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GLOSSARY

Accounting institutions and terms A useful glossary of UK GAAP terms can be found in Appendix 1 of FRS102, the UK GAAP in force from 2015 (https://frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/FRS-102-The-Financial-Reporting-Standard-applicabl.aspx).

accounting policies The specific principles or rules and conventions applied by an entity in preparing and presenting financial statements,

accruals concept Convention whereby revenue and costs are matched to the period to which they relate rather than the period in which they are received or paid. Also called the 'matching' concept.

amortization The systematic allocation of the depreciable amount of an asset over its useful life - effectively synonymous with depreciation and more commonly used when systematically writing down intangible fixed assets.

business combination The bringing together of separate entities or businesses into one reporting entity.

capital A term used in many connotations, for example: share capital, capital expenditure, the whole quantity of assets less liabilities owned and invested. Capital is normally linked with balance sheet items,

carrying amount The amount at which an asset or liability is recognized in the balance sheet or statement of financial position,

cash equivalents Short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

compound financial instrument A financial instrument that, from the issuer's perspective, contains both a liability and an equity element,

consolidated financial statements The financial statements of a parent and its subsidiaries presented as those of a single economic entity - commonly called a group.

contingent liability A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or a present obligation that arises from past events but is not recognized because: it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.

control (of an entity) The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

deferred tax liabilities Income tax payable in future reporting periods in respect of future tax consequences of transactions and events recognized in the financial statements of the current and previous periods,

depreciation The systematic allocation of the depreciable amount of an asset over its useful life. A practice similar to amortization but normally the term is used in relation to tangible fixed assets,

derecognition The removal of a previously recognized asset or liability from an entity's statement of financial position,

derivative A financial instrument or other contract with all three of the following characteristics:

i its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable (sometimes called the 'underlying'), provided in the case of a non-financial variable that the variable is not specific to a party to the contract;

ii it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contract that would be expected to have a similar response to changes in market factors;

iii it is settled at a future date.

discontinued operation A component of an entity that has been disposed of and represented a separate major line of business or geographical area of operations; was part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or was a subsidiary acquired exclusively with a view to resale.

dividend distribution of its earnings to its shareholders by a company.

equity The residual interest in the assets of the entity after deducting all its liabilities.

EU-adopted IFRS An IFRS that has been adopted in the European Union in accordance with EU Regulation 1606/2002.

fair value The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm's length transaction. In the absence of any specific guidance provided in the relevant section of this FRS, the guidance in paragraphs 11.27 to 11.32 shall be used in determining fair value.

FASB Financial Accounting Standard Board - United States.

finance lease A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. A lease that is not a finance lease is an operating lease,

financial instrument A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity,

fixed assets Assets of an entity which are intended for use on a continuing basis in the entity's activities.

FRS Financial Reporting Standard - UK term. FRS 102 is the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland effective from 2015.

gains Increases in economic benefits that meet the definition of income but are not revenue.

going concern An entity is a going concern unless management intends either to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

goodwill Future economic benefits arising from assets that are not capable of being individually identified and separately recognized.

group A parent and all its subsidiaries.

hedge To protect or minimize against loss by counterbalancing one transaction, such as a bet, against another. In spite of what may be said, there is always an element of a gamble in a hedge!

heritage assets Tangible and intangible assets with historic, artistic, scientific, technological, geophysical, or environmental qualities that are held and maintained principally for their contribution to knowledge and culture.

IASB International Accounting Standards Board.

IFRS Standards and interpretations issued (or adopted) by the International Accounting Standards Board (IASB).

impairment loss The amount by which the carrying amount of an asset exceeds its recoverable amount: in the case of inventories, its selling price less costs to complete and sell; or in the case of other assets, its recoverable amount.

investment property Property (land or a building, or part of a building, or both) held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes, or sale in the ordinary course of business.

joint control The contractually agreed sharing of control over an economic activity. It exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).

joint venture A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint ventures can take the form of jointly controlled operations, jointly controlled assets, or jointly controlled entities.

key management personnel Those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.

market risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

matching concept An accounting convention whereby revenue and costs are accrued, matched with one another and dealt with in the profit and loss account of the period to which they relate. Also called the accruals concept.

merger An entity combination that results in the creation of a new reporting entity formed from the combining parties, in which the controlling parties of the combining entities come together in a partnership for the mutual sharing of risks and benefits of the newly formed entity and in which no party to the combination in substance obtains control over any other, or is otherwise seen to be dominant.

monetary items Units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.

onerous contract A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

operating segment An operating segment is a component of an entity: that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available.

ordinary share An equity instrument that is subordinate to all other classes of equity instrument.

other comprehensive income Items of income and expense (including reclassification adjustments) that are not recognized in profit or loss.

parent An entity that has one or more subsidiaries.

prepayments An amount on a balance sheet representing the cost of future benefits which have been paid for in a period prior to their consumption. This is the matching process.

present value A current estimate of the present discounted value of the future net cash flows in the normal course of business,

presentation currency The currency in which the financial statements are presented,

provision A liability of uncertain timing or amount. Frequently a provision is known as a contingency, but this common use of the word differs from the accounting use (see contingent liability).

prudence The inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.

related party A related party is a person or entity that is related to the entity that is preparing its financial statements (the reporting entity),

related party transaction A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged and which normally has to be disclosed in financial statements,

reporting date The end of the latest period covered by financial statements or by an interim financial report,

residual value (of an asset) The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

revenue The gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.

share-based payment transaction A transaction in which the entity: receives goods or services (including employee services) as consideration for its own equity instruments (including shares or share options); or receives goods or services but has no obligation to settle the transaction with the supplier; or acquires goods or services by incurring liabilities to the supplier of those goods or services for amounts that are based on the price (or value) of the entity's shares or other equity instruments of the entity or another group entity.

share option A contract that gives the holder the right, but not the obligation, to subscribe to the entity's shares at a fixed or determinable price for a specific period of time.

significant influence Significant influence is the power to participate in the financial and operating policy decisions of the associate but is not control or joint control over those policies.

subsidiary An entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).

treasury shares An entity's own equity instruments, held by that entity or other members of a consolidated group,

turnover UK term for sales income or revenue - the amounts derived from the provision of goods and services falling within the entity's ordinary activities.

useful life The period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by an entity.

value in use The present value of the future cash flows expected to be derived from an asset or cash-generating unit.

 
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