obligations.
Example: The loan was backed by a government guarantee.
Government-related entity
An entity controlled or significantly influenced by government.
Example: The utility is a government-related entity.
Grant date
The date on which an entity and its employees reach a mutual understanding of the terms of a share-based payment.
Example: The fair value of the options was measured at the grant date.
Grantor
The party that grants a service concession right to an operator.
Example: The grantor retains control over the infrastructure asset.
Grants related to assets
Government grants whose primary condition is acquiring long-term assets.
Example: Grants related to assets are recognised as deferred income.
Grants related to income
Government grants other than those related to assets.
Example: Grants related to income are recognised in profit or loss over the periods.
Gross investment in the lease
Total lease payments plus unguaranteed residual value.
Example: The gross investment in the lease equals the total lease payments.
Gross margin
The difference between revenue and the cost of sales, representing the profit before operating expenses.
Example: The gross margin improved due to lower raw material costs and higher selling prices.
Gross profit
Revenue less cost of sales.
Example: Gross profit is disclosed before operating expenses.
Group
Parent and all its subsidiaries together.
Example: The group reported consolidated revenue of ten million.
Group administration (employee benefit) plans
Benefit plans administered collectively for a group of entities.
Example: The group administration plans covered all subsidiaries' staff.
Group and Treasury Share Transactions
Guidance on share-based payment arrangements involving group entities and treasury shares.
Example: Under the interpretation on Group and Treasury Share Transactions, the group recharged the share-based payment cost.
Group Cash-Settled Share-Based Payment Transactions
Share-based payments settled in cash within a group of entities.
Example: Group cash-settled share-based payment transactions require careful attribution.
Group insurance contract
An insurance policy covering a group of persons under a single contract.
Example: The employer provided a group insurance contract to its staff.
Group of assets
A set of assets assessed together for impairment.
Example: The group of assets was tested for impairment as a unit.
Group of biological assets
Similar biological assets grouped together.
Example: A group of biological assets is measured at fair value.
Group of similar financial assets
A portfolio of financial assets with similar credit risk characteristics that are assessed collectively for impairment.
Example: Impairment of a group of similar financial assets was assessed on a collective basis.
Grouping of assets
Combining assets for assessment.
Example: Grouping of assets is used for impairment testing.
Guarantee
Promise to answer for another party's obligation.
Example: The parent issued a guarantee for the subsidiary's debt.
Guarantee amount
The maximum amount payable by an entity under a guarantee.
Example: The guarantee amount was disclosed in the notes.
Guarantee fund
A fund established to protect policyholders or depositors if an institution becomes insolvent.
Example: Contributions to the guarantee fund were recognised as an expense of the period.
Guaranteed benefits
Benefits promised to employees regardless of the plan's asset performance.
Example: Guaranteed benefits must be discounted to their present value.
Guaranteed element
A component of a contract guaranteeing a minimum return or benefit.
Example: The guaranteed element is separated and measured separately.
Guaranteed residual value
A residual value guaranteed by the lessee or a third party.
Example: The guaranteed residual value affects the finance lease classification.
Guarantor
A party that guarantees an obligation.
Example: The guarantor is liable if the borrower defaults.
H
Harmonise
The process of aligning national accounting standards with international standards to reduce differences.
Example: The regulator launched a project to harmonise local accounting rules with IFRSs.
Harvest
The detachment of produce from a biological asset.
Example: Harvest marks the point at which agricultural produce is measured.
Hedge accounting
Matching gains and losses of hedged items and instruments.
Example: Hedge accounting reduces volatility in reported earnings.
Hedge effectiveness
The degree to which a hedging instrument offsets the hedged risk.
Example: Hedge effectiveness was tested at each reporting date.
Hedged item
An asset, liability, firm commitment, forecast transaction or net investment exposed to a risk being hedged.
Example: The forecast purchase of copper was designated as a hedged item.
Hedges of a Net Investment in a Foreign Operation
Hedging translation exposure arising from net investment in foreign operations.
Example: Hedges of a net investment in a foreign operation are recognized in equity.
Hedging
Designating a derivative to offset changes in fair value or cash flows.
Example: The company applied hedge accounting to its interest rate swaps.
Hedging instrument
A derivative or instrument used to offset a hedged risk.
Example: The forward contract is designated as a hedging instrument.
Hedging relationship
The pairing of a hedged item and a hedging instrument.
Example: The hedging relationship must be formally designated.
Hedging reserve
A component of equity that accumulates the effective portion of gains and losses on hedging instruments.
Example: The effective portion of the cash flow hedge was recognised in the hedging reserve.
Held for resale
Assets held for sale rather than for use.
Example: Assets held for resale are classified as current.
Held for sale
Asset available for immediate sale in present condition.
Example: The building was classified as held for sale.
Held for trading
Financial assets acquired mainly for short-term profit from price changes.
Example: The shares are classified as held for trading.
Held-to-maturity investment
A non-derivative financial asset with fixed payments and maturity that the entity intends and is able to hold to maturity.
Example: The government bonds were classified as held-to-maturity investments and carried at amortised cost.
Higher level parent entity
A parent that controls the reporting entity indirectly through another parent.
Example: The higher level parent entity prepares consolidated financial statements.
Highly probable
More likely than probable, with a forecast transaction expected to occur.
Example: The forecast sale is considered highly probable.
Hire-purchase contract
A contract to hire an asset with an option to purchase.
Example: A hire-purchase contract may transfer substantially all risks and rewards.
Historical cost
Measurement at the original transaction cost.
Example: Property is measured at historical cost less depreciation.
Historical loss experience
Past data on credit losses used to estimate expected credit losses on financial assets.
Example: Expected credit losses were estimated using historical loss experience adjusted for current conditions.
Historical summaries
Summaries of prior-period financial data.
Example: Historical summaries are often presented in annual reports.
Historical waste
Waste arising from products sold in past periods.
Example: The provision covers historical waste from old products.
Holding company
A company that controls other companies through ownership.
Example: The holding company owns three operating subsidiaries.
Host contract
The non-derivative contract that contains an embedded derivative.
Example: The embedded derivative was separated from its host contract and measured at fair value.
Host instrument
The non-derivative contract in which an embedded derivative resides.
Example: The host instrument is a debt contract with an embedded derivative.
Hybrid contract
A contract containing a non-derivative host and an embedded derivative.
Example: The embedded derivative in the hybrid contract was separated.
Hybrid instrument
An instrument containing both a host contract and a derivative.
Example: The hybrid instrument's embedded derivative was measured separately.
Hyperinflation
Very high and persistent inflation.
Example: Hyperinflation requires restating the financial statements.
Hyperinflationary economies
Economies with cumulative inflation rates so high that financial statements must be restated in terms of the measuring unit current at the reporting date.
Example: Financial statements of entities operating in hyperinflationary economies must be restated for changes in purchasing power.
I
discontinuing operation)
The first public announcement relating to a discontinuing operation.
Example: The entity made its first public announcement regarding the discontinuing operation.
IAS
International Accounting Standard issued by the IASB.
Example: IAS 2 governs the accounting for inventories.
IAS 19- The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction
Interpretation limiting a defined benefit asset and minimum funding requirements.
Example: The entity applied the interpretation on the limit of a defined benefit asset.
IASC
The predecessor body of the IASB that issued the original International Accounting Standards.
Example: The IASC issued the standards that later became known as IFRS.
IASC Foundation Constitution
The founding document governing the IASC Foundation's objectives and structure.
Example: The IASC Foundation Constitution sets out the trustees' responsibilities.
IASCF
The foundation that oversees the IASB and IFRS standard-setting.
Example: The IASCF was restructured and later renamed the IFRS Foundation.
Identifiability
Being separable or arising from legal or contractual rights.
Example: Identifiability is required to recognise an intangible asset.
Identifiable
Capable of being separately identified.
Example: An identifiable asset can be separated or arises from rights.
Identifiable asset
An asset that can be separated from the entity or arises from contractual or legal rights and is measured separately in a business combination.
Example: In a business combination, only identifiable assets acquired are recognised separately from goodwill.
IFAC
The International Federation of Accountants.
Example: IFAC develops international standards for accountants.
IFRIC
Committee issuing interpretations of IFRS standards.
Example: The IFRIC issued an interpretation on service concessions.
IFRS
International Financial Reporting Standards issued by the IASB.
Example: The group prepares its statements under IFRS.
IFRS 2- Group and Treasury Share transactions
The part of IFRS 2 that deals with share-based payment transactions within a group and involving treasury shares.
Example: IFRS 2 requirements on Group and Treasury Share transactions governed the recharge between the parent and its subsidiary.
IFRS-compliant
Prepared in accordance with International Financial Reporting Standards.
Example: The statements are IFRS-compliant in all material respects.
Illustrative example
A non-mandatory example showing how a standard may be applied.
Example: The illustrative example clarified the disclosure requirement.
Impairment
A decline in an asset's recoverable amount below carrying amount.
Example: An impairment loss was recognised on the equipment.
Impairment loss
The excess of carrying amount over recoverable amount.
Example: The impairment loss was recognised in profit or loss.
Impairment of assets
A reduction in the recoverable amount of an asset below its carrying amount, requiring a write-down.
Example: An impairment loss was recognised because the asset's carrying amount exceeded its recoverable amount.
Impairment test
Testing whether an asset's value has declined.
Example: The impairment test compared recoverable and carrying amounts.
Implementation guidance
Non-mandatory guidance helping entities apply a standard.
Example: The implementation guidance explains how to apply the standard.
Import duties
Taxes levied on goods entering a country.
Example: Import duties increased the cost of the equipment.
Impracticability exemption
A relief from applying a requirement when an entity cannot do so after making every reasonable effort.
Example: The entity applied the impracticability exemption and did not restate the earlier period.
Impracticable
Applying a requirement is not feasible despite every reasonable effort.
Example: Retrospective application was impracticable due to missing records.
Improvements to IFRSs
Periodic amendments made to clarify or correct IFRS standards.
Example: Improvements to IFRSs were issued as a single omnibus document.
Imputed rate of interest
The rate that discounts a transaction to its fair value.
Example: The imputed rate of interest was used to measure the deferred consideration.
In the money
An option whose exercise price is favourable.
Example: The option is in the money when the share price exceeds the strike.
In-substance defeasance
A transaction in which an entity places assets in an irrevocable trust to satisfy a debt, without legally extinguishing the liability.
Example: Under in-substance defeasance, the liability is not legally extinguished and therefore remains on the balance sheet.
Incentives
Benefits encouraging certain behaviour.
Example: Sales incentives are recognised as a reduction of revenue.
Inception of the lease
Date the lease agreement commences.
Example: The lease was classified at the inception of the lease.
Incidental income
Minor income from transactions outside the main business.
Example: Incidental income from scrap sales was immaterial.
Incidental operations
Activities carried out while an asset is being developed that are not necessary to its construction.
Example: Income from incidental operations was deducted from the cost of the asset under construction.
Income
Increases in economic benefits that increase equity, excluding contributions.
Example: Income is recognized when performance obligations are satisfied.
Income approach
A valuation technique converting future amounts into a single present value.
Example: The income approach was used to measure the fair value.
Income statement = Statement of income
The statement presenting an entity's income and expenses.
Example: Revenue and expenses are presented in the income statement.
Income statement liability method
A method recognising deferred tax through the income statement.
Example: The income statement liability method focuses on the income statement.
Income Tax
The standard that prescribes the accounting treatment for income taxes, including current and deferred tax.
Example: Income Tax requires entities to account for the current and future tax consequences of transactions.
Income tax expense
The total tax expense for a period.
Example: Income tax expense includes current and deferred tax.
Income Taxes
IAS 12 standard covering accounting for income taxes.
Example: IAS 12 Income Taxes deals with deferred tax.
Income Taxes – Changes in the Tax Status of an Enterprise or Its Shareholders
Guidance on accounting when an entity's or shareholders' tax status changes.
Example: The interpretation addresses changes in the tax status of an enterprise.
Income Taxes – Recovery of Revalued Non- Depreciable Assets
Guidance on deferred tax when a non-depreciable asset is revalued and recovered through sale.
Example: Under the interpretation on Income Taxes, the deferred tax on the revalued land was measured using the tax rate for disposals.
Increasing rate preference shares
Preference shares whose dividend rate rises over time.
Example: Increasing rate preference shares are classified as a financial liability.
Incremental borrowing rate of interest (lessee’s)
The rate a lessee would pay to borrow funds on similar terms.
Example: The lessee used its incremental borrowing rate to discount lease payments.
Incremental costs
Costs that would not have arisen without the transaction.
Example: Incremental costs directly attributable to the contract are capitalised.
Incremental share
Additional shares assumed to be issued.
Example: Incremental shares are used in diluted EPS.
Indemnification assets
Assets recognised by an acquirer to reflect an indemnification received from the seller for the outcome of a contingency.
Example: The acquirer recognised an indemnification asset for the seller's promise to reimburse a contingent liability.
Indication of an impairment
A signal that an asset may be impaired.
Example: A decline in market value is an indication of impairment.
Indicator [of impairment]
Sign suggesting an asset may be impaired.
Example: A falling market price is an indicator of impairment.
Indirect method of reporting cash flows from operating activities
Reporting operating cash flows by adjusting profit for non-cash items.
Example: The indirect method starts with net profit and adjusts for non-cash items.
Individual asset
A single asset assessed on its own rather than as part of a group.
Example: Impairment is assessed for each individual asset unless it does not generate independent cash flows.
Individual financial statements
Statements presented by a parent without consolidating its subsidiaries.
Example: Individual financial statements show investments at cost or fair value.
Induced conversion
A conversion of convertible debt encouraged by additional consideration.
Example: The issuer offered an inducement to encourage early conversion.
Industry segments
Distinct components of an entity based on products or services.
Example: The entity reported results by industry segments.
Inflation
A general rise in the price level.
Example: Inflation reduces the purchasing power of money.
Information Reflecting the Effects of Changing Prices
Supplementary information presented to reflect the effects of changing prices on an entity's financial position and performance.
Example: In hyperinflationary economies, entities present information reflecting the effects of changing prices.
Initial classification
Classification at initial recognition.
Example: Initial classification determines subsequent measurement.
Initial direct costs
Costs directly attributable to negotiating and arranging a lease.
Example: Initial direct costs are added to the right-of-use asset.
Initial disclosure event (for a
The first event triggering disclosure about discontinued operations.
Example: The initial disclosure event occurred when the disposal was approved.
Initial measurement
The amount at which an asset or liability is first recognised in the financial statements.
Example: The initial measurement of the asset was its fair value plus transaction costs.
Initial public offering
The first sale of a company's shares to the public.
Example: The initial public offering raised significant new capital.
Initial recognition
The first time an item is recorded in the financial statements.
Example: Assets are measured at cost on initial recognition.
Instrument-by-instrument approach
Assessing instruments individually to determine classification.
Example: Classification was assessed on an instrument-by-instrument basis.
Insurable interest
A financial interest in the subject of insurance.
Example: An insurable interest is required for a valid insurance contract.
Insurance agency commissions
Fees earned by an insurance agent for placing insurance contracts with insurers.
Example: Insurance agency commissions are recognised as revenue when the related insurance contract is placed.
Insurance assets
Assets arising from insurance contracts.
Example: Insurance assets are measured under the insurance standard.
Insurance company
Entity issuing insurance contracts to policyholders.
Example: The insurance company reported strong underwriting profits.
Insurance contract
A contract under which one party accepts significant insurance risk.
Example: The insurance contract transferred risk from the policyholder.
Insurance contracts
Contracts under which the insurer accepts significant insurance risk from the policyholder.
Example: The insurer applied the standard on Insurance Contracts to all policies in force.
Insurance enterprise
An entity that assumes and manages insurance risks.
Example: The insurance enterprise applies specific disclosure requirements.
Insurance liability
The net contractual obligation of an insurer under insurance contracts.
Example: The insurer recognised an insurance liability for outstanding claims.
Insurance obligations
Obligations arising from insurance contracts.
Example: Insurance obligations are measured using current estimates.
Insurance risk
Risk transferred under an insurance contract.
Example: Insurance risk arises from uncertainty over insured events.
Insurance swaps
Financial arrangements in which parties exchange insurance-related cash flows or risks.
Example: The entity used insurance swaps to transfer a portion of its underwriting risk to another counterparty.
Insured event
An event covered by an insurance contract.
Example: Losses from the insured event are covered by the insurer.
Insurer
Party that issues an insurance contract.
Example: The insurer bears the risk under the contract.
Intangible asset
An identifiable non-monetary asset without physical substance.
Example: The patent is recognised as an intangible asset.
Intangible Assets
Identifiable non-monetary assets without physical substance, such as patents and licences.
Example: The acquired patent was recognised as an intangible asset and amortised over ten years.
Intangible Assets – Web Site Costs
Guidance on when website development costs may be capitalized.
Example: Intangible assets – web site costs clarify which expenses qualify for capitalization.
Integral foreign operation
A foreign operation that is an extension of the reporting entity's activities.
Example: The foreign branch is treated as an integral foreign operation.
Interest
The cost of using borrowed money.
Example: Interest expense is recognised using the effective interest method.
Interest cost (for an employee benefit plan)
The increase in benefit obligation due to passage of time.
Example: Interest cost reflects the unwinding of the discount.
Interest rate implicit in a lease
The discount rate that makes the present value of the lease payments plus the unguaranteed residual value equal to the fair value of the leased asset.
Example: The lessee used the interest rate implicit in the lease to measure the lease liability.
Interest rate implicit in the lease
The rate that discounts lease payments to the asset's value.
Example: The interest rate implicit in the lease discounts the lease payments.
Interest rate risk
Risk that interest rate changes affect financial position.
Example: Floating-rate debt exposes the firm to interest rate risk.
Interest rate strip
A hedging instrument combining a cap and a floor on rates.
Example: The interest rate strip limited exposure to rate movements.
Interest rate swap
A derivative in which two parties exchange interest payment streams, typically fixed for floating.
Example: The company entered into an interest rate swap to hedge its variable-rate debt.
Interest-only strip
A right to receive only interest cash flows from a transferred asset.
Example: The retained interest-only strip is measured at fair value.
Interest-only strip receivable
A right to receive only the interest cash flows from a financial asset.
Example: The entity retained an interest-only strip receivable on the securitisation.
Interests in Joint Ventures
An entity's ownership interests in joint ventures.
Example: Interests in joint ventures are accounted for using the equity method.
Interim financial report
A report for a period shorter than a full year.
Example: An interim financial report covers a six-month period.
Interim Financial Reporting
The standard that prescribes the minimum content of an interim financial report and the recognition and measurement principles for interim periods.
Example: Interim Financial Reporting requires entities to present a condensed set of financial statements.
Interim financial reporting and impairment
Impairment considerations in interim reporting.
Example: Interim financial reporting and impairment apply the same principles as annual reporting.
Interim financial statements
Financial statements for a period shorter than a full year.
Example: The company published interim financial statements for the half year.
Interim period
A financial reporting period shorter than a full financial year.
Example: The interim period covered the first six months.
Intermediate or ultimate parent entity
A parent entity that is itself a subsidiary of another parent or that sits at the top of the group.
Example: The intermediate or ultimate parent entity must also prepare consolidated financial statements.
Internal rate of return
The discount rate that makes the net present value zero.
Example: The internal rate of return determines the effective interest rate.
Internal risk transfer
Transfer of risk between business units within the same entity.
Example: Internal risk transfer is eliminated on consolidation.
Internally generated
Created within the entity rather than acquired.
Example: Internally generated brands are not recognised as intangible assets.
Internally generated goodwill
Goodwill created internally, which is not recognised.
Example: Internally generated goodwill is not recognised as an asset.
International Accounting Standard
A standard issued by the International Accounting Standards Board's predecessor that prescribes accounting treatments for particular transactions.
Example: International Accounting Standard 2 deals with the measurement of inventories.
International Accounting Standards Committee
The predecessor body of the IASB.
Example: The IASC issued the original International Accounting Standards.
International Accounting Standards Committee Foundation
Body overseeing the IASC and IASB.
Example: The IASC Foundation appointed new trustees.
International Federation Of Accountants
The global organisation representing the accountancy profession.
Example: IFAC issues standards on ethics and auditing.
International Financial Reporting Interpretations Committee
The body that issued interpretations on how to apply IFRS to specific issues.
Example: The International Financial Reporting Interpretations Committee issued guidance on the accounting treatment.
International Financial Reporting Standard
Standards issued by the IASB for global financial reporting.
Example: Each International Financial Reporting Standard sets out specific requirements.
Intragroup
Occurring between entities within the same group.
Example: Intragroup balances are eliminated in the consolidated statements.
Intragroup payment arrangement
An arrangement for payment within a group of entities.
Example: The intragroup payment arrangement is eliminated on consolidation.
Intragroup transaction
Transactions between entities in the same group.
Example: Intragroup transactions are eliminated on consolidation.
Intrinsic value
The difference between the fair value of a share and the exercise price of an option, being the amount that would be gained on immediate exercise.
Example: The intrinsic value of the share option is measured as the excess of the share price over the exercise price.
Introduction of the Euro
The adoption of the euro currency.
Example: The introduction of the Euro affected currency translation.
Inventories
Assets held for sale or in production.
Example: Inventories are measured at the lower of cost and net realisable value.
Inverse floating interest rate
An interest rate that moves opposite to the reference rate.
Example: The note pays an inverse floating interest rate as rates fall.
Investee
An entity in which another entity holds an ownership interest.
Example: The investor holds significant influence over the investee.
Investing activities
Cash flows from acquiring and disposing of long-term assets.
Example: Investing activities include purchases of property and equipment.
Investment
An asset held to increase wealth through income or appreciation.
Example: The company made a long-term investment in a subsidiary.
Investment contract
A contract providing a return based on an investment.
Example: Investment contracts are measured at fair value at inception.
Investment enterprise
An entity whose business is making investments.
Example: An investment enterprise measures investments at fair value.
Investment entity
An entity that obtains funds from investors to provide them with investment management services and measures its investments at fair value through profit or loss.
Example: An investment entity does not consolidate its controlled investees but measures them at fair value.
Investment grade
A credit rating indicating low default risk.
Example: The bonds are rated investment grade.
Investment performance
Return achieved on an investment over a period.
Example: Investment performance is reported to policyholders annually.
Investment property
Property held to earn rentals or for capital appreciation.
Example: The office block is held as investment property.
Investment retained
The interest in a former subsidiary that a parent continues to hold after losing control.
Example: The investment retained was remeasured at fair value when control was lost.
Investment securities
Financial assets held to earn returns rather than for trading.
Example: Investment securities are classified by their contractual cash flows.
Investment tax credits
Tax incentives granted to encourage capital investment.
Example: Investment tax credits reduced the entity's tax expense.
Investment-linked insurance funds
Insurance funds whose value is linked to investments.
Example: Assets held in investment-linked insurance funds are measured at fair value.
Investments in Associates
The standard on accounting for associates.
Example: Investments in associates are accounted for using the equity method.
Investor
A party that holds an interest in another entity, such as through shares, and is entitled to returns from that investment.
Example: The investor assessed whether it had significant influence over the associate.
Investor in a joint venture
A party with an interest in a joint venture.
Example: The investor in a joint venture uses the equity method.
Investor-owned entity
Entity owned by investors rather than policyholders.
Example: Investor-owned entities report profits for shareholders.
Involuntary liquidation
Winding up of a company ordered by a court or regulator.
Example: The bank faced involuntary liquidation after the collapse.
Irrevocable commitments
Binding obligations that cannot be cancelled or withdrawn by the entity.
Example: Irrevocable commitments to purchase raw materials were disclosed in the notes.
Issued capital
The amount of share capital actually issued to shareholders.
Example: Issued capital is presented separately from share premium.
Issued shares
Shares that have been allocated and paid for by shareholders.
Example: Issued shares are recorded at their nominal value.
Issuing entity
The entity that issues equity instruments to holders.
Example: The issuing entity recognised the preference shares as equity.
Item
A single element of the financial statements.
Example: Each item is classified as asset, liability, income or expense.
Item by item basis
An approach in which each individual item is considered separately rather than in aggregate.
Example: The entity assessed its financial assets for impairment on an item by item basis.
Item of inventory
A single unit or category of inventory.
Example: Each item of inventory is measured at the lower of cost and net realisable value.
J-L
Joint control
Contractually shared control of an arrangement.
Example: The two parties exercise joint control over the venture.
Joint venture
A joint arrangement where parties share control and net assets.
Example: The two firms formed a joint venture for the project.
Joint working group
A group formed by two or more bodies to work together on a common project or standard.
Example: The joint working group was set up to align the two frameworks.
Jointly Controlled Entities – Non-Monetary Contributions by Venturers
Guidance on non-monetary contributions made by venturers to jointly controlled entities.
Example: Non-monetary contributions by venturers require careful gain recognition.
Jointly controlled entity
An entity whose strategic decisions require unanimous consent of the venturers.
Example: Profits of the jointly controlled entity are shared equally.
Jurisdiction
A legal territory with its own rules and courts.
Example: Tax rates are applied based on the relevant jurisdiction.
Key management personnel
Those with authority for planning and control.
Example: Key management personnel compensation is disclosed.
Larger financial asset
The financial asset of greater value in a comparison, relevant when allocating or measuring assets.
Example: The fair value adjustment was allocated to the larger financial asset in the portfolio.
Last-in, first-out
An inventory costing method.
Example: Last-in, first-out is not permitted under IFRS.
Lease
Contract conveying the right to use an asset.
Example: The lease term is five years without renewal option.
Lease term
The non-cancellable period during which a lessee may use an asset.
Example: The lease term was extended by an optional renewal period.
Leaseback
A transaction in which the seller of an asset leases it back from the buyer.
Example: The sale and leaseback arrangement resulted in a right-of-use asset.
Leased assets
Assets recognized by a lessee or lessor under a finance lease.
Example: Leased assets are depreciated over the shorter of lease term or useful life.
Leasehold interest
The lessee's interest in a leased asset under a lease agreement.
Example: The leasehold interest was classified as an asset.
Leases
Contracts transferring the right to use an asset for a period.
Example: Leases are recognised as a right-of-use asset and a lease liability.
Legal entity
An entity recognised as such by law.
Example: A legal entity may be separate from the reporting entity.
Legal merger
A combination in which two or more entities are legally merged into a single entity.
Example: Following the legal merger, the surviving entity assumed all the assets and liabilities of the merged company.
Legal obligation
An obligation arising from law.
Example: A legal obligation may require recognising a provision.
Legal parent
Entity that controls another through ownership.
Example: The legal parent controls two subsidiaries.
Legal release
Legal discharge of a debt or obligation.
Example: The legal release of the guarantee removed the liability.
Legal rights
Enforceable entitlements recognised or disclosed in the financial statements.
Example: The entity had legal rights to offset the two balances.
Legal subsidiary
The entity legally designated as subsidiary in a reverse acquisition.
Example: The legal subsidiary is treated as the accounting acquirer.
Legally enforceable right
A right that can be enforced in a court of law.
Example: Offsetting requires a legally enforceable right of set-off.
Legislative requirement
A requirement imposed by law.
Example: A legislative requirement created a present obligation.
Lender
A party that provides funds as a loan.
Example: The lender assesses the borrower's credit risk.
Lessee
The party that obtains the right to use an underlying asset for a period of time in exchange for consideration.
Example: The lessee recognises a lease liability and a right-of-use asset at the commencement date.
Lessee’s incremental borrowing rate of interest
The rate a lessee would pay to borrow.
Example: The lessee's incremental borrowing rate discounts lease payments.
Lessor
Party that provides an asset under a lease.
Example: The lessor recognised a finance lease receivable.
Letters of credit
Bank documents guaranteeing payment to a seller.
Example: The exporter required letters of credit for the shipment.
Level of serviceability
The standard of performance or capacity an asset must maintain to be considered usable.
Example: The maintenance provision keeps the aircraft at the required level of serviceability.
Leverage
The use of debt to increase the potential return on equity.
Example: High leverage increases the entity's financial risk.
Leveraged written option
A written option whose payoff increases more than proportionally to the underlying.
Example: The leveraged written option increased the entity's exposure.
Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment
Obligations from participating in a market for WEEE.
Example: Liabilities arise from participating in the WEEE market.
Liabilities assumed
Obligations taken over in a transaction.
Example: Liabilities assumed are measured at fair value in a business combination.
Liability
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources.
Example: The trade payable is recognised as a liability because the entity has a present obligation to pay.
Liability adequacy test
A test of whether liabilities are adequate.
Example: The liability adequacy test ensures insurance liabilities are sufficient.
Liability component
Debt portion of a compound financial instrument.
Example: The liability component was measured at present value.
Liability issue
The issuance of debt instruments to raise funds.
Example: The liability issue raised funds for expansion.
Licence fee
A payment made for the right to use intellectual property or operate under a permit.
Example: The licence fee was recognised as revenue over the licence period.
Licensing agreement
A contract granting rights to use intellectual property or technology.
Example: The licensing agreement provides for royalty payments.
Life-contingent annuity
An annuity whose payments depend on the survival of the annuitant.
Example: The insurer priced the life-contingent annuity using mortality assumptions.
LIFO
Last-in, first-out inventory costing method.
Example: LIFO is not permitted under IFRS.
Like transactions and events in similar circumstances
Comparable transactions treated consistently.
Example: Like transactions in similar circumstances are treated consistently.
Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
An amendment providing first-time adopters a limited exemption from presenting comparative IFRS 7 disclosures.
Example: The limited exemption from comparative IFRS 7 disclosures for first-time adopters reduces the burden of transition.
Line item
A single line presented in a statement.
Example: Each line item is presented separately.
Line of business
Distinct segment or area of commercial activity.
Example: Results are reported by line of business.
Liquid assets
Cash and assets easily convertible into cash.
Example: The company held sufficient liquid assets to meet payments.
Liquidity
The availability of cash and the ability of an entity to meet its short-term obligations.
Example: The company maintained sufficient liquidity to meet its obligations as they fell due.
Liquidity presentation
Presentation of assets and liabilities by their nearness to cash.
Example: The bank adopts liquidity presentation in its balance sheet.
Liquidity risk
The risk that an entity will struggle to meet its financial obligations.
Example: The entity monitors liquidity risk through maturity analysis.
Litigation settlements
Amounts agreed to settle legal disputes.
Example: Litigation settlements were recognised as a provision.
Loan
Funds provided that must be repaid.
Example: The loan is measured at amortised cost.
Loan asset
A financial asset arising from the lending of money to a borrower.
Example: The loan asset is measured at amortised cost using the effective interest method.
Loan commitment
A commitment to provide a loan.
Example: The loan commitment fee is recognised over the commitment period.
Loan sub-participation
Agreement transferring part of a loan's risk and return.
Example: The bank entered a loan sub-participation with another lender.
Loans and advances
Amounts lent by a bank to its customers.
Example: Loans and advances to customers grew during the year.
Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Example: Trade receivables were classified as loans and receivables under the old standard.
Loans and receivables originated by the enterprise
Non-derivative financial assets created by providing money or goods.
Example: Loans and receivables originated by the enterprise are measured at amortized cost.
Loans payable
Liabilities arising from borrowed funds that must be repaid.
Example: Loans payable are classified as non-current liabilities.
Loans payable in default
Loans in breach of their terms and repayable on demand.
Example: Loans payable in default are classified as current liabilities.
Long-term employee benefits
Benefits payable beyond twelve months.
Example: Long-term employee benefits include long-service leave.
Long-term investment
An investment intended to be held for more than one year, not expected to be converted into cash in the short term.
Example: Long-term investments are presented separately from current assets in the statement of financial position.
Look through
Assessing the substance behind a structure.
Example: A look through approach assesses the underlying assets.
Look through approach
Basing treatment on underlying substance rather than legal form.
Example: The look through approach is used for financial conglomerates.
Loss event
An event that causes an actual credit loss.
Example: A loss event was identified on the defaulted loan.
Loss of control
The event in which a parent no longer has control over a former subsidiary.
Example: The loss of control triggered the derecognition of the subsidiary's assets and liabilities.
Loss per share
The net loss attributable to each ordinary share.
Example: The entity reported a loss per share for the period.
Loss recognition test
A test to determine whether an insurance contract is onerous.
Example: A loss recognition test is performed for each insurance portfolio.
Loss sharing arrangement
An agreement to share losses between parties.
Example: Under the loss sharing arrangement, losses are borne proportionately.
Losses
Decreases in economic benefits.
Example: Losses are recognised in profit or loss.
Lower level parent
A parent entity that is itself a subsidiary of another parent higher up the group structure.
Example: The lower level parent prepares consolidated financial statements for its own group within the wider structure.
M-N
Majority interest
Ownership of more than half the voting rights.
Example: Majority interest gives the parent control.
Managed on a contractual yield basis
Assets managed to achieve returns set by contract.
Example: The portfolio is managed on a contractual yield basis.
Management
The people responsible for directing and controlling an entity.
Example: Management is responsible for preparing the financial statements.
Management approach
An approach that bases segment reporting on the information used internally by management.
Example: Under the management approach, segments were reported as reviewed by the chief operating decision maker.
Management commentary
Narrative explanation of financial results accompanying the statements.
Example: The management commentary explains key performance drivers.
Management intentions
Management's stated plans for holding or disposing of an asset.
Example: The classification depended on management intentions.
Margin
The difference between revenue and cost of sales.
Example: The gross margin improved following cost reductions.
Market condition
A condition related to market prices.
Example: A market condition affects the fair value of a share option.
Market price
The price at which an asset or liability could be bought or sold in an active market.
Example: The market price of the listed shares was used to determine their fair value.
Market rate of interest
The prevailing interest rate in the market.
Example: The loan was granted at the market rate of interest.
Market risk
Risk of loss from market price movements.
Example: Market risk arises from commodity price fluctuations.
Market value
The price at which an asset could be traded in the market.
Example: The market value of the land rose sharply.
Marketable
Describes an asset that can be readily bought or sold in a market.
Example: The marketable securities were measured at fair value at the reporting date.
Marketing-related intangible assets
Intangible assets used in marketing, such as trademarks and brand names.
Example: Marketing-related intangible assets include trademarks and internet domains.
Mask works
Intellectual property rights protecting semiconductor chip designs.
Example: Mask works are recognised as intangible assets.
Master netting arrangement
An agreement allowing offsetting of multiple contracts on default.
Example: A master netting arrangement allows offset on default.
Matching of costs with revenues
Recognising expenses with the related revenue.
Example: Matching of costs with revenues recognises expenses in the same period.
Material
Information is material if omitting, misstating or obscuring it could influence the decisions that users make.
Example: The omission of the disclosure was not material to the users of the financial statements.
Material adjustments
Adjustments significant enough to matter.
Example: Material adjustments were made to the prior period figures.
Material errors
Errors significant enough to affect users' decisions.
Example: Material errors in prior statements were corrected retrospectively.
Material omissions
Failures to include information significant enough to affect decisions.
Example: Material omissions in the notes led to a restatement.
Materiality
The threshold at which information could influence the economic decisions of users of financial statements.
Example: The omission was not considered material to the financial statements as a whole.
Matrix approach Matrix presentation
Presenting information across two dimensions in a grid format.
Example: The matrix presentation discloses risk by type and by category.
Matrix form of organisation
An organisational structure where staff report to more than one manager.
Example: The group operates in a matrix form of organisation.
Maturity
The date an instrument becomes due for settlement.
Example: The bond's maturity is ten years from issue.
Maturity value
The amount payable at maturity.
Example: The bond was redeemed at its maturity value.
Measured at fair value through other comprehensive income
A measurement category for financial assets whose fair value changes are recognised in other comprehensive income rather than profit or loss.
Example: The debt instrument is measured at fair value through other comprehensive income because it is held within a business model of hold to collect and sell.
Measurement
Determining the monetary amount of an item.
Example: Measurement of the provision used the best estimate.
Measurement bases
Methods used to determine amounts in financial statements.
Example: The standard lists several measurement bases.
Measurement date
The date at which an asset or liability is measured.
Example: The measurement date for the plan assets was year end.
Measurement of change
The determination of the amount of change in an item that must be recognised or disclosed.
Example: The measurement of change in the fair value of the liability was recognised in profit or loss.
Measurement or recognition inconsistency
An accounting mismatch between related assets and liabilities.
Example: The derivative was held to remove a measurement or recognition inconsistency.
Measuring interim income tax expense
Calculating income tax for interim periods using the estimated annual effective rate.
Example: Measuring interim income tax expense requires an estimated annual rate.
Membership fees
Fees paid to join or remain in an organisation.
Example: Membership fees are recognised as revenue over the membership period.
Members’ shares
Equity held by members of a co-operative.
Example: Members' shares may be classified as equity or liability.
Members’ Shares in Co-operative Entities and Similar Instruments
An interpretation addressing whether members' shares in co-operative entities should be classified as liabilities or equity.
Example: The interpretation on members' shares in co-operative entities determines when such shares are classified as equity.
Merchandise
Goods held for resale.
Example: Merchandise is reported within inventory.
Merger
Combination of two entities into one.
Example: The merger created the largest bank in the region.
Method of accounting
The approach used to recognise and measure transactions.
Example: The company changed its method of accounting for leases.
Mid-market price
The price midway between the bid price and the asking price of a financial instrument.
Example: The shares were measured using the mid-market price at the reporting date.
Minerals and mineral products
Extracted natural resources and products derived from them.
Example: Inventory of minerals and mineral products is measured at net realizable value.
Minimum funding contributions
Required contributions set by law or regulation to fund a plan.
Example: The entity paid minimum funding contributions to the pension plan.
Minimum funding requirement
A legal minimum contribution required for a benefit plan.
Example: The minimum funding requirement increased the plan liability.
Minimum lease payments
Payments required over the lease term.
Example: Minimum lease payments are discounted in lease accounting.
Minority interest
The portion of equity in a subsidiary not attributable, directly or indirectly, to the parent entity.
Example: Minority interest is presented within equity in the consolidated statement of financial position.
Mismatch
A mismatch between assets and liabilities.
Example: The mismatch between maturities creates risk.
Misstatement
Difference between reported and required amounts.
Example: The auditor identified a misstatement in revenue.
Mitigating device
An instrument or action that reduces risk exposure.
Example: The derivative served as a mitigating device for currency risk.
Mixed attribute approach
An accounting approach under which different measurement bases are applied to different items.
Example: The standard uses a mixed attribute approach, measuring some assets at cost and others at fair value.
Monetary asset
An asset representing money or a claim to fixed amounts of money.
Example: Cash and trade receivables are monetary assets.
Monetary items
Units of currency held and assets and liabilities to be received or paid in fixed amounts.
Example: Monetary items are translated at the closing exchange rate.
Monetary items (monetary assets; monetary financial assets and financial liabilities; monetary financial instruments)
Assets and liabilities to be received or paid in fixed money units.
Example: Monetary items are retranslated at the closing rate.
Monitor compliance
Watching adherence to rules or covenants.
Example: The entity monitors compliance with loan covenants.
Mortality risk
The risk that actual mortality rates differ from those expected, affecting the measurement of insurance or benefit obligations.
Example: The insurer's mortality risk was assessed using recent actuarial tables.
Multi-employer (benefit) plans
Benefit plans shared by several employers.
Example: Multi-employer plans pool the assets of several employers.
Multi-employer plans (for an employee benefit plan)
Plan pooling contributions from several unrelated employers.
Example: Multi-employer plans spread risk across participating employers.
Multiple arrangements
Several separate contracts entered into at or near the same time.
Example: The multiple arrangements were assessed as a single transaction.
Multiple embedded derivatives
Two or more embedded derivatives contained in a single host contract.
Example: When a contract contains multiple embedded derivatives, they may be treated as a single compound derivative.
Mutual cooperative entity
An entity owned and controlled by its members for mutual benefit.
Example: The mutual cooperative entity distributes surpluses among its members.
Mutual entity
An entity whose owners receive dividends or returns rather than equity shares.
Example: A mutual entity provides its members with membership rights.
Mutual fund
A pooled investment vehicle owned by its investors.
Example: Units in the mutual fund are measured at fair value.
Mutual insurance company
An insurer owned by its policyholders.
Example: A mutual insurance company is owned by its policyholders.
National requirements
Local legal or regulatory requirements that an entity must comply with in addition to international standards.
Example: Where national requirements differ from IFRSs, the entity discloses the nature of the differences.
Nature of expense method
Presenting expenses by their nature.
Example: The nature of expense method groups expenses by type.
Negative goodwill
Gain when acquisition cost is below fair value acquired.
Example: The bargain purchase produced negative goodwill.
Negotiable paper
A transferable financial instrument that can be endorsed to another party.
Example: The negotiable paper was endorsed to the bank.
Net assets
The amount by which total assets exceed total liabilities, equivalent to equity.
Example: Net assets increased following the profitable year.
Net assets available for benefits
Plan assets less liabilities available to pay employee benefits.
Example: Net assets available for benefits grew over the reporting period.
Net basis
Presentation of assets and liabilities at their net amount.
Example: The liability was settled on a net basis.
Net cash-settled option
An option settled in cash equal to the net gain.
Example: The net cash-settled option is classified as a liability.
Net disposal proceeds
Proceeds from disposal less disposal costs.
Example: Net disposal proceeds reduce the gain or loss on disposal.
Net exchange differences
The net amount of gains and losses arising from translating foreign currency amounts at different exchange rates.
Example: Net exchange differences are recognised in other comprehensive income and accumulated in a separate component of equity.
Net identifiable assets
Identifiable assets less liabilities acquired.
Example: Goodwill is the excess of consideration over net identifiable assets.
Net income
Profit remaining after all expenses and taxes.
Example: Net income increased by twelve percent this year.
Net investment hedge
A hedge of currency exposure in a net investment abroad.
Example: The group used a net investment hedge for its overseas subsidiary.
Net investment in a foreign entity
The amount of the reporting entity's interest in the net assets of a foreign operation.
Example: The intercompany loan formed part of the net investment in a foreign entity.
Net investment in a foreign operation
The reporting entity's net share of a foreign operation's net assets.
Example: Exchange differences on a net investment in a foreign operation go to equity.
Net investment in a lease
The gross investment in a lease discounted at the implicit interest rate.
Example: The net investment in a lease equals gross investment less unearned finance income.
Net loss
Total expenses exceeding total income for a period.
Example: The entity reported a net loss for the year.
Net monetary position
The difference between monetary assets and liabilities.
Example: The net monetary position gives rise to a gain in inflation.
Net position
The difference between the total assets and total liabilities of a given exposure or category.
Example: The entity's net position in foreign currency was disclosed in the risk management note.
Net profit
Profit after all expenses and taxes.
Example: Net profit for the year increased by ten percent.
Net profit or loss [for the period]
Bottom-line result of the reporting period.
Example: Net profit or loss is presented on the income statement.
Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies
Guidance on reporting period profit, fundamental errors and policy changes.
Example: The standard addressed net profit and changes in accounting policies.
Net realisable value
The estimated selling price less the estimated costs of completion and the costs to make the sale.
Example: Inventory was written down to net realisable value because it had become obsolete.
Net selling price
Fair value less costs to sell an asset.
Example: The net selling price was lower than the asset's carrying amount.
Net settlement = Settle net
Settlement of a contract by paying or receiving only the net gain or loss.
Example: The derivatives allowed net settlement without physical delivery.
Neutrality
Freedom from bias in financial information.
Example: Neutrality supports faithful representation of the results.
Newly acquired asset
An asset recently obtained.
Example: A newly acquired asset is measured at fair value at acquisition.
Next most senior parent
The parent entity that is next in the group hierarchy above a lower level parent.
Example: The next most senior parent is required to prepare consolidated financial statements that include the whole group.
Non- adjusting event [after the balance sheet date]
An event after the reporting date not requiring adjustment.
Example: A decline in market value after year-end is a non-adjusting event.
Non-adjusting event after the reporting period
Event after period-end that does not change reported figures.
Example: A fire after year-end is a non-adjusting event after the reporting period.
Non-bank financial service firm
A financial institution that is not a licensed bank.
Example: The lessor is a non-bank financial service firm.
Non-cancellable lease
A lease that cannot be terminated by the lessee without incurring a penalty.
Example: The minimum lease payments under the non-cancellable lease were discounted to present value.
Non-cash assets
Assets other than cash and cash equivalents.
Example: Non-cash assets were contributed to the joint venture.
Non-cash collateral
Assets other than cash pledged as security for an obligation.
Example: Non-cash collateral must be measured at fair value.
Non-cash items
Income or expenses not involving cash movements.
Example: Depreciation is a non-cash item added back in the cash flow statement.
Non-cash transactions
Transactions that do not involve cash movements.
Example: Non-cash transactions are excluded from the cash flow statement.
Non-controlling interest
The equity in a subsidiary not attributable, directly or indirectly, to a parent.
Example: Non-controlling interests are presented separately within equity in the consolidated financial statements.
Non-controlling interests
Equity in a subsidiary not owned by the parent.
Example: Non-controlling interests are presented within equity.
Non-coterminous year-ends
Different reporting period ends within a group.
Example: Non-coterminous year-ends require adjusting for significant transactions.
Non-current assets
Assets expected to be realised beyond twelve months.
Example: Non-current assets include property, plant and equipment.
Non-current assets (or disposal groups) as held for distribution to owners
Assets expected to be distributed to owners in their capacity as owners rather than sold.
Example: The subsidiary's assets were classified as non-current assets held for distribution to owners.
Non-current Assets Held for Sale and Discontinued Operations
Classification and presentation of assets held for sale and discontinued operations.
Example: Non-current assets held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current liabilities
Obligations expected to be settled after more than twelve months.
Example: Non-current liabilities are presented separately from current ones.
Non-depreciable assets
Assets not subject to depreciation, such as land.
Example: Land is a non-depreciable asset.
Non-derivative
An instrument that is not a derivative.
Example: A non-derivative contract is classified separately.
Non-derivative contract
A contract whose value does not depend on an underlying variable in the manner of a derivative instrument.
Example: The ordinary share purchase contract is a non-derivative contract classified as an equity instrument.
Non-discretionary
Not subject to discretion.
Example: The levy is a non-discretionary payment.
Non-discretionary employee profit- sharing plan
Plan requiring fixed contributions regardless of management choice.
Example: The non-discretionary plan obliges the firm to pay bonuses.
Non-financial assets
Assets such as inventory and equipment rather than financial instruments.
Example: Inventory is a non-financial asset.
Non-linearities
Effects in a sensitivity analysis where a change in one variable does not produce a proportional change in the outcome.
Example: The sensitivity analysis disclosed non-linearities in the relationship between the variables.
Non-marketable securities
Securities that are not traded on an active market.
Example: Non-marketable securities are valued using valuation techniques.
Non-monetary asset
An asset not representing a fixed or determinable amount of money.
Example: Property, plant and equipment is a non-monetary asset.
Non-monetary government grants
Grants received as assets rather than cash.
Example: Non-monetary government grants are measured at fair value.
Non-owner changes in equity
Changes in equity from transactions other than with owners.
Example: Comprehensive income reflects non-owner changes in equity.
Non-puttable ordinary shares
Ordinary shares that do not give the holder the right to require the issuer to repurchase them for cash.
Example: Non-puttable ordinary shares are classified as equity because the holder cannot require redemption.
Non-reciprocal distributions of assets
Distributions made without receiving consideration.
Example: Non-reciprocal distributions of assets reduce equity.
Non-redeemable
Not subject to repayment or redemption by the holder.
Example: The preference shares are non-redeemable.
Non-refundable purchase taxes
Taxes on purchases that cannot be recovered from tax authorities.
Example: Non-refundable purchase taxes form part of the asset's cost.
Normal capacity of production facilities
The production level the facility is expected to achieve on average over a number of periods.
Example: Fixed overheads were allocated based on the normal capacity of the production facilities.
Not-for-profit organizations
Entities whose objective is not to generate profit for owners.
Example: Not-for-profit organizations report on their service performance.
Notes (receivable/payable)
Written promises to pay a sum of money at a future date.
Example: The entity signed a note payable to the bank.
Notional amount
The face amount underlying a derivative contract.
Example: The notional amount of the swap was 10 million.
O
Objective
Free from bias; also a goal or aim.
Example: The information should be objective and free from bias.
Obligating event
A past event that creates a present legal or constructive obligation for which a provision must be recognised.
Example: The environmental damage constituted an obligating event requiring recognition of a provision.
Obligation
A duty or responsibility to act or pay.
Example: A present obligation is required to recognise a provision.
Obligations for removal and restoration
Duties to dismantle assets and restore sites.
Example: The company recognised obligations for removal and restoration.
Observable (benchmark) interest rate
An interest rate directly observable in the market.
Example: The observable interest rate was used to discount cash flows.
Observable markets
Markets for which price information is readily available to participants.
Example: Fair value was determined from prices in observable markets.
Observed (benchmark) interest rate
A market interest rate observed for similar instruments.
Example: The fair value was estimated using the observed benchmark interest rate.
Observed market price
A quoted price taken directly from an active market.
Example: Fair value was based on the observed market price.
Obsolescence
Loss of usefulness due to technological or market change.
Example: Obsolescence reduced the asset's recoverable amount.
Obtaining or losing control
Gaining or losing power over an entity.
Example: Losing control results in deconsolidation.
Offer price
The price at which a party offers to buy or sell a financial instrument or asset.
Example: The offer price is used when measuring the fair value of a liability in the principal market.
Offset
Presenting an asset and liability net.
Example: Financial assets and liabilities are offset when the criteria are met.
Offsetting
Presenting assets and liabilities net in the statements.
Example: Offsetting is permitted only when required or allowed.
One-step approach
A method recognising a gain or loss in a single step.
Example: The one-step approach simplified the accounting treatment.
One-way reclassification
A change in the classification of a financial asset that is permitted in only one direction.
Example: The standard allowed a one-way reclassification of the instrument out of the trading category.
Onerous contract
A contract where unavoidable costs exceed expected economic benefits.
Example: A provision is recognized for the onerous contract.
Onerous minimum funding requirements
Funding obligations that create a liability because they are burdensome.
Example: Onerous minimum funding requirements gave rise to an additional liability.
Ongoing access
Continuous right to use an asset or facility.
Example: Ongoing access to the infrastructure is provided under the arrangement.
Opening balance
The balance at the beginning of a period.
Example: The opening balance agrees with the prior period's closing balance.
Opening IFRS balance sheet
The statement of financial position prepared at the date of transition to IFRSs, being the starting point for first-time adoption.
Example: The opening IFRS balance sheet was prepared by recognising and measuring all assets and liabilities in accordance with IFRSs.
Opening IFRS statement of financial position
The first IFRS balance sheet at transition.
Example: The opening IFRS statement of financial position is prepared at the transition date.
Operating activities
Principal revenue-producing activities of the entity.
Example: Cash from operating activities remained positive.
Operating cycle
The time between acquiring materials and receiving cash from customers.
Example: The operating cycle of the retailer is short.
Operating decisions
Decisions relating to the day-to-day use of resources in running an entity's business.
Example: Operating decisions about the plant are made by the segment's management.
Operating lease
A lease that does not transfer substantially all ownership risks and rewards.
Example: Operating lease payments are recognized as an expense on a straight-line basis.
Operating Leases—Incentives
Lease incentives received or receivable under an operating lease.
Example: The entity recognized operating lease incentives over the lease term.
Operating Segments
Components reported separately based on internal reporting.
Example: Operating segments are identified based on the chief operating decision maker's reports.
Operator
A party that operates a facility or service.
Example: The operator recognises revenue under the concession agreement.
Option
A contract that gives the holder the right, but not the obligation, to buy or sell an asset at a specified price.
Example: The holder of the call option may purchase the shares at the agreed exercise price.
Option contract
A contract granting a right to buy or sell.
Example: The option contract gives the holder the right to buy shares.
Option pricing model
Model used to estimate the fair value of an option.
Example: The entity used an option pricing model to value the share options.
Options, warrants and their equivalents
Contracts giving the holder the right to buy shares.
Example: The entity issued options, warrants and their equivalents to investors.
Ordinary activities
The regular business activities of an entity, excluding unusual or non-recurring items.
Example: The gain arose from ordinary activities and was included in operating profit.
Ordinary course of business
Normal day-to-day business activities carried out on arm's length terms.
Example: The sale was made in the ordinary course of business.
Ordinary equity holders
Owners of ordinary shares in an entity.
Example: Profits are distributed to ordinary equity holders as dividends.
Ordinary share
A basic equity instrument carrying voting rights.
Example: Ordinary shares rank after preference shares on liquidation.
Original asset
The asset before modification or exchange.
Example: The original asset's carrying amount affects the exchange.
Original cost
The amount originally paid to acquire an asset, before any adjustments.
Example: The original cost of the building was based on the purchase price plus transaction costs.
Originate and hold’ business model
A model where assets are held to collect cash flows.
Example: Under the originate and hold business model, assets are measured at amortised cost.
Originated loan approach
Method treating loans the entity originated itself for disclosure purposes.
Example: Under the originated loan approach, only loans the bank granted are included.
Originated loans and receivables
Loans and receivables created by the entity itself.
Example: Originated loans and receivables are measured at amortised cost.
Origination costs
Costs directly attributable to originating a financial instrument, such as a loan.
Example: Loan origination costs are amortised over the life of the loan using the effective interest method.
Originator of the financial asset
Entity that creates a financial asset by transferring goods or services.
Example: The bank was the originator of the financial asset.
Other components of equity
Equity items other than share capital and retained earnings.
Example: Other components of equity include the revaluation surplus.
Other comprehensive income
Income and expenses not recognised in profit or loss.
Example: Actuarial gains are presented in other comprehensive income.
Other long-term employee benefits
Long-term benefits other than pensions.
Example: Other long-term employee benefits require actuarial measurement.
Other price risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices other than those arising from interest or currency risk.
Example: Other price risk arises from changes in the market price of the equity instruments held.
Out of the money
An option with an unfavourable exercise price.
Example: The option is out of the money when the strike exceeds the share price.
Outreach programme
Activities to inform and consult stakeholders about a project.
Example: The board launched an outreach programme before revising the standard.
Outright sale
An unconditional sale transferring ownership completely and permanently.
Example: The asset was transferred through an outright sale.
Outsourcing arrangements
Agreements under which an entity contracts with a third party to perform activities on its behalf.
Example: Under the outsourcing arrangements, the service provider handles the payroll function.
Outsourcing provider
External party performing services previously handled in-house.
Example: The outsourcing provider handles our payroll processing.
Over-the-counter market
Market where securities trade directly between parties off exchange.
Example: The shares are traded on the over-the-counter market.
Overheads
Indirect costs of running a business.
Example: Production overheads are allocated to inventory.
Own credit risk
The risk of an entity's own default.
Example: Own credit risk affects the fair value of liabilities.
Owner
A holder of an ownership interest in an entity, such as a shareholder.
Example: Transactions with owners in their capacity as owners are recorded directly in equity.
Owner changes in equity
Equity changes from transactions with owners.
Example: Owner changes in equity include dividends and share issues.
Owner-occupied property
Property held by its owner for operations, not for rental.
Example: Owner-occupied property is accounted for under IAS 16.
Owners
Holders of instruments classified as equity in the entity.
Example: Distributions to owners are recognised directly in equity.
Ownership interest
The proportion of an entity's equity held by an investor.
Example: The entity acquired a 25% ownership interest in the joint venture.
Owners’ equity
Residual interest in the assets after deducting all liabilities.
Example: Owners' equity increased after the profitable year.
P
Paid in capital
Capital contributed by shareholders in exchange for shares.
Example: The company reported paid in capital of one million.
Parent
An entity that controls one or more other entities.
Example: The parent prepares consolidated financial statements.
Parent-subsidiary relationship
A control relationship between entities.
Example: The parent-subsidiary relationship triggers consolidation.
Partial disposal
The sale of a portion of an entity's interest in a subsidiary or investment without losing control or significant influence.
Example: The partial disposal of the subsidiary's shares did not result in a loss of control.
Partially-owned subsidiary
A subsidiary not wholly owned by the parent.
Example: A partially-owned subsidiary gives rise to non-controlling interests.
Participants [in a pension plan]
Members entitled to benefits under a pension plan.
Example: All participants in the pension plan receive annual statements.
Participating equity instruments
Equity instruments entitled to share in profits.
Example: Participating equity instruments receive a share of distributable profits.
Pass-through arrangement
A contract in which an entity collects amounts on behalf of third parties and remits them without recognising them as its own revenue.
Example: The utility acted as agent under a pass-through arrangement and recorded only the net fee as revenue.
Past business combination
Combination that occurred in an earlier reporting period.
Example: The goodwill arose from a past business combination.
Past due
Payment not made by its contractual due date.
Example: The receivable was past due by thirty days.
Past event
An event that has already occurred and creates an obligation.
Example: A past event gave rise to a present obligation.
Past service cost
Change in benefit obligation for past service.
Example: Past service cost is recognised when the plan is amended.
Payables
Amounts owed by an entity to its suppliers or other parties for goods or services received.
Example: Trade payables are presented as current liabilities if payable within twelve months.
Pension
Retirement income paid to a person.
Example: The pension is paid monthly after retirement.
Pension liability
Present obligation to pay future retirement benefits to employees.
Example: The company recognised a pension liability in its statement of financial position.
Pension scheme
Arrangement providing post-employment benefits to employees.
Example: The company operates a defined benefit pension scheme.
Percentage of completion method
A revenue recognition method under which income is recognised according to the stage of completion of a contract.
Example: Revenue on the long-term construction contract was recognised using the percentage of completion method.
Performance
Degree to which an entity achieves its financial objectives.
Example: The company's performance improved in the second quarter.
Performance (=Financial performance)
Extent to which an entity achieves its financial results.
Example: Financial performance is measured by profit and returns.
Performance conditions
Conditions requiring specified performance for an award to vest.
Example: Share awards vest subject to performance conditions.
Period of service
The period an employee provides service.
Example: Benefits accrue over the period of service.
Period-certain annuity
An annuity that guarantees payments for a fixed number of periods, regardless of whether the recipient survives.
Example: A period-certain annuity was purchased to provide income for a fixed ten-year term.
Period-specific effects
Effects limited to a specific period.
Example: Period-specific effects are not extrapolated to other periods.
Perpetual debt instruments
Debt instruments with no fixed maturity date.
Example: Perpetual debt instruments pay interest indefinitely but never repay principal.
Persistency bonus
Bonus paid for policy renewals or continued participation.
Example: Policyholders received a persistency bonus for renewing their contracts.
Personnel
The employees of an entity, whose costs and benefits are recognised in the financial statements.
Example: Personnel costs increased as the company expanded its workforce.
Phantom shares
Cash-settled awards valued by reference to the share price.
Example: Phantom shares give employees a cash bonus tied to share price.
Physical capital
Capital viewed as the physical productive capacity of an entity.
Example: Physical capital is measured in units of production capacity.
Plan assets (of an employee benefit plan)
Assets held by a fund to meet employee benefit obligations.
Example: Plan assets are measured at fair value at the reporting date.
Plan commitment date
The date on which a plan is committed.
Example: The plan commitment date determines the accounting.
Plan to sell the controlling interest in a subsidiary
A formal plan to dispose of a controlling interest in a subsidiary, which may trigger classification as held for sale.
Example: A plan to sell the controlling interest in a subsidiary requires the assets to be presented as held for sale.
Pledged as collateral
Provided as security for a loan.
Example: The building was pledged as collateral for the loan.
Policyholder
Person or entity that holds an insurance contract.
Example: The policyholder may surrender the contract at any time.
Pooling of interest method
Old method combining entities without recognising goodwill.
Example: The pooling of interest method was applied to the business combination.
Portfolio
A group of financial assets or liabilities managed together to achieve a common objective.
Example: The derivatives are managed as part of a portfolio of interest rate exposures.
Portfolio Hedge of Interest Rate Risk
Hedge of interest rate risk on a portfolio of items.
Example: The bank applied a portfolio hedge of interest rate risk.
Portfolio transfer
Transfer of a group of insurance contracts or assets.
Example: The insurer completed a portfolio transfer of its policies.
Post-employment benefit plans
Plans providing benefits after employment ends.
Example: Post-employment benefit plans are classified as defined contribution or defined benefit.
Post-employment benefits
Benefits payable after employment ends.
Example: Post-employment benefits include pensions and lump sums.
Post-tax profit or loss
The profit or loss of an entity after deducting income tax expense.
Example: Profit or loss from discontinued operations is presented on a post-tax basis.
Post-vesting transfer restriction
A restriction on transferring shares after vesting.
Example: The post-vesting transfer restriction affects the option's fair value.
Potential ordinary share
Instrument that may entitle its holder to ordinary shares.
Example: Convertible bonds are potential ordinary shares in diluted EPS.
Potential voting rights
Rights to obtain voting power if currently exercisable.
Example: Potential voting rights are considered when assessing control.
Practical ability to sell the asset
The capacity of an entity to dispose of an asset in its present condition without undue delay.
Example: Classification as held for sale required the entity to have the practical ability to sell the asset.
Pre-combination
Period or amounts existing before the business combination date.
Example: Pre-combination revenues were restated in the consolidated accounts.
Preface to International Financial Reporting Interpretations Committee
Introductory document explaining the Interpretations Committee's role and authority.
Example: The preface describes the Interpretations Committee's objectives.
Preface to International Financial Reporting Standards
Introductory document setting out the purpose of IFRS.
Example: The Preface explains the objectives and scope of IFRSs.
Preference dividend
Dividend paid on preference shares.
Example: The preference dividend has priority over ordinary dividends.
Preference share
A share that carries a preferential right to dividends or repayment of capital before ordinary shares.
Example: The preference shares are classified as a liability because they are mandatorily redeemable.
Premium
An amount paid above the basic price.
Example: The share premium is recognised in equity.
Preparation and Presentation of Financial Statements
Title of IAS 1, setting requirements for financial statements.
Example: IAS 1 Preparation and Presentation of Financial Statements applies to all entities.
Preparers
Those who prepare the financial statements of an entity.
Example: Preparers must apply the standards consistently across periods.
Prepayment risk
The risk that borrowers repay loans earlier than expected, reducing interest income.
Example: The mortgage portfolio exposed the bank to prepayment risk.
Prepayments
Amounts paid in advance for goods or services not yet received.
Example: Prepayments are shown as a current asset.
Prepayments of future contributions
Early payments of contributions due in future periods.
Example: The entity made prepayments of future contributions to the plan.
Present obligation
An existing duty arising from a past event.
Example: A provision requires a present obligation at the reporting date.
Present value
The discounted value of future cash flows.
Example: The provision is measured at the present value of expected outflows.
Present value of a defined benefit obligation
The discounted value of expected future benefit payments required to settle a defined benefit obligation.
Example: The present value of a defined benefit obligation is measured using actuarial assumptions at the reporting date.
Presentation
How items are displayed in the statements.
Example: Presentation of financial statements follows the standard.
Presentation currency
Currency in which the financial statements are presented.
Example: The group's presentation currency is the US dollar.
Presentation of Financial Statements
Standard setting out how financial statements are presented.
Example: IAS 1 Presentation of Financial Statements governs the format.
Previous GAAP
The accounting framework an entity applied immediately before adopting IFRS.
Example: The reconciliation from previous GAAP to IFRS identified several adjustments to equity.
Price earnings ratios
Market price per share divided by earnings per share.
Example: Investors compared the price earnings ratios of both firms.
Price index
Statistical measure tracking changes in prices of goods.
Example: The contract is linked to a consumer price index.
Price risk
The risk that market prices will change unfavourably.
Example: The entity is exposed to commodity price risk.
Primary basis of accounting
The foundation principles of accounting.
Example: Accrual and going concern are primary bases of accounting.
Primary economic environment
The economic environment in which an entity primarily generates and expends cash, determining its functional currency.
Example: The functional currency is the currency of the primary economic environment in which the entity operates.
Primary financial instruments
Instruments other than derivatives.
Example: Primary financial instruments include loans and shares.
Primary objective
Main goal that a standard or framework aims to achieve.
Example: The primary objective of IFRS 9 is to improve financial instrument accounting.
Primary reporting format
The main basis on which segment information is presented.
Example: Business segments were identified as the primary reporting format.
Principal amount
The face amount of a debt instrument on which interest is calculated, excluding interest itself.
Example: The principal amount of the loan is repayable in ten equal instalments.
Principal-only strip
Security receiving only principal repayments from underlying assets.
Example: The principal-only strip pays no interest until maturity.
Principles-based approach
Accounting approach relying on broad principles rather than detailed rules.
Example: IFRS adopts a principles-based approach to standard setting.
Prior period error
An omission or misstatement in prior period financial statements.
Example: The prior period error was corrected retrospectively.
Private entity
An entity whose securities are not publicly traded.
Example: A private entity may use a simplified reporting framework.
Privatisation
The transfer of ownership of a state-owned entity to the private sector.
Example: The privatisation of the state-owned enterprise was accounted for as a sale by the government.
Pro forma
A hypothetical or preliminary presentation.
Example: Pro forma figures illustrate the effect of a transaction.
Pro rata basis
Allocation in proportion to each party's share.
Example: Costs were allocated on a pro rata basis to each segment.
Pro rata share of the net assets
Proportional portion of net assets attributable to the holder.
Example: The minority holds a pro rata share of the net assets.
Probability recognition criterion
The condition that an item is recognised only if it is probable that economic benefits will flow to or from the entity.
Example: The provision met the probability recognition criterion and was recorded in the accounts.
Probable
More likely than not to occur.
Example: A provision is recognised when an outflow is probable.
Probable maximum loss
Largest insurance loss considered likely under normal conditions.
Example: The probable maximum loss was estimated by actuaries.
Product warranty obligations
Obligations to repair or replace products under warranty.
Example: Product warranty obligations are recognised as a provision on sale.
Production overheads
Indirect costs of production.
Example: Production overheads are allocated to inventory.
Production process
The series of activities by which raw materials are converted into finished goods.
Example: Normal capacity is used to determine the fixed overhead allocated during the production process.
Profit
Income exceeding expenses.
Example: Profit for the period is reported in the income statement.
Profit after tax
Net earnings remaining after deducting income tax expense.
Example: Profit after tax rose to five million euros.
Profit allowance
An allowance deducted from profit for expected losses.
Example: A profit allowance was recognised for anticipated future losses.
Profit before tax
The profit earned by an entity before deducting income tax expense.
Example: Profit before tax for the year was 12 million.
Profit or loss
Total income less expenses for a reporting period.
Example: Gains were recognised in profit or loss.
Profit sharing
Arrangement distributing profits among employees or partners.
Example: The company operates an employee profit sharing plan.
Progress billing
Invoicing based on the stage of completion of work.
Example: Progress billings are offset against contract assets.
Progress payment
Payments made as work progresses.
Example: Progress payments are recognised against the contract asset.
Prohibitions
Restrictions that prevent an entity from applying a particular accounting treatment or option.
Example: The standard sets out prohibitions on changing accounting policies retrospectively without justification.
Projected unit credit method
An actuarial method for defined benefit plans.
Example: The projected unit credit method allocates benefits to periods of service.
Promissory notes
Written promise to pay a stated sum at a future date.
Example: The company issued promissory notes to secure short-term funding.
Property interest
A right or interest in a property.
Example: The party holds a property interest in the leased building.
Property revaluation
The restatement of property to fair value under the revaluation model.
Example: The property revaluation increased the carrying amount of the building and created a revaluation surplus.
Property, plant and equipment
Tangible assets held for use in producing goods or services.
Example: Machinery is classified as property, plant and equipment.
Property, Plant and Equipment – Compensation for the Impairment or Loss of Items
Compensation received for impaired or lost property and equipment.
Example: Compensation for loss of items is recognized in profit or loss.
Property, Plant and Equipment – Major Inspection or Overhaul Costs
Costs of major inspections recognised as part of an asset.
Example: Major inspection costs are capitalised when they meet recognition criteria.
Proportionate consolidation
Consolidating a proportionate share of assets and liabilities.
Example: Proportionate consolidation is no longer common for joint ventures.
Proportionate interest
A share of the results or net assets of an arrangement corresponding to the entity's ownership percentage.
Example: Under proportionate consolidation, the venturer recognised its proportionate interest in the joint venture's assets.
Proposed improvements
Suggested amendments to standards.
Example: The proposed improvements were exposed for comment.
Prospective application
Applying a change only to events after the change date.
Example: The new policy was applied prospectively from January.
Provision
A liability of uncertain timing or amount.
Example: A provision was recognised for the warranty obligations.
Provisional value
A temporary amount recognised in a business combination when the fair value of an asset or liability is not yet final.
Example: The provisional value of the acquired intangible was adjusted within the measurement period.
Provisions, Contingent Liabilities and Contingent Assets
Standard governing recognition of provisions and contingencies.
Example: IAS 37 covers provisions, contingent liabilities and contingent assets.
Proxy
Person or document authorized to act for another.
Example: Shareholders may vote by proxy at the meeting.
Prudence
Caution in making judgements under uncertainty.
Example: Prudence supports neutral treatment of uncertain estimates.
Prudential supervisors
Regulators overseeing financial stability.
Example: Prudential supervisors require banks to hold sufficient capital.
Public accountability
The responsibility of an entity to be accountable to the public for the resources entrusted to it, a criterion for IFRS application.
Example: Public accountability is one of the criteria that determines whether an entity must apply IFRSs.
Public entity
An entity whose securities are publicly traded.
Example: A public entity must apply full IFRS.
Public sector
Government-controlled entities providing public services.
Example: Public sector entities may apply IPSAS instead of IFRS.
Public securities markets
Markets where securities are publicly traded.
Example: The shares are quoted on public securities markets.
Public-to-private’ service concession arrangement
An arrangement in which a government grants a private operator the right to provide public services.
Example: The toll road was operated under a public-to-private service concession arrangement.
Publicly quoted entity
Entity whose securities are traded on a public market.
Example: A publicly quoted entity must file quarterly reports.
Publish what you pay campaign
Campaign urging companies to disclose payments to governments.
Example: The publish what you pay campaign promotes extractive industry transparency.
Published price
A quoted price available in an active market.
Example: The published price was used to determine fair value.
Purchase consideration
What the acquirer pays in a business combination.
Example: Purchase consideration may include contingent payments.
Purchase method
A method of accounting for a business combination in which the acquirer recognises the identifiable assets and liabilities at fair value.
Example: Under the purchase method, the cost of the combination is allocated to the identifiable assets acquired.
Purchase price
The price paid to acquire something.
Example: The purchase price was allocated to the assets acquired.
Purchased option hedging instrument
Option bought to offset exposure in a hedging relationship.
Example: A purchased option hedging instrument caps the entity's downside risk.
Purchased options
Option contracts acquired by the entity as a holder.
Example: Purchased options were held to hedge price risk.
Put option
A contract giving the holder the right, but not the obligation, to sell an asset at a set price.
Example: The non-controlling interest held a put option that could require the group to buy its shares.
Puttable
Instrument allowing the holder to require redemption.
Example: Puttable shares are classified as financial liabilities.
Puttable Financial Instruments and Obligations Arising on Liquidation
Instruments giving holders a right to put them back.
Example: Puttable instruments may require the issuer to repurchase shares.
Puttable instrument
An instrument allowing the holder to require redemption.
Example: A puttable instrument may be classified as equity under strict conditions.
Q-R
Qualify for recognition/derecognition
Meeting the criteria to recognise or remove an item.
Example: The asset must qualify for recognition before it is recorded.
Qualifying asset
An asset that necessarily takes a substantial period of time to get ready for its intended use or sale, for which borrowing costs may be capitalised.
Example: Borrowing costs are capitalised to the extent they relate to the acquisition of a qualifying asset.
Qualifying insurance policy
A policy meeting specified criteria.
Example: The qualifying insurance policy supports the retirement benefit.
Qualitative characteristics
Attributes that make financial information useful to users.
Example: Relevance and faithful representation are fundamental qualitative characteristics.
Quantitative disclosures
Numerical information disclosed in the financial statements.
Example: Quantitative disclosures about credit risk were provided.
Quoted equity instrument
An equity instrument for which published market prices are available.
Example: Fair value of the quoted equity instrument was based on the closing market price.
Quoted market price
Price available in an active market for the asset.
Example: The fair value equals the quoted market price.
Rated and unrated credit exposures
Credit exposures classified by whether they carry a rating.
Example: The bank disclosed its rated and unrated credit exposures.
Reacquired rights
Rights reacquired by the acquirer in a business combination.
Example: Reacquired rights are recognised separately from goodwill.
Reacquisition provision
A provision relating to the reacquisition of an item.
Example: The reacquisition provision affects the contract's measurement.
Readily obtainable assets
Assets that can be purchased in the market as an alternative to constructing or developing them.
Example: The cost of a self-constructed asset does not exceed the cost of readily obtainable assets of equivalent quality.
Realisable value
The amount obtainable on sale.
Example: Inventory is measured at the lower of cost and realisable value.
Reasonable estimate
Estimate based on adequate information and sound judgement.
Example: The provision was based on a reasonable estimate of future costs.
Reasonably possible
More than remote but less than likely to occur.
Example: A loss was assessed as reasonably possible, not probable.
Reassessment
A review of a previous judgement or measurement to determine whether it remains appropriate.
Example: A reassessment of the lease term was required after the renewal option was exercised.
Reassessment of Embedded Derivatives
Standard requiring review whether an embedded derivative must be separated.
Example: IFRIC 9 addresses the reassessment of embedded derivatives.
Rebates
Amounts returned to a customer after a purchase.
Example: The entity recognized rebates as a reduction of revenue.
Rebuttable presumption
An assumption accepted unless evidence disproves it.
Example: There is a rebuttable presumption that the acquirer is the former owner.
Receivables
Amounts owed to an entity by customers or others.
Example: Receivables are measured at amortised cost less impairment.
Reclassification adjustments
Amounts reclassified from other comprehensive income to profit or loss in the current period.
Example: Reclassification adjustments are disclosed separately to avoid double counting items of other comprehensive income.
Reclassification date
The date on which an item is reclassified.
Example: The reclassification date marks the change in measurement.
Recognised financial instruments
Financial instruments recorded in the statement of financial position.
Example: Only recognised financial instruments appear in the balance sheet.
Recognition
Incorporating an item into the financial statements.
Example: Recognition of the asset occurred when control transferred.
Recognition as an expense
The treatment of a cost as an expense in profit or loss rather than as an asset.
Example: Research costs were recognised as an expense when incurred.
Recognition criteria
Conditions required to record an item in the financial statements.
Example: The asset met the recognition criteria.
Reconciliation
Process of making two sets of figures consistent.
Example: The reconciliation explains differences between the two balances.
Recourse loan
A loan for which the lender has recourse to the borrower.
Example: The recourse loan was recognised as a financial liability.
Recoverability
The ability to recover a carrying amount.
Example: The recoverability of the asset was questioned.
Recoverable
Capable of being recovered through future use or sale, as opposed to being written off.
Example: The asset's carrying amount was reduced to its recoverable amount.
Recoverable amount
The higher of fair value less costs and value in use.
Example: The recoverable amount exceeded the carrying amount.
Recycling
Transferring amounts in other comprehensive income to profit or loss.
Example: Recycling of gains on disposal is permitted for some items.
Redemption
Repayment or cancellation of an instrument by the issuer.
Example: The bonds are subject to redemption at the option of the issuer.
Redemption amount
The amount payable to the holder when a financial instrument is redeemed.
Example: The redemption amount of the preference shares was disclosed in the notes.
Redemption price
Amount paid to redeem a security at or before maturity.
Example: The redemption price was set at par value.
Redemption prohibition
Restriction preventing an entity from redeeming its instruments.
Example: A redemption prohibition applied to the preference shares.
Refinancing
Replacing an existing debt with new financing.
Example: Refinancing completed before year-end allowed non-current classification.
Reformatted
Restructured for a new presentation.
Example: The comparative figures were reformatted for consistency.
Reformatted (IAS)
A standard that has been restructured or reissued in a new format without changing its substantive requirements.
Example: The reformatted International Accounting Standard was issued with updated references but no change in content.
Refund or a reduction in future contributions
Recoveries from a benefit plan.
Example: A refund reflects a surplus in the plan.
Regular way purchase or sale
Purchase or sale of a financial asset under a standard contract.
Example: Regular way purchases are recognised on trade date or settlement date.
Regulator
Body that supervises and regulates financial markets.
Example: The regulator required additional disclosures from the bank.
Rehabilitate-operate-transfer
A concession model in which the operator renovates existing infrastructure, operates it and then transfers it back to the public sector.
Example: The water treatment plant was modernised under a rehabilitate-operate-transfer concession.
Reimbursement
Compensation received for costs or losses incurred.
Example: The insurer confirmed reimbursement of the loss.
Reinsurance assets
Ceded reinsurance amounts recognized as an asset.
Example: Reinsurance assets are presented separately from liabilities.
Reinsurance contract
A contract by which an insurer transfers risk to a reinsurer.
Example: The reinsurance contract was assessed for significant risk transfer.
Reinsurer
An insurer that insures another insurer.
Example: The reinsurer assumes part of the insurer's risk.
Reinvestment of dividends
The use of dividends received to purchase additional shares instead of taking cash.
Example: The shareholder elected reinvestment of dividends to acquire additional shares in the company.
Related parties
Parties with a relationship to the entity.
Example: Related parties include key management personnel.
Related Party Disclosures
IAS 24, requiring disclosure of related party transactions.
Example: Related Party Disclosures require disclosure of key management compensation.
Related party transaction
Transfer of resources between related parties.
Example: Each related party transaction must be disclosed.
Relevance
The qualitative characteristic whereby information is capable of making a difference in users' decisions.
Example: The information had predictive value and therefore possessed relevance.
Reliability
Quality of information that is free from material error.
Example: Reliability of the estimate was questioned by auditors.
Reliability exception
Exception allowing departure from a requirement for reliability reasons.
Example: The reliability exception applies to certain related party disclosures.
Reliable measurement test
A test of whether an amount can be measured reliably.
Example: The provision failed the reliable measurement test.
Reload feature
A feature granting new options automatically.
Example: The reload feature grants additional options on exercise.
Reload option
A share option feature that grants the holder new options when existing options are exercised, replacing the shares used.
Example: Under the reload option feature, exercising the option granted the holder a new option over the same number of shares.
Remeasurement
Recalculating an amount using new information.
Example: Remeasurement of the plan was recognised in other comprehensive income.
Removal of accounts provision
Right to remove accounts from a securitisation structure.
Example: The removal of accounts provision lets the transferor withdraw receivables.
Rendering of services
Provision of services generating revenue from contracts.
Example: Revenue from the rendering of services is recognised over time.
Renewal rights
Rights held by a lessee or counterparty to extend the term of a contract.
Example: The renewal rights were considered when determining the enforceable lease term.
Reorganisations
Restructuring of an entity's legal or operating structure.
Example: Reorganisations often involve significant one-off costs.
Repackaging
Combining and reselling financial instruments in a new form.
Example: Repackaging transactions were excluded from the consolidation scope.
Repairs and maintenance
Routine spending to keep assets in working order.
Example: Repairs and maintenance are expensed as incurred.
Repayment
Returning borrowed funds.
Example: Repayment of the loan is due in five years.
Replacement award
A share-based payment award granted to replace an existing award, for example in a business combination.
Example: The replacement award granted to the acquiree's employees was measured with reference to the original award.
Replacement cost of an asset
The cost to replace an asset.
Example: Replacement cost reflects current market prices.
Repledge
Pledging collateral received from a counterparty to a third party.
Example: The bank repledged the securities received as collateral.
Reportable segment
A segment meeting the thresholds for separate reporting.
Example: Only one reportable segment was identified this year.
Reporting currency
The currency in which an entity presents its financial statements.
Example: The foreign operation's results were translated into the reporting currency.
Reporting Currency – Measurement And Presentation of Financial Statements Under IAS 21 and IAS 29
Guidance on measuring and presenting statements under IAS 21 and IAS 29.
Example: The paper discusses the reporting currency under IAS 21 and IAS 29.
Reporting Currency – Translation from Measurement Currency to Presentation Currency
Converting amounts from measurement currency into the reporting currency.
Example: Translation to the presentation currency uses the closing rate.
Reporting date
The date of the entity's financial statements.
Example: Assets are measured as at the reporting date.
Reporting enterprise
The entity whose financial statements are prepared.
Example: The reporting enterprise presents its own financial statements.
Reporting entity
An entity, or a portion of an entity, for which financial statements are prepared and presented.
Example: A reporting entity may be a single entity or a group comprising a parent and its subsidiaries.
Reporting package
A set of reports prepared for consolidation.
Example: Subsidiaries submit a reporting package to the parent.
Reporting period
Period covered by a set of financial statements.
Example: The reporting period ends on 31 December each year.
Representational faithfulness
Information faithfully representing the economic phenomena it purports to depict.
Example: Representational faithfulness requires complete and neutral information.
Repurchase agreement
An agreement to sell securities with a commitment to buy them back at a later date.
Example: The securities sold under the repurchase agreement were recorded as a collateralised borrowing.
Repurchase transactions
Sale of assets with an agreement to buy them back.
Example: Repurchase transactions are treated as secured borrowings.
Research
Original investigation undertaken to obtain new knowledge.
Example: Research expenditure is expensed when incurred.
Reserve
A component of equity set aside for a purpose.
Example: The revaluation reserve is presented within equity.
Residual cost
The remaining carrying amount of an item.
Example: The residual cost reflects the remaining unrecognised value.
Residual interest
The remaining interest in an entity after other interests have been accounted for, often measured at fair value.
Example: The residual interest retained after the disposal was remeasured at fair value.
Residual value
The estimated value at the end of useful life.
Example: The residual value is deducted from cost to find the depreciable amount.
Resolution of the IASB – Withdrawal of IAS 15 by the Board
Board decision removing IAS 15 from the standards.
Example: The resolution of the IASB withdrew IAS 15 from its standards.
Restatement
Correcting previously issued financial statements for errors.
Example: A restatement of prior period figures was required.
Restricted shares
Shares subject to restrictions on transfer or vesting, often issued to employees as compensation.
Example: The restricted shares granted to executives vest over three years.
Restructuring
Programme that materially changes the scope or manner of operations.
Example: The restructuring closed two production plants.
Restructuring provision
Liability recognized for the costs of a planned restructuring.
Example: The restructuring provision covers employee termination costs.
Result
The profit or loss for a period.
Example: The result for the year was reported after tax.
Retail method
Estimating inventory value using retail prices.
Example: The retail method estimates closing inventory at selling price less margin.
Retail store chain
A business operating multiple retail outlets under common ownership or management.
Example: The retail store chain reported strong like-for-like sales growth during the year.
Retained earnings
Cumulative profits not distributed.
Example: Retained earnings are presented within equity.
Retained profit
Cumulative profits kept in the entity rather than distributed.
Example: Retained profit is reported within equity.
Retirement benefit plans
Arrangements providing benefits after employment ends.
Example: The group sponsors several retirement benefit plans.
Retroactive classification
The application of a classification decision to earlier periods as well as the current one.
Example: The change in segment structure required retroactive classification of prior period figures.
Retrospective application
Applying a new policy as if it had always been used.
Example: The change was made by retrospective application.
Retrospective restatement
Correcting prior period figures as if the error never occurred.
Example: The error was corrected through retrospective restatement.
Return on investment
A measure of the gain relative to the investment made.
Example: The project's return on investment exceeded the hurdle rate.
Return on plan assets (of an employee benefit plan)
Investment income earned on plan assets.
Example: Return on plan assets reduces the pension cost.
Revaluation
The remeasurement of a non-current asset to its fair value, with the increase recognised in other comprehensive income.
Example: A revaluation of the property increased its carrying amount and recognised the surplus in other comprehensive income.
Revaluation reserve
A reserve arising from revaluing assets.
Example: The revaluation reserve increased with the property revaluation.
Revaluation surplus
Increase in the carrying amount of an asset on revaluation.
Example: The revaluation surplus is recognised in other comprehensive income.
Revalued amount of an asset
Fair value at revaluation date less subsequent depreciation.
Example: The revalued amount of an asset replaces its carrying amount.
Revenue
Income arising from the ordinary activities of an entity, such as the sale of goods or services.
Example: Revenue from contracts with customers is recognised when control of the goods transfers.
Revenue—Barter Transactions Involving Advertising Services
Guidance on recognising revenue from barter advertising deals.
Example: SIC 31 covers barter transactions involving advertising services.
Reversal
Reduction or cancellation of a previously recognized amount.
Example: The reversal of the impairment loss increased profit.
Reverse acquisition
A business combination where the legal acquiree is the accounting acquirer.
Example: In a reverse acquisition, the legal subsidiary is the accounting acquirer.
Reverse share split
Combining shares to raise the nominal value.
Example: A reverse share split reduces the number of shares outstanding.
Revised
Amended or updated, as applied to a standard, estimate or disclosure that has been changed.
Example: The entity applied the revised standard prospectively from the beginning of the reporting period.
Revised (IAS)
An amended version of a standard.
Example: The revised standard applies to annual periods beginning after 2020.
Revoke a designation
Cancelling a previous designation of a financial asset or liability.
Example: An entity may revoke a designation only in limited circumstances.
Rewards associated with a leased asset
Benefits and risks expected from the leased asset.
Example: Rewards associated with a leased asset indicate a finance lease.
Right of first refusal
A contractual right to be offered an asset before it is offered to other parties.
Example: The shareholder held a right of first refusal over any transfer of the shares.
Right of set-off
Legal right to offset amounts owed between two parties.
Example: The entity had a right of set-off over the balances.
Right to explore
Right held by an entity to explore for resources.
Example: The entity holds the right to explore the offshore block.
Rights issue
An offer of new shares to existing shareholders.
Example: The rights issue was made pro rata to existing shareholders.
Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
Rights over interests in decommissioning funds.
Example: These rights to interests are recognised as an asset.
Risk
The possibility that actual outcomes will differ from expected outcomes, including financial risks such as credit, liquidity and market risk.
Example: The entity discloses the nature and extent of the risks arising from financial instruments.
Risk exposure
The amount subject to risk.
Example: The entity disclosed its risk exposure by type.
Risk of divergence
Risk that measured values move in different directions.
Example: The hedge failed due to the risk of divergence between the variables.
Risk-free interest rate
Return on an investment with no default risk.
Example: The discount rate was based on the risk-free interest rate.
Risks and rewards
The exposures and benefits of ownership of an asset, used to assess transfer in leasing and derecognition.
Example: The lease transferred substantially all the risks and rewards of ownership to the lessee.
Risks and rewards of ownership
Exposure to gains and losses tied to owning an asset.
Example: Transfer of risks and rewards of ownership determines recognition.
Risks associated with a leased asset
Risks arising from ownership or use of a leased asset.
Example: Substantially all risks associated with the leased asset were transferred.
Roll back
Reducing a carrying amount to a lower prior value.
Example: The entity had to roll back the revaluation surplus.
Roll forward
Carrying a balance forward into the next period.
Example: The movement schedule rolls forward the provision balance.
Royalty
A payment made to the owner of an asset, such as a patent or trademark, for the right to use it.
Example: Royalty income from licensing the trademark is recognised on an accrual basis.
S
Sale
Transferring an asset in exchange for consideration.
Example: Revenue from the sale is recognised when control transfers.
Sale and leaseback transaction
Transaction where an owner sells an asset and leases it back.
Example: The company recorded a gain on the sale and leaseback transaction.
SARS
Rights paying the increase in share value to employees.
Example: Employees were granted SARS settled in cash.
Scope
The range of transactions or entities to which a standard or policy applies.
Example: The arrangement fell within the scope of the leasing standard.
Scope of IFRS 2
Extent to which share-based payment rules apply.
Example: The scope of IFRS 2 includes equity-settled awards.
Secondary segment information
Segment disclosures provided for the secondary reporting format.
Example: Secondary segment information is reported by geographic area.
Securities
Tradable financial instruments such as shares and bonds.
Example: Securities held for trading are measured at fair value.
Securitisation
Converting assets into tradable securities.
Example: Securitisation transfers financial assets to a special purpose entity.
Segment
A distinguishable component of an entity for which separate financial information is available and evaluated by management.
Example: Each segment's assets and liabilities are disclosed in the segment reporting note.
Segment assets
Assets attributable to a reportable segment.
Example: Segment assets are disclosed for each segment.
Segment expense
Expense arising from a segment's operating activities.
Example: Segment expense includes costs directly attributable to the segment.
Segment manager
Person responsible for a reportable segment's operations.
Example: The segment manager reports results to the chief executive.
Segment profit or loss
The profit or loss of an operating segment as reported to the chief operating decision maker.
Example: The segment profit or loss for each reportable segment was disclosed in the notes.
Segment Reporting
Disclosure of financial information by operating segment.
Example: Segment reporting helps users assess different business lines.
Segment result
Profit or loss of a reportable operating segment.
Example: Segment result is reported before unallocated corporate costs.
Segment revenue
Revenue attributable to a reportable segment.
Example: Segment revenue is disclosed for each reportable segment.
Self-constructed asset
An asset built by the entity itself.
Example: The cost of a self-constructed asset includes directly attributable costs.
Self-insurance
A risk management approach in which an entity retains a risk rather than transferring it to an insurer.
Example: The entity operates a self-insurance arrangement for small property damage claims.
Selling price
The price at which a good is sold.
Example: The selling price determines the revenue for the unit.
Sensitivity analysis
Technique showing how outcomes change with changes in assumptions.
Example: The bank disclosed sensitivity analysis for market risk.
Separability
Capability of an asset to be separated and sold.
Example: Separability is a criterion for recognising intangible assets.
Separability criterion
The condition that an intangible asset is capable of being separated and sold or transferred.
Example: The software met the separability criterion and was recognised as an intangible asset.
Separable assets
Assets that can be separated and sold independently.
Example: Separable assets were identified in the purchase price allocation.
Separate financial statements
Statements presented by a parent or investor alone.
Example: Separate financial statements account for subsidiaries at cost.
Separate liability
A liability recognised on its own rather than as part of another.
Example: The guarantee is recognised as a separate liability.
Separately identifiable
Capable of being identified separately.
Example: The asset is separately identifiable from goodwill.
Service Concession Arrangement
An arrangement in which a government grants a private operator the right to provide public services over a specified period.
Example: Under a service concession arrangement, the operator recognises a financial asset or an intangible asset.
Service cost
The benefit earned in the current period.
Example: Service cost is recognised in profit or loss.
Service date
Date on which an employee provides services under a plan.
Example: Benefits accrue from the employee's service date.
Service mark
Trademark distinguishing services of one provider.
Example: The company registered a service mark for its brand.
Servicing asset
A right to receive fees for servicing financial assets that exceed adequate compensation.
Example: The retained servicing asset was measured at fair value at inception.
Servicing costs
Costs of administering loans or assets for others.
Example: Servicing costs reduced the net interest income.
Servicing liabilities
Obligations to service financial assets retained after transfer.
Example: Servicing liabilities are measured at fair value initially.
Servicing liability
An obligation to service financial assets.
Example: A servicing liability was recognised for the retained servicing.
Servicing rights
Rights to service transferred financial assets.
Example: Servicing rights are recognised when the assets are transferred.
Set of financial statements
The complete group of statements required to present an entity's financial position, performance and cash flows.
Example: A complete set of financial statements includes a statement of financial position, a statement of profit or loss and other statements.
Set-off, legal right of
A legal right to offset amounts.
Example: A legal right of set-off is required to offset balances.
Settle net = net settlement
Settling a contract by delivering only the net amount.
Example: The contracts are settled net in cash.
Settlement
Extinguishing a liability by paying or transferring resources.
Example: Settlement of the obligation occurred in the following period.
Settlement (of employee benefit obligations)
A transaction that eliminates further legal or constructive obligation for part or all of the benefits.
Example: The settlement of the pension obligation resulted in a gain recognised in profit or loss.
Settlement date
Date on which a transaction is finally settled.
Example: The trade was recorded on the settlement date.
Settlement date accounting
Recognizing transactions on the date assets are delivered.
Example: The entity applies settlement date accounting for regular way trades.
Settlement provision
A provision recognised for an expected settlement.
Example: A settlement provision was recognised for the claim.
Settlement value
The value at which a liability is settled.
Example: The settlement value was agreed with the counterparty.
Severally liable
Situation in which each party to a joint obligation is liable only for its own share of the liability.
Example: Under the partnership agreement, each partner is severally liable for the entity's debts.
Shadow accounting
Aligning policyholders' and shareholders' accounting.
Example: Shadow accounting defers certain unrealised gains.
Share
Unit of ownership interest in a company's capital.
Example: Each share carries one voting right.
Share appreciation rights
Awards settled in cash based on share price increase.
Example: Share appreciation rights are measured at fair value.
Share buy-back arrangements
Agreements under which an entity repurchases its own shares from shareholders.
Example: Treasury shares acquired under the share buy-back arrangements were deducted from equity.
Share call options
Contracts giving the right to buy shares at a set price.
Example: Share call options were granted to senior managers.
Share capital
Amount of capital contributed by holders of shares.
Example: Share capital is presented in the statement of financial position.
Share Capital – Reacquired Own Equity Instruments (Treasury Shares)
Own shares bought back and deducted from equity.
Example: Treasury shares are deducted from equity.
Share consolidation
Combining multiple shares into one.
Example: Share consolidation reduced the number of ordinary shares.
Share option
A contract that gives the holder the right to purchase an entity's shares at a specified price within a set period.
Example: The share option vesting conditions require the employee to remain in service for three years.
Share option plan
A plan granting share options to employees.
Example: The share option plan vests over three years.
Share premium
Amount received for shares above their nominal value.
Example: The issue raised share premium of two million.
Share split
Increasing shares outstanding without changing total capital.
Example: The share split doubled the number of shares in issue.
Share warrant
A security giving the holder the right to purchase shares at a specified price before a set date.
Example: The share warrants issued by the company were classified as equity instruments.
Share-based Payment
Standard on accounting for payments settled in shares or cash.
Example: IFRS 2 governs share-based payment transactions.
Share-based payment arrangement
Agreement to pay for goods or services with shares.
Example: The share-based payment arrangement vests over three years.
Share-based payment awards
Awards settled by issuing shares or share options.
Example: Share-based payment awards vest over the service period.
Share-based payment transaction
A transaction settled in shares or options.
Example: The share-based payment transaction is measured at fair value.
Shareholder
A person or entity that owns shares in a company and holds a residual interest in its net assets.
Example: Dividends paid to shareholders are recognised directly in equity.
Shareholders’ equity
The residual interest in assets after deducting liabilities.
Example: Shareholders' equity comprises capital and reserves.
Short seller
Party that sells borrowed securities expecting prices to fall.
Example: The short seller must return the borrowed shares later.
Short-term employee benefits
Benefits due within twelve months of employee service.
Example: Short-term employee benefits include wages and paid leave.
SIC
A former committee that issued interpretations on the application of International Accounting Standards.
Example: The SIC interpretations were gradually replaced by IFRIC interpretations.
Significant influence
Power to participate in financial and operating policy decisions.
Example: A 30% holding usually gives significant influence.
Single product enterprise
Enterprise deriving revenue predominantly from one product.
Example: A single product enterprise may still report operating segments.
Sinking fund
Money set aside to repay a debt at maturity.
Example: The entity set up a sinking fund to repay the bonds.
Social security
State-provided benefit schemes.
Example: Social security contributions are recognised as an expense.
Social security contribution
Payments made by an employer or employee to a social security system for employee benefits.
Example: Social security contributions are recognised as an expense in the period the related employee service is provided.
Solvency
The ability to meet obligations as they fall due.
Example: Solvency is assessed using liquidity and capital ratios.
SPE
Entity created for a narrow, well-defined purpose.
Example: The bank set up an SPE to hold the securitised assets.
Special purpose entity
Entity created for a narrow, well-defined objective.
Example: The special purpose entity was set up to hold securitised assets.
Specific identification of costs
A method of assigning costs directly to specific items rather than by allocation.
Example: For the construction project, costs were assigned using specific identification of costs.
Specifically identified cash flows
Cash flows clearly linked to a particular asset or liability.
Example: The hedge was matched to specifically identified cash flows.
Speculative grade
Credit rating below investment grade indicating higher risk.
Example: The bonds fell to speculative grade after the downgrade.
Spin-off
Separation of part of a business into a distinct entity.
Example: The spin-off distributed the subsidiary's shares to shareholders.
Sponsoring employers
Employers that fund a benefit plan.
Example: Sponsoring employers bear the risks of the pension plan.
Spot exchange rate
The exchange rate for immediate delivery of currencies, used to translate foreign currency transactions on initial recognition.
Example: The foreign currency transaction was recorded using the spot exchange rate at the transaction date.
Spot foreign exchange risk
Risk arising from spot exchange rates.
Example: Spot foreign exchange risk arises from immediate settlement.
Spot rate
Exchange rate for immediate delivery of currencies.
Example: The transaction was translated at the spot rate on that date.
Stand-alone basis
Considering an entity without its parent or group.
Example: The subsidiary was assessed on a stand-alone basis.
Stand-alone derivative
A derivative instrument that exists in its own right rather than being embedded in another contract.
Example: The forward contract was a stand-alone derivative measured at fair value.
Stand-alone entity
Entity that reports without consolidating other entities.
Example: The parent prepared stand-alone entity accounts.
Stand-by credit facilities
Committed borrowing arrangements available when needed.
Example: Stand-by credit facilities provide backup liquidity support.
Standard cost method
Inventory costing using predetermined standard costs.
Example: The standard cost method is used for routine inventory valuation.
Standby letters of credit
A bank guarantee of payment.
Example: The standby letter of credit supports the entity's payment obligation.
Standing Interpretation Committee
A committee that developed interpretations of accounting standards to address divergent or unacceptable treatments.
Example: The Standing Interpretation Committee issued interpretations to clarify the application of existing standards.
Start-up costs
Costs to establish a new operation.
Example: Start-up costs are expensed as incurred.
State (employee benefit) plan
Plan operated by government rather than the reporting entity.
Example: Contributions to a state plan are recognised as expense when due.
State-controlled entities
Entities controlled by government through ownership or power.
Example: State-controlled entities may apply certain disclosure exemptions.
Stated or implied substantive terms
The explicit or implicit terms of a contract that create enforceable rights and obligations.
Example: The stated or implied substantive terms of the contract indicated that a lease existed.
Statement of cash flows = cash flow statement
Statement showing cash inflows and outflows over a period.
Example: The statement of cash flows shows operating activities.
Statement of changes in equity
Statement showing movements in equity during the period.
Example: The statement of changes in equity reconciles opening and closing balances.
Statement of compliance with IFRSs
A statement that the financial statements comply with IFRS.
Example: The statement of compliance with IFRSs must be explicit and unreserved.
Statement of comprehensive income
A statement showing profit or loss and other comprehensive income.
Example: The statement of comprehensive income includes revaluation gains.
Statement of financial position
A financial statement presenting an entity's assets, liabilities and equity at a specific date.
Example: The statement of financial position presents assets, liabilities and equity at the end of the reporting period.
Statement of income = income statement
The statement reporting profit or loss.
Example: The statement of income presents revenue and expenses.
Step-by-step method
Approach analysing a transaction through successive stages.
Example: The step-by-step method was used to assess the embedded derivative.
Stepped interest
Interest rate that changes at predetermined steps.
Example: The loan carried stepped interest rising each year.
Stewardship of management
The accountability of management for the resources entrusted to it by owners.
Example: Information on stewardship of management helps users assess how efficiently resources are used.
Stock exchange listing
Admission of an entity's securities to a stock exchange.
Example: The stock exchange listing raised new capital.
Stop-loss (Reinsurance)
Reinsurance covering losses above an agreed threshold.
Example: The stop-loss treaty protects against catastrophic claims.
Straight debt
Debt without embedded derivative or equity features.
Example: Straight debt is measured at amortised cost.
Straight-line method
Allocating cost evenly over the useful life.
Example: The straight-line method charges equal depreciation each year.
Stress test
An analysis that assesses how an entity's financial position would be affected under adverse scenarios.
Example: The bank performed a stress test to assess its capital adequacy under adverse economic conditions.
Subsequent gain
A gain arising after initial recognition.
Example: A subsequent gain was recognised in profit or loss.
Subsidiary
Entity controlled by another entity, the parent.
Example: The parent consolidates all of its subsidiaries.
Subsidies
Government assistance provided to an entity.
Example: Government subsidies were recognised as income over the period.
Substance over form
The principle that transactions are accounted for according to their economic substance rather than only their legal form.
Example: Applying substance over form, the transaction was treated as a financing arrangement.
Substantively enacted
Law approved in substance though not yet formally effective.
Example: Deferred tax was measured using substantively enacted rates.
Superannuation scheme
Retirement benefit plan providing pensions to its members.
Example: Employees contribute to the superannuation scheme monthly.
Superseded versions
Earlier versions of a standard replaced by a new one.
Example: Superseded versions of the standard no longer apply.
Supervisory non-management directors
Board members who are not part of management.
Example: Supervisory non-management directors oversee management.
Supplier
A party that provides goods or services to an entity in the ordinary course of business.
Example: The entity renegotiated payment terms with its main supplier to improve working capital.
Supply agreement
An agreement to supply goods or services.
Example: The supply agreement fixes prices for five years.
Surety bonds
Bond guaranteeing performance of another party's obligation.
Example: Surety bonds were issued to guarantee the construction contract.
Surplus in the plan
Excess of plan assets over benefit obligations.
Example: A surplus in the plan was recognised as an asset.
Surrender option
A policyholder's right to terminate an insurance contract and receive a surrender value.
Example: The surrender option was considered when measuring the insurance liability.
Surrender risk
Risk that a policyholder cancels a contract early.
Example: Insurers estimate surrender risk when valuing liabilities.
Surrender values
Amount payable if an insurance policy is cancelled early.
Example: Surrender values are lower in the early policy years.
Surrogate measure
A substitute measure used when a direct one is unavailable.
Example: A surrogate measure was used to estimate fair value.
Swap contract
An agreement to exchange cash flows.
Example: The interest rate swap hedges the floating rate.
Swaption
An option granting the holder the right to enter into an interest rate swap at a future date.
Example: The entity purchased a swaption to protect against a future rise in interest rates.
Symmetrical approach
Treating two parties symmetrically.
Example: The symmetrical approach ensures consistent treatment.
Syndication
Arrangement where several lenders jointly provide financing.
Example: The loan was arranged through syndication with five banks.
Synthetic instrument
Instrument replicating another's payoff using derivatives.
Example: A synthetic instrument was created from two derivative contracts.
T
Tainting
The effect of selling held-to-maturity investments that forces the entity to reclassify the remaining portfolio.
Example: The sale of the bonds caused tainting, and the remaining investments were reclassified as available for sale.
Take-or-pay contract
Contract requiring payment even if goods are not taken.
Example: The take-or-pay contract guaranteed minimum payments.
Tangible asset
Asset with physical form held for use or sale.
Example: Tangible assets include machinery and buildings.
Tangible fixed asset
A physical asset held for use in operations.
Example: Machinery is recognised as a tangible fixed asset.
Targeted exemptions
Limited exceptions to a requirement.
Example: Targeted exemptions reduce the cost of first-time adoption.
Tax
A compulsory charge levied by a government on income, profits or transactions.
Example: Current tax is measured at the amount expected to be paid to the tax authorities.
Tax base
The amount attributed to an asset for tax purposes.
Example: The tax base differs from the carrying amount.
Tax base of an asset or liability
Amount attributed to an asset or liability for tax purposes.
Example: The tax base of the asset differs from its carrying amount.
Tax benefit
Reduction in tax payable or increase in deferred tax asset.
Example: The deductible temporary difference produced a tax benefit.
Tax effects
The income tax consequences of a transaction or adjustment recognised in the financial statements.
Example: The tax effects of the revaluation were recognised in other comprehensive income.
Tax expense (tax income)
Aggregate tax amount recognised in profit or loss.
Example: Tax expense rose due to higher deferred tax.
Tax jurisdiction
Country or region having its own taxing authority.
Example: Deferred tax is measured for each tax jurisdiction.
Tax liability
An obligation to pay tax to a tax authority.
Example: The current tax liability is settled within twelve months.
Tax purposes
Purposes relating to taxation.
Example: The asset's tax base is determined for tax purposes.
Tax rate
The percentage at which an entity's taxable income or profit is taxed.
Example: Deferred tax balances were remeasured using the tax rate expected to apply when the liability is settled.
Taxable profit (tax loss)
Profit or loss determined for tax purposes.
Example: Taxable profit is determined under tax law.
Taxable temporary difference
Difference that will result in taxable amounts in future periods.
Example: A taxable temporary difference gives rise to a deferred tax liability.
Taxation
The levying of taxes on income or activities.
Example: Taxation comprises current and deferred tax expense.
Technical feasibility and commercial viability of extracting a mineral resource
The criteria that determine when exploration and evaluation assets cease to be classified as such.
Example: Once technical feasibility and commercial viability of extracting a mineral resource were demonstrated, the assets were reclassified.
Temporary difference
Difference between the tax base and carrying amount of an asset.
Example: The temporary difference created a deferred tax liability.
Tender offer
Public offer to buy shareholders' shares, often at a premium.
Example: The company made a tender offer for all outstanding shares.
Termination benefits
Benefits provided on terminating an employee's employment.
Example: Termination benefits are recognised when the offer is accepted.
Tests goodwill for impairment
Annual testing of goodwill for impairment.
Example: The entity tests goodwill for impairment annually.
The Effects of Changes in Foreign Exchange Rates
The standard governing the translation of foreign currency transactions and financial statements into the presentation currency.
Example: The Effects of Changes in Foreign Exchange Rates prescribes how to account for exchange differences.
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction
Interpretation on the limit on a defined benefit asset.
Example: The interpretation limits the recognised net defined benefit asset.
Theoretical ex-rights value per share
Theoretical price per share after a rights issue.
Example: EPS for prior periods is adjusted by the theoretical ex-rights value per share.
Three-category approach
Classification of financial assets into three measurement categories.
Example: The three-category approach replaced the older four-category model.
Time value of money
The concept that money available today is worth more than the same amount received in the future.
Example: The discount rate reflected the time value of money and the risks specific to the liability.
Time-weighting factor
Fraction of a period used to weight an amount.
Example: The time-weighting factor reflected six months of use.
To market individual units ‘off plan’
Selling properties before or during construction.
Example: The developer began to market individual units off plan.
To ‘manufacture’ gains
Creating apparent gains through asset exchanges.
Example: Entities should not manufacture gains through related-party exchanges.
Top-down test
An impairment test starting at a higher level.
Example: The top-down test assesses the larger cash generating unit.
Total comprehensive income
The total of profit or loss for a period plus other comprehensive income items.
Example: Total comprehensive income for the year comprises profit or loss and other comprehensive income.
Total return swap
A swap exchanging total returns.
Example: The total return swap transfers the economic return of an asset.
Trade date
Date the entity commits to buy or sell an asset.
Example: The purchase is recognised on the trade date.
Trade date accounting
Recognising transactions on the date they are agreed.
Example: Under trade date accounting, the asset is recognised at trade date.
Trade receivable
An amount owed by a customer for goods or services sold on credit.
Example: Trade receivables are measured at transaction price less any loss allowance.
Trade secret
Confidential business information giving a competitive advantage.
Example: The formula was protected as a trade secret.
Trading financial asset or liability held – for trading
Financial instrument held principally for short-term trading profit.
Example: Trading financial assets are measured at fair value.
Trading gains and losses
Gains and losses from buying and selling financial instruments.
Example: Trading gains and losses are recognised in profit or loss.
Transaction
An event that affects the financial position.
Example: Each transaction is recorded in the accounting system.
Transaction costs (financial instruments)
Incremental costs directly attributable to the acquisition, issue or disposal of a financial instrument.
Example: Transaction costs directly attributable to the issue of the financial liability are deducted from its carrying amount.
Transaction price
The price of a transaction between parties.
Example: The transaction price is allocated to performance obligations.
Transfer
Movement of an asset, liability or amount between categories.
Example: The transfer of assets to the fund was completed in June.
Transfer of control
Passing the power to direct the use of an asset.
Example: Revenue is recognised upon transfer of control to the customer.
Transfer of risks and rewards
The criterion used to determine whether control of an asset has passed from one party to another.
Example: Derecognition depended on whether there had been a transfer of risks and rewards.
Transferee
Party that receives assets or rights in a transfer.
Example: The transferee assumed the related obligations.
Transferor
Party that transfers an asset to another party.
Example: The transferor derecognized the transferred financial assets.
Transfers of assets from customers
Assets received from customers for connecting to a network.
Example: Assets transferred from customers are recognised at fair value.
Transitional liability (defined benefit plans)
An additional liability on transition to a new standard.
Example: The transitional liability arose on adopting the revised standard.
Translation difference
The difference arising from translating an entity's financial statements from its functional currency into a different presentation currency.
Example: Translation differences on converting the foreign operation's results are recognised in other comprehensive income.
Translation method
The method for translating foreign currency balances.
Example: The translation method uses the closing rate for assets.
Translation of foreign currency
Converting amounts in one currency into another currency.
Example: Translation of foreign currency balances uses the closing rate.
Translation of the financial statements
Converting financial statements from one currency to another.
Example: Translation of the financial statements used the closing rate.
Translation to the presentation currency
The process of converting financial statements from the functional currency into the currency of presentation.
Example: Assets and liabilities were translated to the presentation currency at the closing rate.
Transparency
Open and clear disclosure of relevant information.
Example: Transparency of disclosures improved investor confidence.
Treasury shares
Entity's own shares reacquired and held by it.
Example: Treasury shares are deducted from equity.
Triggering event
An event that prompts a reassessment or recognition.
Example: A triggering event required the entity to test the asset for impairment.
Trust activities
Activities in which an entity holds assets in trust.
Example: Trust activities require separate disclosure.
Trustee
A person or entity that holds and administers assets on behalf of beneficiaries.
Example: The trustee is responsible for administering the pension fund in the interest of the beneficiaries.
Two-class ordinary shares
Ordinary shares with different dividend rights.
Example: Two-class ordinary shares affect the EPS calculation.
Two-step approach
Method applying two sequential tests to a question.
Example: The two-step approach first identifies then measures the obligation.
U
Ultimate controlling party
The party at the top of the control chain.
Example: The ultimate controlling party was disclosed in the notes.
Unallocated surplus
The excess of a defined benefit plan's assets over liabilities that is not allocated to specific benefits.
Example: The unallocated surplus in the pension fund was disclosed to the plan members.
Unamortised
Not yet written off over the asset's useful life.
Example: The unamortised balance remains on the balance sheet.
Unbundle
Separately accounting for distinct components of a contract.
Example: The insurer must unbundle certain embedded derivatives.
Uncertain event
An event whose outcome is not yet known.
Example: An uncertain event may affect the measurement of the provision.
Uncollectability
The likelihood that receivables will not be collected.
Example: Provision is made for uncollectability of receivables.
Unconditional prohibitions
Absolute restrictions that apply without any exceptions or conditions.
Example: The standard imposes unconditional prohibitions on recognising certain internally generated intangibles.
Unconditional right to refuse redemption
A right to refuse to redeem an instrument.
Example: The unconditional right to refuse redemption supports equity classification.
Underlying asset
Asset whose price determines the value of a derivative.
Example: The option's value follows the underlying asset's price.
Underlying variable
Variable that determines the value of a derivative.
Example: The underlying variable was an interest rate index.
Understandability
The qualitative characteristic whereby information is presented clearly and concisely so users can comprehend it.
Example: The notes were written with a focus on understandability for non-specialist users.
Underwriting year
Year in which an insurance contract was written.
Example: Claims are tracked by underwriting year.
Undistributed earnings
Profits retained in the entity and not yet distributed.
Example: Undistributed earnings are available for future investment.
Undrawn loan commitment
A commitment to lend funds not yet drawn down.
Example: Fees on undrawn loan commitments are recognised over time.
Undue cost or effort
Cost or effort considered excessive.
Example: The disclosure is required unless it involves undue cost or effort.
Unearned finance income
Finance income relating to future periods that has not yet been earned and is therefore deferred.
Example: Unearned finance income is allocated to future periods over the lease term.
Unearned premiums
Premiums received for future coverage periods.
Example: Unearned premiums are recognised as a liability.
Unguaranteed residual value
Portion of residual value not guaranteed by the lessee.
Example: The lessor bears the risk of the unguaranteed residual value.
Uniform accounting policies
Same accounting policies applied across all group entities.
Example: Consolidation requires uniform accounting policies throughout the group.
Unit of account
The level at which an asset or liability is aggregated or disaggregated for recognition and measurement.
Example: The unit of account determined how the financial instrument was measured.
Unit of production
Depreciation method based on output or usage.
Example: The machine is depreciated using the unit of production method.
Unit trust
Investment fund pooling money from many investors.
Example: The unit trust invests in a diversified bond portfolio.
Unit value
The value of one unit in an investment fund.
Example: The unit value of the fund is calculated daily.
Unit-linking feature
A feature linking value to fund units.
Example: The unit-linking feature ties the benefit to fund units.
Uniting of interests
A former method of accounting for business combinations in which entities combined on equal terms without identifying an acquirer.
Example: The uniting of interests method was previously used when two entities of similar size combined.
Unquoted
Not listed on a stock exchange.
Example: Unquoted instruments are measured using valuation techniques.
Unquoted equity instruments
Equity instruments not traded on an active market.
Example: Unquoted equity instruments are measured at fair value.
Unrecognised
Not recorded in the financial statements as an asset or liability.
Example: The deferred tax asset remained unrecognised at year end.
Unrecognised financial instruments
Financial instruments that are not recorded in the financial statements but may affect future cash flows.
Example: Unrecognised financial instruments were described in the risk management disclosures.
Unsecured commercial loans
Loans without collateral backing the obligation.
Example: Unsecured commercial loans carry higher interest rates.
Upstream transactions
Transactions between an associate and its investor.
Example: Upstream transactions are eliminated to the extent of the interest.
Useful life
The period an asset is expected to be used by the entity.
Example: The useful life of the equipment is estimated at eight years.
User [of financial statements]
A person who relies on financial statements.
Example: Users of financial statements make economic decisions.
Users
Parties who use financial statements to make economic decisions, including investors, lenders and other creditors.
Example: The financial statements are prepared to meet the common information needs of a wide range of users.
Users of financial statements
Those who rely on financial statements.
Example: Users of financial statements include investors and lenders.
V-W
Valid expectation
Expectation created in employees that a benefit will be provided.
Example: A valid expectation arises when the entity has no realistic alternative.
Valuation
Process of determining the value of an asset or liability.
Example: The valuation of the investment property used market data.
Valuation method
The technique used to determine the fair value or carrying amount of an item.
Example: The valuation method used for the unquoted shares was the market approach.
Valuation technique
Method used to estimate the fair value of an asset.
Example: The entity applied a market-based valuation technique.
Value added statement
Statement showing value created and distributed by an entity.
Example: The value added statement shows distribution to employees and government.
Value in use
Present value of cash flows expected from an asset.
Example: The recoverable amount is the higher of fair value less costs and value in use.
Value-at-risk
A statistical measure of potential loss.
Example: Value-at-risk estimates losses over a given period.
Variable production overheads
Indirect production costs that vary directly with the volume of production, such as indirect materials and energy.
Example: Variable production overheads are allocated to inventory on the basis of actual use of the production facilities.
Venture capital organisation
An entity investing in venture capital.
Example: A venture capital organisation measures investments at fair value.
Venturer
Party that participates in a joint venture.
Example: The venturer accounts for its interest using the equity method.
Vest
To become an unconditional entitlement for the employee.
Example: The share options vest after three years of service.
Vested benefits
Benefits that an employee is entitled to receive even if employment ends before retirement.
Example: Vested benefits are not conditional on continued future service.
Vested employee benefits
Benefits to which employees have an irrevocable right.
Example: Vested employee benefits cannot be forfeited.
Vesting conditions
Conditions determining when an employee becomes entitled to benefits.
Example: Vesting conditions include service and performance requirements.
Vesting period
The period over which vesting conditions must be met.
Example: The expense is recognised over the vesting period.
Voting rights
Rights to vote at shareholder meetings.
Example: Voting rights determine control over the entity.
Warrant
A financial instrument that gives the holder the right to purchase shares at a specified price within a set period.
Example: The detachable warrant entitled the bondholder to buy ordinary shares at a fixed price.
Warranty
A promise to repair or replace goods.
Example: The warranty obligation is recognised as a provision.
Warranty obligation
Obligation to repair or replace goods sold under warranty.
Example: A warranty obligation is recognised when products are sold.
Wash sale
Sale and repurchase of the same security.
Example: The wash sale was excluded from revenue for tax purposes.
Waterfall structure
A contractual arrangement that specifies the order in which cash flows are distributed to different classes of investors.
Example: Under the waterfall structure, senior noteholders are paid before equity investors.
Wear and tear
Physical deterioration reducing an asset's value.
Example: Depreciation reflects wear and tear of the equipment.
Weather derivatives
Derivatives whose value depends on weather conditions.
Example: The utility uses weather derivatives to hedge revenue risk.
Weighted average
An average giving different weights to different items.
Example: The weighted average cost of inventory is used for valuation.
Weighted average cost formula
Inventory costing using weighted average cost.
Example: The weighted average cost formula is applied to inventory.
Weighted average number of ordinary shares outstanding during the period
The average number of ordinary shares outstanding during a period, weighted by the time each share was outstanding.
Example: Basic earnings per share is calculated using the weighted average number of ordinary shares outstanding during the period.
Whole of life infrastructure
Infrastructure used over its entire life.
Example: Whole of life infrastructure assets are measured over their useful life.
Wholly-owned subsidiary
Subsidiary in which the parent holds all shares.
Example: The wholly-owned subsidiary has no non-controlling interests.
Willing parties
Buyer and seller that are both willing to transact.
Example: Fair value assumes a transaction between willing parties.
Wind-up
The process of terminating an entity or plan and settling its remaining obligations.
Example: On wind-up of the plan, the remaining assets were distributed to members.
Work in progress
Partially finished goods still in the production process.
Example: Work in progress is valued at cost.
Working capital
Current assets minus current liabilities of an entity.
Example: Working capital decreased due to higher inventory levels.
Worst-case scenario
The most unfavourable outcome considered in an analysis.
Example: Sensitivity analysis considered the worst-case scenario.
Write off
Removing an asset's value as irrecoverable.
Example: The unrecoverable receivable was written off.
Write-down
A reduction in the carrying amount of an asset to reflect a decline in its value or recoverable amount.
Example: The inventory write-down was recognised as an expense in the period the decline occurred.
Written option
An option sold by its writer.
Example: A written option creates an obligation for the writer.
Y-Z
Year-to-date
Period from the start of the year to the current date.
Example: Year-to-date revenue grew by eight percent.
Zero-cost interest rate collar
Interest rate collar structured with no net premium.
Example: The entity entered a zero-cost interest rate collar to cap its exposure.
Zero-coupon government issues
Government securities issued at a discount that pay no periodic interest and repay face value at maturity.
Example: The portfolio included zero-coupon government issues measured at amortised cost.